FINRA Arbitrators Award Over $5 Million To Former RBC Employee

November 18, 2011

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim initially filed in July 2010 and thereafter amended, Claimant Schonhorst alleged that Respondents Respondents:

  • breached the terms of his Employment Agreement;
  • wrongfully terminated him; and
  • maliciously defamed him on his Form U5.

Asserting breach of contract, fraud, tortious interference with business relations, and defamation, Claimant Schonhorst claimed to have suffered "an enormous loss of past and future earnings," and sought at least $3 million in compensatory damages; at least $2 million in punitive damages, interest, fees, costs, injunctive relief, and declaratory judgment, and an expungement of his Central Registration Depository record ("CRD"). In the Matter of the FINRA Arbitration Between Mel H. Schonhorst, Claimant, vs. RBC Capital Markets Corporation (f/k/a RBC Dain Rauscher, Inc.) and William Gumbert, Respondents (FINRA Arbitration 10-03097, November 11, 2011).

Respondents generally denied the allegations and asserted various affirmative defense.

Decision

The FINRA Arbitration Panel found Respondent RBC liable for and ordered it to pay to Claimant Schonhorst:

  • $4,400,000.00 in compensatory damages;
  • $314,224.00 for Wealth Accumulation Plan; and
  • $483,871.00 for unpaid bonus.

Bill Singer's Comment

At this point, I would normally go off on a tirade about how the FINRA Arbitration Panel failed to fully explain the facts of the case and offered us no meaningful rationale for its decision; however, not this time - not with this case. To this FINRA Arbitration Panel's credit, they drafted and published as competent and comprehensive a Decision as the ever-dyspeptic Bill Singer could want. I am in awe.

For starters, the Panel explains why it denied the requested expungement and lets us know of the issues that it wrestled with in rejecting the request. The Panel explains that the disputed statement on Claimant's Form U5 referenced his status as "subject of investigation" by a federal agency. In delving into the issue, the Panel noted that:

This was verified at the proceeding, by the United States Attorney General (USAG) to be a true and correct statement at the time it was placed on the U-5 and still, as of the close of the hearing, to be considered true and correct. We firmly believe that removal of this statement is not possible at this time, since the statue of limitations has not run as a possible action by the federal agency against the Claimant

Expungement of this statement will in no way change history or "un-ring" the bell. We suggest that at a future time the Claimant could seek an amended Form shedding light on the situation at the end of the pending FBI/USAG investigation.

In explaining the monetary awards, the Panel explained that the $4.4 Million in compensatory damages represented

  • $2.2 Million for income lost from the date of Claimant's termination through the September 19, 2011, arbitration hearing; and
  • $2.2 Million for potential lost earnings from the September 19th hearing until Claimant's retirement age of 67.

Also, the Panel ordered the return to Claimant of his $314,224.00 Wealth Accumulation Plan balance, as was its balance at the time of his release from employment. Further, the Panel awarded $483,871.00 as the unpaid portion of Claimant's Bonus Plan.

Finally, this FINRA Arbitration Panel earned a much-deserved last word - so, let me close out this article with one more quote from the Decision: 

We have an opinion that had the termination of employment been of a mutual decision and with a more level headed approach other than the reliance of information from an industry publication and a possibly overly quick reaction to such "news" the panel would not have been requested to hear and rule on what we consider to be 'thin' evidence.