On February 16, 2009, Doug Shaw was awarded $1.2 million for his claims of wrongful termination and defamation, by an arbitration panel of the New York Stock Exchange. Mr. Shaw, a 20-year veteran of Salomon Smith Barney (SSB), had been a top Financial Advisor at the firm's Greenwich, Connecticut branch office until his departure on September 1, 2005. On September 9, 2005, SSB filed a Form U-5 for Shaw, stating that we was Permitted to resign and disclosed that the reason was manager discretion non-sales practice. Mr. Shaw alleged that SSB wrongfully terminated his employment and filed a false U-5 with the specific intent of keeping his assets under management with the firm. Throughout the arbitration hearings, SSB unsuccessfully argued that Mr. Shaw was an employee at will and therefore could be terminated without just cause. Additionally, Respondent unsuccessfully tried to establish that there was just cause in terminating Mr. Shaw because he supposedly failed to disclose certain information about several clients. Jeffrey L. Liddle, Esq. and David H. Feldstein, Esq. of Liddle & Robinson, L.L.P. in New York City, represent Mr. Shaw.
Lawyer(s):
Jeffrey L. Liddle

L&R's client, William Raedle, sued his former employer Credit Agricole Indosuez (CAI) and his former managers, on grounds that (1) CAI breached his employment agreement by failing to pay him $250,000 in unpaid salary and bonuses and (2) CAI and one of his former managers tortiously interfered with a job that the Mellon Financial Corporation (Dreyfus) had offered to him. On September 18, 2008, the United States District Court for the Southern District of New York denied the Defendants motion for summary judgment. Click here to read the Court's Opinion.
Lawyer(s):
Ethan A. Brecher

Judge: Thomas P. Griesa

On April 2, 2008, the Honorable James C. Francis IV, United States Magistrate Judge, granted the request of former Banc of America Securities analyst Jerry Treppel to compel Biovail Corporation and its former CEO, Eugene Melnyk, to produce additional electronic discovery in his pending litigation against them. In so doing, the Court held that Biovail's efforts to preserve electronic evidence were inadequate. In particular, Biovail failed to preserve backup tapes in existence at the time it received notice from Mr. Treppel's counsel to preserve all relevant electronic information. Judge Francis deemed defendants' inaction sufficient to constitute gross negligence or recklessness. To ameliorate the harm caused to Mr. Treppel as a result of these preservation failures, the Court ordered defendants to produce Mr. Melnyk's laptop to plaintiff's forensic expert, who will, at defendants' expense, conduct a thorough forensic examination in an effort to recover additional relevant e-mails that were deleted by Mr. Melnyk. Moreover, defendants are required to restore and search six additional backup tapes, and to potentially pay the costs of additional discovery warranted by any further relevant evidence uncovered. In reaching its decision, the Court frequently cited to Zubulake IV and Zubulake V -- seminal decisions addressing a firm's obligations to preserve and produce electronic evidence, which this firm handled and which played a significant role in recent revisions to the Federal Rules of Civil Procedure dealing with electronic evidence. Although the Court declined to go so far as to grant an adverse inference instruction, Judge Francis noted that "[i]t seems quite possible, and even likely, that documents were destroyed as a result of defendants' failure to preserve. As was the case in Zubulake V, additional evidence discovered on the backup tapes to be restored may well serve to satisfy plaintiff's burden of establishing that at least some of the destroyed documents would have been favorable to his claims, thereby entitling him to an adverse inference instruction at trial." Click here to read the April 2, 2008 Memorandum and Order in Treppel v. Biovail Corp., et al.; 03 Civ. 3002 (PKL) (JCF). For more information, contact Jim Batson at 212-687-8500.
Lawyer(s):
Jeffrey L. Liddle
James A. Batson
Christine A. Palmieri

On February 17, 2006, after a two week trial, a Phoenix, Arizona jury found in favor of Liddle & Robinson, L.L.P.'s client Philip L. Spartis on both his claims for defamation and invasion of privacy/false light. The jury awarded Mr. Spartis $400,000 in compensatory damages and $600,000 in punitive damages. In August 2002, the Defendant, Stuart C. Goldberg, Esq. began operating a website at www.publicinvestorsattorney.com that concerned Mr. Spartis, Salomon Smith Barney, and the Atlanta Branch Office in which Mr. Spartis worked. Mr. Goldberg posted on his website a self-styled Special Study that he authored, called Salomon Smith Barney: Wordcom's Exclusive Employee Stock Options Administrator and SSB's Atlanta Branch Office's Boiler Room Operation. A second document authored by the defendant and published on his website was The Grubman Circle: Jack Grubman and Philip Spartis. Mr. Goldberg published the Special Study and Grubman Circle to solicit SSB clients who had WorldCom stock and/or employee stock options to use his services to bring lawsuits against Mr. Spartis, and to assist other attorneys with similar claims. Mr. Spartis served as a Senior Vice-President in Salomon Smith Barney's Atlanta Branch Office from 1984-1997, and as Director of the Corporate Client Group from 1997 until February of 2002. In these roles, Mr. Spartis helped win for Salomon Smith Barney, Inc. the exclusive right to administer WorldCom, Inc.'s employee stock option program, among many other corporate clients. The jury found that Mr. Goldberg made numerous false and defamatory statements concerning Mr. Spartis in his Special Study and Grubman Circle. Mr. Goldberg, among other things, stated in these materials that Mr. Spartis engaged in criminal conduct, was a member of organized crime, a participant in securities fraud, and the head of a boiler room operation. The case, Spartis v. Goldberg, (CV 2003-021588), was tried in the Superior Court of the State of Arizona, Maricopa County, before the Honorable Paul A. Katz. Liddle & Robinson, L.L.P. partners James R. Hubbard, Jeffrey L. Liddle and David I. Greenberger represented Mr. Spartis, with the assistance of Arizona counsel Peter T. Limperis (of Haralson, Miller, Pitt, Feldman & McAnally, P.L.C.). Terrence P. Wood and Marilyn D. Cage of Broening Oberg Wood Wilson & Cass represented Mr. Goldberg.
Lawyer(s):
Jeffrey L. Liddle
James R. Hubbard
David I. Greenberger

Judge: Paul A. Katz

On August 7, 2001, a NASD arbitration panel awarded our client, Stephen B. Sawtelle, $27,574,499, including $25 million in punitive damages, against Waddell & Reed, Inc. for violation of the Connecticut Unfair Trade Practices Act (CUTPA) in the manner in which it competed with Mr. Sawtelle after it terminated him as a mutual fund broker and he went to work for another firm. The award is for $1,827,499 in actual damages and $747,000 in attorneys' fees against Waddell & Reed and fourteen of its employees and agents and for $25 million in punitive damages against Waddell & Reed and Robert Hechler, its CEO. The punitive damages award is one of the largest ever in a securities industry arbitration. Waddell & Reed and the other Respondents were also ordered to pay all $110,300 of the NASD's forum fees, resulting in a refund to Mr. Sawtelle of the $21,440 in forum fees he had paid. The arbitrators denied Waddell & Reed's counterclaims against Mr. Sawtelle. In addition to awarding damages, the arbitrators ordered that defamatory information Waddell & Reed had placed on Mr. Sawtelle's Form U-5 be expunged. During the hearings, the arbitrators also granted our request to sanction the Respondents, ordering them to pay Mr. Sawtelle $2,000 each, for a total of $30,000, for violating an order of the arbitrators. Mr. Sawtelle was a mutual fund broker for Waddell & Reed, Inc. in Connecticut for 17 years until his termination in February 1997. Mr. Sawtelle had been the top-producing broker in the country for Waddell & Reed in 1996. In mid-1996, Waddell & Reed discovered that another broker, David Stevenson, had embezzled several million dollars from his customers. The SEC began an investigation in which Mr. Sawtelle testified. Mr. Sawtelle testified to the SEC that when Mr. Sawtelle was Mr. Stevenson's supervisor years before Mr. Stevenson's embezzlement was discovered, Waddell & Reed's upper management failed to follow Mr. Sawtelle's repeated recommendations that Mr. Stevenson's employment be terminated after other incidents of misconduct by Stevenson. When Waddell & Reed obtained a transcript of Mr. Sawtelle's testimony, Waddell & Reed terminated Mr. Sawtelle. Shortly after his termination, Mr. Sawtelle became a mutual fund broker for Hackett Associates, Inc. The Arbitration Panel found that "Respondent Waddell & Reed and Hechler through agents of Waddell & Reed demonstrated reprehensible conduct that warrants an award of punitive damages. The Panel further found that after Claimant [(Mr. Sawtelle)] was terminated Respondents orchestrated a campaign of deception which included, among other things, giving the impression to clients that Claimant had mishandled their investments, Claimant was untrustworthy, Claimant was no longer in business, Claimant was not authorized to do business, and Claimant was in some way involved with the embezzling of client funds. The Panel also found that Waddell & Reed, through its agents, re-routed Claimant's mail and his telephone lines, as a result, telephone calls and mail intended for Claimant were received by Waddell & Reed and its agents." On June 10, 2002, the New York State Supreme Court entered a Judgment, on behalf of Sawtelle, in the amount of $28,671,410.18, against Waddell & Reed and Robert Hechler (the firm's former CEO). This follows the May 31, 2002 Decision and Order of New York State Supreme Court Justice Michael D. Stallman, which confirmed, in spite of Waddell & Reed's motion to vacate, almost all of the arbitration award. Justice Stallman upheld all of the arbitrators' $25 million punitive damages award, the $747,000 attorneys' fee award, and the expungement of information from Mr. Sawtelle's Form U-5, and upheld $1,080,499 of the $1,827,499 compensatory damages award. The Court modified the award and reduced it by $747,000, on grounds that the compensatory damages award included attorneys' fees which were also awarded as a separate item. The Court also ordered over $1.8 million in interest to be paid on the arbitration award. Notably, Justice Stallman wrote in his Decision and Order, in connection with the arbitration panel's punitive damages award, that "[s]uffice it to say, the Panel's findings find support in the record. For example, there was evidence before the Panel that Waddell representatives implied to certain customers that Sawtelle had been fired because, like Stevenson [a different Waddell broker], he had embezzled client funds. In light of the Panel's findings, it was not unreasonable for the Panel to impose punitive damages in an amount that would, in fact, be punitive." In November 2002, Mr. Sawtelle was selected by the National Employment Lawyers' Association as one of its Courageous Plaintiffs. On February 11, 2003, the Appellate Division, First Department modified the Judgment entered by Justice Stallman to vacate the punitive damages award, "remanded to the original panel of arbitrators for reconsideration of the issue of punitive damages," and otherwise affirmed Justice Stallman's Judgment. (Sawtelle v. Waddell & Reed, Inc., 304 A.D.2d 103, 754 N.Y.S.2d 264 (1st Dep't 2003).) On February 25, 2003, Mr. Sawtelle was paid $2,069,620.80, comprised of the confirmed $1,080,499 in compensatory damages, the confirmed $747,000 attorneys' fee award, plus $242,121.80 in interest on those amounts. On September 4, 2003, after reviewing the parties' written submissions and holding a one-day hearing on remand from the Appellate Division, the Arbitration Panel issued an Award for $25 million in punitive damages, and assessed the $2,000 in forum fees against Waddell & Reed and Hechler. In its Award, the Arbitration Panel acknowledged that Waddell & Reed and Hechler argued to the Arbitration Panel on remand "that this case remains an 'ordinary commercial dispute' meriting a modest award of punitive damages," and added language to its Award that was not in its original Award that Waddell & Reed's and Hechler's "campaign of deception" was a "horrible campaign of deception, defamation and persecution of Claimant." On January 22, 2004, Justice Stallman of the New York State Supreme Court vacated the second arbitration Award of $25 million in punitive damages and directed the parties to submit the issue to a new panel. Mr. Sawtelle then filed a motion before Justice Stallman requesting that he set a remittitur -- a maximum amount of punitive damages that the Court would approve -- which Mr. Sawtelle could then accept and avoid yet another arbitration, or which he could reject and proceed to a new arbitration hearing. While remittitur is a standard procedure in jury cases in court, and Justice Stallman recognized that remittitur would "make sense" to avoid multiple arbitrations to determine the amount of punitive damages, Justice Stallman denied Mr. Sawtelle's request in an Order on November 30, 2004. On September 22, 2005, the Appellate Division affirmed Justice Stallman's order vacating the punitive damages award and remanding to a new arbitration panel. (21 A.D.3d 820, 801 N.Y.S.2d 286 (1st Dep't 2005).) Mr. Sawtelle then appealed to the New York Court of Appeals, New York's highest court. The Court of Appeals declined to take the case at the time, on technical grounds, because it lacked jurisdiction over the appeal. On December 15, 2005, Waddell & Reed and Hechler and Mr. Sawtelle reached a settlement in which Waddell & Reed paid Mr. Sawtelle $7.9 million. In total, Mr. Sawtelle received about $10 million ($7.9 million in settlement of his punitive damages, $2,069,620.80 in compensatory damages, attorneys' fees, and interest, $30,000 in sanctions paid during the arbitration, and $21,440 refunded from the NASD pursuant to the arbitrators' first Award ordering that Waddell & Reed and the other Respondents pay all of the forum fees).
Lawyer(s):
Jeffrey L. Liddle
Michael E. Grenert

Web Info(URL) www.liddlerobinson.com/pdf/9703642.pdf
Judge: Michael D. Stallman and 1st Department

We commenced this arbitration on behalf of Rose Mary Finocchi after Charles Schwab Corp. ("Schwab") terminated Ms. Finocchi's employment and then filed damaging information on her Form U-5 Termination of Registration form. Following Schwab's injurious U-5 filing, Ms. Finocchi was unable to find another employment position within the securities industry. The principal claim asserted was one for intentional interference with prospective business advantage based on the U-5. We sought a complete expungement of the damaging and false information on the U-5 and damages resulting there from.Prior to and throughout the arbitration hearing, Schwab contended that it was justified in filing the damaging information on Ms. Finocchi's U-5 record, relying on an internal investigation conducted by Ms. Finocchi's former managers and conclusions reached by these managers in connection with that investigation. We established at the hearings that Schwab did not terminate Ms. Finocchi's employment due to the alleged results of the internal investigation. Instead, as the arbitration panel recognized, the firm fired Ms. Finocchi due to a conflict between Ms. Finocchi and her supervisor, which followed Ms. Finocchi's request for an accommodation of a bonus payment. On February 28, 2005, the arbitration panel found Schwab liable, among other things, for intentional interference with prospective business advantage. The Panel awarded Ms. Finocchi $106,500 in lost income for the period July 2000 to February 2005; $15,000 in emotional distress damages caused by "Schwab's careless behavior in handling Claimant's inquiries about on-the-job computer problems, appeal of management decisions and post-employment forms;" and $20,000 in arbitration costs. The Panel also fully expunged Ms. Finocchi's U-5 form, clearing her good name. The Panel also awarded $150,000 in attorneys' fees.
Lawyer(s):
Marc A. Susswein

Web Info(URL) www.nyse.com/pdfs/2002-010432.pdf

Tegwen Hunt, a sales-trader with HSBC in New York, claimed that HSBC defamed her and improperly interfered with a new job opportunity following her departure from the firm. That interference led to a retraction of the job offer. Following a five-day arbitration hearing at the New York Stock Exchange, an arbitration panel awarded Ms. Hunt $770,000.00 in compensatory damages in recognition of the serious harm HSBC had caused to her career and assessed all of the arbitrators' costs, totaling $9,900.00, against HSBC.
Lawyer(s):
Ethan A. Brecher

Web Info(URL) www.nyse.com/pdfs/2002-009795.pdf

We commenced this arbitration on behalf of Robert Lorelli after First Union had terminated Mr. Lorelli's employment and then filed damaging and false information on his registration license, the Form U-5 Termination of Registration form. Following First Union's false U-5 filing, Mr. Lorelli was unable to find a job requiring a securities registration. The principal claim asserted was one for defamation based on the U-5, and we sought a complete expungement of the damaging and false information. Prior to, and throughout the arbitration hearing, First Union had contended that it was fully justified in filing the damaging information on Mr. Lorelli's securities record, relying on an audit prepared by its compliance department, and conclusions reached by senior management, including the CEO and President of First Union Brokerage Services, Dwight Moody. Our presentation at hearing included our examination of a number of hostile witnesses, including: Mr. Moody; Michael Roach, Mr. Lorelli's supervisor; Sherran Beshears, the Regional Compliance Analyst who prepared the internal audit; Pat Haney, the Associate Director of Compliance; and Rachel Raemore, First Union's Head of Compliance. We established at hearing that First Union did not terminate Mr. Lorelli's employment due to the internal audit or the supposed results from that audit. Instead, as the arbitration panel eventually recognized, the firm had fired Mr. Lorelli due to a conflict between Mr. Lorelli and his supervisor, Mr. Roach, which followed Mr. Lorelli's complaints about Mr. Roach's handling of a commission issue between Mr. Lorelli and a broker at another First Union branch. On May 20, 2003, the arbitration panel found First Union liable for defamation. Although the panel awarded Mr. Lorelli only nominal damages upon the defamation claim, the panel fully expunged Mr. Lorelli's U-5 form, awarded Mr. Lorelli $223,626.25 in attorneys' fees and costs, and assessed against First Union all $22,800 of the NYSE forum fees. First Union (now Wachovia) is apparently not pleased with this result, which was tried in Charlotte, where First Union maintained its corporate headquarters. Wachovia sought to overturn the award in the Superior Court of North Carolina. By Order dated October 6, 2003, the Superior Court denied Wachovia's motion to vacate the panel's award. On February 1, 2005, the North Carolina Court of Appeals affirmed the lower court's order confirming the award. Click here to read the appellate court's decision in First Union v. Lorelli.
Lawyer(s):
James R. Hubbard

Web Info(URL) www.nyse.com/pdfs/2001-008918.pdf

Our client, Charles V. Marais, a former an equity derivatives salesman with Barclays De Zoete Wedd, Inc. and Barclays Capital ("Barclays"), sued Barclays for wrongful termination, breach of contract, quantum meruit, fraud, negligent misrepresentation, promissory estoppel, violations of the New York Labor Law, and tortious interference with prospective economic advantage. On September 26, 2002, a NASD arbitration panel, chaired by retired New York State Supreme Court Justice Walter M. Schackman, awarded Mr. Marais $1,250,000 in damages based on the filing of a damaging U-5 NASD regulatory form, over $642,000 in various contract damages, $106,242 in liquidated damages based on wages withheld pursuant to New York's Labor Law, $248,000 in legal fees under the Labor Law, and $1,000,000 in punitive damages. The award, which specified that 9% interest be paid on various components from as early as February 6, 1996, when Mr. Marais' 1995 bonus should have been paid, totaled nearly $4.2 million, inclusive of punitive damages and pre-award interest. Mr. Marais asserted that Barclays had scapegoated him and subjected him to employment restrictions before firing him. Mr. Marais alleged that Barclays took these actions in order to deflect attention from a variety of regulatory issues plaguing the bank and due to Barclays' concern about its effort to expand its securities trading ("Section 20") powers, despite acknowledging to regulators that Mr. Marais was not in violation of Barclays' procedures and promising to him that he would be paid bonus compensation he had earned. The award chastised Barclays, finding that it had "willfully and wantonly disregarded the rights of Claimant" regarding the Form U-5 filing, and "in subjecting Claimant to humiliation in their various interrogations of him during 1996; in failing to advise Claimant to retain his own counsel at the appropriate time; and misleading Claimant as to the likelihood of his continued employment with Respondents." The award of punitive damages apparently also represented sanctions for Barclays' misconduct during the arbitration itself. The award specified that the $1 million punitive damages award also related to Barclays "consciously disregarding a specific order of the Panel to produce a document after being warned that a sanction would follow," as well as "withholding records from Claimant's counsel." On March 31, 2003, the New York State Supreme Court confirmed the arbitration award and rejected Barclays' motion to vacate the award. Click here to read the Court's detailed opinion.
Lawyer(s):
Jeffrey L. Liddle

Web Info(URL) www.liddlerobinson.com/pdf/MaraisArbitrationAward.pdf

On May 28, 2002, a NYSE arbitration panel awarded our client, Robert J. Lebenson, $30,600 in actual damages and $80,000 in attorneys' fees against Salomon Smith Barney (SSB) in connection with his defamation claim. In addition to awarding damages, the arbitrators ordered that defamatory information Salomon Smith Barney had placed on Mr. Lebenson's Form U-5 be expunged. Salomon Smith Barney induced Mr. Lebenson to leave his prior job and transfer his lucrative retail brokerage business to SSB. After Mr. Lebenson joined SSB, SSB botched the transfer of Mr. Lebenson's clients' accounts. Four months later, SSB abruptly fired Mr. Lebenson and filed false and defamatory statements on his Form U-5.
Lawyer(s):
Jeffrey L. Liddle

Web Info(URL) www.nyse.com/pdfs/1999-007633.pdf

Our client, William Gibbs, served as a financial consultant in Merrill Lynch's Brunswick, Georgia branch office. He left Merrill Lynch to join PaineWebber. Upon his departure, Merrill Lynch filed with the National Association of Securities Dealers a Form U-5 Uniform Termination Notice for Securities Industry Registration, which he believed was defamatory. Mr. Gibbs sued Merrill Lynch following his departure, alleging that the firm had interfered with his account relationships during his transfer to PaineWebber. The NASD arbitration panel hearing his case initially dismissed the Form U-5 libel claim in December 1998, on Merrill Lynch's motion to dismiss, without ever holding an evidentiary hearing. Mr. Gibbs appealed that award to the United States District Court for the Northern District of Georgia, and on January 28, 2000, the District Court vacated the award and ordered the panel to hold an evidentiary hearing on the merits of the libel claim. Contrary to the District Court's Order, however, the panel on March 13, 2000 again dismissed the libel claim, without ever holding the evidentiary hearing that the Court ordered, and misrepresented in its award that it had held such a hearing. Mr. Gibbs appealed again to the District Court, and in a March 29, 2001 Order, the Court again vacated the award dismissing the libel claim, and directed that a "new" panel hold an evidentiary hearing on the merits of the claim. Merrill Lynch appealed to the United States Court of Appeals for the Eleventh Circuit, which affirmed the District Court's Order on February 7, 2002. It is virtually unprecedented for a federal court to vacate an arbitration award, and even more so for a court to vacate two awards in the same case. Ultmately, in August 2003, a NASD panel denied Mr. Gibbs' claim after a two-week arbitartion hearing in July 2003.

Read the District Court's March 29, 2001 Order Here

Read the Eleventh Circuit's Order affirming the District Court's Order Here

On October 6, 2000, a two-member arbitration panel based in Chicago, Illinois awarded our client, Paul D. Svigos, $2,264,479.81 against Merrill Lynch for defamation and wrongful termination. Mr. Svigos was a former top Merrill Lynch stockbroker who the firm fired in October 1992 from its Oakbrook, Illinois branch office. The award appears to be the largest ever for a retail stockbroker against a NASD registered securities firm, and the third largest Form U-5 defamation award in the history of the securities industry. The award is also the largest ever for wrongful termination where securities industry arbitrators have been asked to determine whether a brokerage firm had a common law obligation to prove just cause to fire a registered stockbroker. The award includes $1,025,000.00 as compensatory damages for defamation, $515,000.00 as compensatory damages for wrongful termination and punitive damages of $607,679.81. Mr. Svigos requested an award of punitive damages and attorneys' fees and costs based on Merrill Lynch's defamation of his character and its misconduct in litigating the case. One element of punitive damages for defamation under Illinois law is an award of attorneys' fees and costs. Such an award is also appropriate to punish a party for engaging in misconduct during the course of the litigation. The panel awarded Mr. Svigos $357,679.81 in attorneys' fees and costs and $250,000.00 as punitive damages. The arbitrators also directed Merrill Lynch to pay forum fees of $116,800.00 to the NASD, constituting all the arbitrators' fees in the case and refunded forum fee assessments of $21,650.00 to Mr. Svigos. Most significantly, the panel ordered Merrill Lynch to restore Mr. Svigos' professional reputation by filing an amended Form U-5 Uniform Termination Notice for Securities Industry Registration with the Central Registration Depository (CRD), a database run jointly by NASD Regulation, Inc. and the North American Securities Administrators Association containing stockbroker employment and regulatory history available to securities industry firms and on a limited basis to investors. Based on the defamatory Form U-5, Mr. Svigos has been barred from obtaining other employment as a stockbroker since October 1992. The amended Form U-5 is to indicate that Mr. Svigos had been fired based on a misunderstanding with superiors, rather than for violating a Firm directive as Merrill Lynch originally indicated. One of the major questions before the arbitrators was whether Merrill Lynch had ever given Mr. Svigos a Firm directive. Mr.Svigos's counsel tried repeatedly to have Merrill Lynch articulate the nature of the directive at issue. When pressed by the arbitrators, Merrill Lynch's counsel was unable to identify a precise directive, and no documents from Merrill Lynchs files, including notes prepared by a Merrill Lynch attorney and compliance officer during a meeting when the directive was allegedly issued, reflect that a Firm directive was ever given to Mr. Svigos. Additionally, the arbitrators instructed Merrill Lynch to change its original Yes answer to No to the following question listed on the Form U-5: Currently is, or at termination was, the individual under internal review for fraud or wrongful taking of property, or violating investment-related statutes, regulations, rules or industry standards of conduct. The award constitutes the most significant application ever, at least in terms of amount of damages awarded, of the principle explained at length in 1995 by the United States Court of Appeals for the Eighth Circuit in PaineWebber, Inc. v. Agron and in 1981 by the United States Court of Appeals for the Seventh Circuit Court in Shearson Hayden Stone, Inc. v. Liang that mandatory predispute arbitration agreements about employee discharges imply a requirement that discharges be only for just cause, or discernable cause. Similarly, where there is an employment relationship between a securities industry representative (such as a stockbroker) and a brokerage firm under which the NASD contemplated the use of arbitration for settling employment-related disputes, the employment relationship is altered from an at-will relationship to one where either just cause or discernable cause is required to justify firing an employee. Accordingly, the arbitrators are empowered to determine whether a firing was justified, and award damages, or render other relief, if it was not. This rule ensures that registered employees in the securities industry will be able to challenge and obtain compensation for unfair and arbitrary terminations. The arbitration hearings started in 1995 and ended in June 2000 after 75 hearing sessions. The arbitrators heard from 11 witnesses whose testimony covered over 8,000 pages and reviewed approximately 100 exhibits before reaching their decision. The third arbitrator on the original three-member panel resigned from panel in June 1998.
Lawyer(s):
Jeffrey L. Liddle
Ethan A. Brecher
Christine A. Palmieri

Web Info(URL) www.liddlerobinson.com/pdf/9304516.pdf

Kidder Peabody hired our client, Linda E. LaPrade, in January 1989 as an Assistant Vice President and the Manager of the New Issue Agency Syndicate. In July 1989, Kidder Peabbody promoted her to Vice President, Product Manager-Agency Bond Trading. Notwithstanding her successes, she claimed that her supervisors knew that in order for her to achieve succeed, she would have to enage in potentially unethical or even illegal behavior, and instructed her to do so. She claimed that her supervisors threatened her job if she did not comply with their direction. Although she initially resisted her supervisor's instructions, she eventually caved to their pressure. During the summer of 1991 the SEC launched an investigation into securities firms' operations with respect to new issues of Agency securities, resulting in a Kidder internal investigation. Ms. LaPrade alleged that as a result of these investigations Kidder discriminated against her when it scapegoated her for inflating pre-sale order indications, despite the fact that (1) her male counterparts at Kidder had engaged in the same conduct, and (2) she had informed Kidder's in-house lawyers that her male superiors threatened to terminate her if she did not inflate pre-sale order indications. She alleged that Kidder wrongly and discriminatorily forced her to resign, singled her out and put her in a false light in its communications with the United States Securities and Exchange Commission and the Fiscal Agents, placing inappropriate and damaging information on her Form U-5. She further alleged that Kidder wrongfully discriminated against her by paying her less than males whose jobs involved comparable skills, effort and responsibilities. On October 8, 1999 a NASD arbitration issued an award that found that Kidder had defamed her on her Form U-5, and also awarded her $65,000.00 in damages. The panel instructed Kidder Peabody to file an amended Form U-5, and also assessed Kidder Peabody $61,424.00 in forum fees.
Lawyer(s):
Jeffrey L. Liddle
Blaine H. Bortnick

Web Info(URL) www.liddlerobinson.com/pdf/9304030.pdf

In one of the largest securities arbitration awards ever, a NASD arbitration panel awarded our client John Glennon $1,734,024.51, plus interest on his claims for Form U-5 defamation and unpaid compensation. With interest on the award, Dean Witter paid Mr. Glennon in excess of $2 million. Dean Witter employed Mr. Glennon as branch manager of its Nashville, Tennessee office and terminated him from branch manager following his complaints to Dean Witter's regional manager that a number of brokers in the branch, including the top-producing broker, were engaging in improprieties, including forging customer signatures. Mr. Glennon then became a producing broker, but was subsequently terminated, ostensibly over a compensation dispute. In his position as a producing broker, Mr. Glennon was entitled to a $2,500 annual expense stipend. Dean Witter inadvertently deposited that amount into Mr. Glennon's account monthly between September of 1990 and May of 1991. Although Mr. Glennon acknowledged that those amounts in excess of $2,500 were overpayments to which he was not entitled, he refused to return the money, claiming it as a set-off against monies Dean Witter owed him for a finder's fee and a recruitment bonus. Asserting entitlement to the finder's fee and recruitment bonus, in August of 1991, Mr. Glennon commenced an arbitration proceeding against Dean Witter at the NASD. Dean Witter discharged Mr. Glennon in October of 1991, and in November of 1991 completed and filed a Form U-5, Uniform Termination Notice for Securities Industry Registration, in accordance with NASD rules. The form inquired whether the terminated individual was "under internal review for fraud or wrongful taking of property, or violating investment-related statutes, regulations, rules or industry standards of conduct." In response to this question, Dean Witter answered "yes." Subsequently, Mr. Glennon amended his arbitration demand, alleging that Dean Witter defamed him by maliciously making the false "yes" answer on the Form U-5. Mr. Glennon sought compensatory and punitive damages as well as an order directing Dean Witter to amend the Form U-5. In October 1993, an NASD arbitration panel ruled that Mr. Glennon was entitled to the $2,450.51 finder's fee and $40,074.00 recruitment bonus. (The panel also instructed Mr. Glennon to return $22,500.00 to Dean Witter.) Most significantly, the panel found that the statements explaining Mr. Glennon's termination in the Form U-5 were defamatory and awarded him $728,250.00 in compensatory damages, $750,000.00 in punitive damages, and $213,000 in attorneys fees. It also ordered Dean Witter to amend the Form U-5 so as to remove the defamatory explanation of Glennon's termination and replace it with an explanation that he had been terminated as a result of a compensation dispute. The panel took the extraordinary step of making a disciplinary referral to NASD Regulation to investigate Dean Witter for its misconduct in connection with Mr. Glennon's Form U-5. Dean Witter appealed the arbitrators' decision, asking the United States District Court for the Middle District of Tennessee to vacate the award. The Court denied Dean Witter's motion and confirmed the award. See Glennon v. Dean Witter, 1994 WL 757709 (M.D. Tenn. 1994). Dean Witter then appealed to the United States Court of Appeals for the Sixth Circuit, based in Cincinnati, Ohio. Dean Witter argued that under Tennessee law any statements of Forms U-5 were protected by an absolute privilege, that Glennon had failed to prove he suffered damages as the result of the defamation and that under it was denied due process of law because courts had only limited authority to review the arbitration panel's award of punitive damages. On May 6,1996 the federal appeals court rejected every one of Dean Witter's arguments, and upheld the district court's confirmation of the arbitration award. See Glennon v. Dean Witter, 83 F.3d 132 (6th Cir. 1996).
Lawyer(s):
Jeffrey L. Liddle
Ethan A. Brecher

Web Info(URL) www.liddlerobinson.com/pdf/9102594.pdf

In one of the earliest securities industry defamation awards, an NASD panel held that our client Barry Berkeley was entitled to $1,000,000 in compensatory damages for defamation, interference with prospective advantage and injurious falsehood. The panel also decided that Mr. Berkeley did not have to repay to PaineWebber $775,000 that had been advanced to him under a promissory note. Mr. Berkeley served as a high yield fixed income salesman at PaineWebber in its mortgage-backed securities department. As part of inducing Mr. Berkeley to join the firm, PaineWebber agreed o advance him a loan of $775,000, which was forgivable over two years. Based on his performance in 1990, PaineWebber led Mr. Berkeley to believe that he would be promoted to National Sales Manager. Subsequently, however, PaineWebber decided to promote another individual. Mr. Berkeley objected, claiming that the other candidate would interfere with his business. Mr. Berkeley and his supervisor agreed, however, that he should take a few vacation days to cool down, since he was upset that he had been denied the promotion. After returning to work, PaineWebber’s head of fixed income terminated his employment for taking unauthorized vacation days. Subsequently, PaineWebber employees started “badmouthing” Mr. Berkeley to prospective employers, including asserting that he was a “compliance problem,” a “pain in the ass,” and that he had to be physically removed from the trading floor upon his termination because he was “ranting and raving.” PaineWebber filed a Form U-5 stating that he was fired because of his “supervisor’s dissatisfaction with reaction to promotion decision.” PaineWebber also told its own employees that he had been fired because of poor performance and his taking of unauthorized vacation days. Mr. Berkeley was unable to find comparable employment following his termination. Besides awarding Mr. Berkeley substantial damages, the panel on its own initiative, ordered PaineWebber to amend Mr. Berkeley’s Form U-5 to reflect that “An NASD arbitration panel…has determined that Mr. Berkeley was terminated as a result of irreconcilable differences between himself and various subordinates, colleagues, and superiors, tat were caused by internal office politics within the Fixed Income Department at PaineWebber, Inc. Mr. Berkeley was fired for espousing a theory of account management that was unpopular with others in the office and found by the firm’s management to be incompatible with its desires.” The panel also assessed PaineWebber with $29,800 in forum fees.
Lawyer(s):
Jeffrey L. Liddle

Web Info(URL) www.liddlerobinson.com/pdf/9002908.pdf