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John J. Glennon, Jr. v. Dean Witter Reynolds - 10/12/1993

Award Amount- $1,734,024.00

Case Summary: 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).

Jeffrey L. Liddle

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