Former UBS Broker Sues Firm For $3.8 Million in Deferred Comp and Unused Vacation Time

November 29, 2011

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in November 2009, Claimant Mendenhall asserted breach of contract; breach of fiduciary duty; fraud; and quantum meruit [essentially the fair value of services rendered] in connection with his dispute pertaining to allegedly unpaid deferred compensation and unused paid vacation time following his retirement from Respondent UBS Financial Services. Claimant sought at least $3,786,833.02 in compensatory damages; punitive damages; interest; attorneys' fees; fees; and costs. In the Matter of the FINRA Arbitration Between Patrick M. Mendenhall, Claimant/Counter-Respondent vs. UBS Financial Services, Inc., Respondent/Counter-Claimant (FINRA Arbitration 09-06504, November 16, 2011).

Respondent UBS generally denied the allegations, asserted various affirmative defenses; and asserted a Counterclaim for violation of the Computer Fraud and Abuse Act (18 U.S.C. § 1030); misappropriation of trade secrets; breach of fiduciary duty; breach of contract and money had and received; and conversion. The causes of action in the Counterclaim related to Mendenhall's alleged failure to repay monies owed on draws and his taking of confidential and proprietary information.

Claimant Mendenhall generally denied the allegations in the Counterclaim and asserted various affirmative defenses.


The FINRA Arbitration Panel found Respondent UBS liable and ordered it to pay to Claimant Mendenhall $350,000 in compensatory damages plus 6% interest until paid. UBS' Counterclaim was dismissed.

Bill Singer's Comment

No - you're right, not a particularly interesting case; however, it is illustrative of a number of factors that Wall Street professionals should consider before initiating lawsuits against former employers (and equally instructive for employing brokerage firms).

According to online FINRA records as of November 28, 2011, Claimant Mendenhall seems to have started his securities industry career at least as early as 1982 with Merrill Lynch, Pierce, Fenner & Smith, Inc., and thereafter becoming affiliated with Lehman Brothers, Drexel Burnham Lambert, and Smith Barney.  By 1990 he had landed at PaineWebber, which is now known as UBS - a relationship that lasted a prodigious 19 years until his resignation in August 2009.

And how did those 19 years end?  Clearly with a thud.  Within a few months of Mendenhall's departure in November 2009, he filed his Statement of Claim.

This FINRA Arbitration Decision is quite disappointing because it fails to explain to us what the respective components were in tallying up Mendenhall's impressive demand for nearly $3.8 Million in damages.  Frankly, that's a hell of a lot of "unused vacation time" and I suspect that the bulk of the allocation of damages is in the "deferred compensation" claim.  Regardless, I don't think that FINRA Arbitration Decisions should be guessing games, and the sparse nature of the fact pattern in this case does a disservice to those trying to derive something of value from the lessons of this dispute.

Similarly, it certainly strikes a sour note to see that an employee of nearly two decades gets whacked by his former employer with not repaying a draw and for allegedly stealing confidential computer data.  The basis for those charges must have been quite flimsy because the Panel dismissed the charges and awarded zippo to UBS.

Reduced to its essence, we have  a veteran employee who apparently retired, gets enmeshed in a pissing contest with his former employer, and reason flies out the window and intransigience walks in the door.  How else can we explain a demand for nearly $3.8 Million that is ultimately awarded at one-tenth that amount?  Also, factor in the legal costs of two years of pending arbitration and the disruption such a lawsuit causes to both sides.  You'd like to think that these things could be mediated or amenable to rational settlement. Unfortunately, as is all too often the case, both sides are convinced of the rectitude of their respective positions, neither side is willing to budge, and years later, both sides lick their wounds with little to show for all their bluster.

Solely judging by the hand raised aloft by the Panel, Claimant Mendenhall won.  But when you demand ten times what you're awarded, I'm not sure that's much of a victory.