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Barry S. Berkeley v. PaineWebber, Inc., and Timothy E. Cronin - 12/1/1991

Award Amount- $1,775,000.00

Case Summary: 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 to 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, that 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.

Jeffrey L. Liddle

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