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Former Schwab Employee Lost Defamation Arbitration But Employer Gets Slammed By Panel
Written: November 17, 2011

In a Financial Industry Regulatory Authority (“FINRA”) Arbitration Statement of Claim filed in July 2010, Claimant Johnson, representing himself pro se, asserted defamation, duress, intentional infliction of emotional distress, negligence and invasion of privacy as they related to a letter purportedly sent by Respondent Schwab to Claimant’s then current and now previous employer. 

Claimant sought $500,000 in compensatory damages; $10 Million in punitive damages; interest;  fees; costs;  and a “full letter of retraction to Claimant’s previous employer.” At the close of the arbitration hearings, Claimant added a request of an additional net award of $75,000 for four years of lost compensation William James Johnson, Claimant, vs. Charles Schwab & Co., Inc., Respondent (FINRA Arbitration 10-03164, November 11, 2011).

Respondent Schwab generally denied the allegations and asserted various affirmative defenses.

SIDE BAR: Given that I found the FINRA Arbitration Decision in this case to be vague as to the precise nature of this dispute, I communicated with Claimant Johnson in an effort to clarify some of the issues. 

Based upon Claimant Johnson’s explanations and the facts specified and implied in the FINRA Arbitration Decision (and a whole lot of inference on my part), it seems that Respondent Schwab sent two letters to a former and also to a then-current employer of Johnson. Apparently, Schwab complained in its correspondence about representations pertaining to the scope and nature of Johnson’s duties during his employment at Schwab.  Allegedly, Schwab  characterized Claimant’s online biographies and biographical blurbs in several of his published works as inaccurate and untruthful when it came to describing his role at Schwab; and Schwab requested that such marketing materials be removed from the former and current employers’ websites and hard-copy publications.  Claimant Johnson believed that the communications damaged his relationship with his then employer.

Round One: Sanctions

Claimant Johnson filed a Motion for Sanctionsalleging abuse of the discovery process by Respondent Schwab. Claimant asserted that Respondent Schwab had made

false statements to the FINRA Arbitration Panel and was recklessly seeking irrelevant information. Claimant further asserted that the majority of Respondent’s discovery production was marked “redacted” or “attorney-client privilege” and additionally, that Respondent was avoiding his discovery requests.

Respondent Schwab denied the discovery abuse allegations and countered that it was Claimant who was not cooperating and had not made an effort to resolve the discovery issues. The FINRA Panel denied Claimant’s Motion for Sanctions.

Round Two: Sanctions

Thereafter, Respondent Schwab filed its own Motion for Sanctions alleging that Claimant Johnson had failed to comply with a July 2011 Order from the FINRA Arbitration Chair. Claimant argued, among other things, that the information sought was irrelevant and outside the relevant time period. The Panel denied Respondent’s Motion for Sanctions.

One Last Shot

Thereafter, Claimant Johnson filed a Motion to Object to Respondent’s Supplemental Notices of Compliance, Witness Lists and Other Discovery. The Panel ultimately determined the motion to be moot and did not rule on it.


The FINRA Arbitration Panel found Respondent not liable on any of Claimant’s claims, but ordered Respondent to pay to Claimant the $600 refundable portion of his FINRA filing fee.

Okay, as they would say at the scene of a fender bender, nothing to see here, move on — except, the FINRA Arbitration Panel added this odd comment after ruling against Claimant Johnson:

The Panel wishes to note its view that Respondent’s investigation of Claimant’s biography was insufficient and incomplete by failing to contact either Respondent’s Orlando office or any of Claimant’s previous co-workers. We recommend that Respondent review its procedures to insure that in the future in similar circumstances that each and every statement taken together or standing alone, is accurate.

Bill Singer’s Comment

Ooooooooookay, ummm . . . what the Hell???

Seems to me that this whole dispute was about Claimant Johnson’s contention that Respondent Schwab sent out letters to a former employer and a current employer that he felt damaged his ongoing relationship with the latter and defamed him with both.  Claimant loses his case but the FINRA Arbitration Panel makes Respondent Schwab pay him $600 — and then the Panel admonishes Schwab that it’s “investigation of Claimant’s biography was insufficient and incomplete. . .”

For starters, why is the Panel requiring Respondent Schwab — the victor in this case — to pay $600 to the losing Claimant?  If you can make sense out of that, congratulations.

Then there’s the Panel’s shot against Schwab for undertaking an insufficient and incomplete investigation of its assertions.  Insufficient and incomplete as in wrong and damaging the Claimant? – or insufficient and incomplete as in no big deal?

Clearly, I’m not understanding what the Panel said or meant to say. Did the Panel find Schwab’s statements defamatory or not:  Simply going by the Decision, you’d have to say the Panel found no defamation but for the fact that the Panel is also chastising Schwab for not properly checking out the information upon which its letters were based.  Which sort of drives me crazy because I’m not understanding why an arbitration panel would complain about a given Respondent’s purported investigative sloppiness if the disputed statements were found to be accurate and not defamatory? 

On top of that confusion, I can’t even begin to wrap my arms around the point of the Panel’s adding that Schwab should ”review its procedures to insure that in the future in similar circumstances that each and every statement taken together or standing alone, is accurate. . .”  Does that mean that Schwab’s letter(s) contained some defamatory comments?  I’m still not getting why this Panel did not conclude that Schwab drafted letters based upon incomplete and inaccurate information, transmitted those flawed allegations to two third-parties, and, as a result, defamed Claimant Johnson.

All of which reminds me of a restaurant review that is glowing about the food and service, only to end with the critic giving the establishment one star out of a possible five.  You scratch your head.  You re-read the review. It doesn’t matter — you just can’t reconcile what was written with the rating.

Ultimately, Johnson v. Schwab seems to find that Claimant was defamed but dismisses his case.  I fully appreciate that such may be my personal inference and others may read this case differently, but I still don’t like this Decision.  Bending over backwards to be fair, the best that I will say is that this is a case the FINRA Arbitration Panel:

  • reached the right verdict but woefully failed to explain the facts and rationale;
  • reached the wrong verdict and woefully failed to explain the facts and its rationale; or
  • issued a Decision that will forever remain inexplicable and indecipherable. 

Regardless of which of the three bullet-points is correct, FINRA owes the industry and the public far more than a jig-saw puzzle with a missing piece.  As if you haven’t heard me voice that same complaint over and over and over again.


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