In a Financial Industry Regulatory Authority (“FINRA”) Arbitration Statement of Claim filed in November 2010, Claimant Edward D. Jones & Co asserted the following causes of action against Respondents Morgan Stanley Smith Barney (“MSSB”) and Callahan:

• breach of contract;
• violation of the Illinois Trade Secrets Act;
• violation of the Computer Fraud and Abuse Act;
• breach of fiduciary duty; and
• unfair competition.

What prompted that kitchen sink of charges?  It seems that Respondent Callahan resigned from Claimant Edward Jones without notice on October 22, 2010.  And where did this former employee go?  Ah, to a competitor, Respondent MSSB.

Claimant Edward Jones wasn’t tickled by the defection of this one broker.  What appears to have stoked the flames of the former employer’s ire was its belief that before Callahan quit, he misappropriated and misused Claimant’s trade secrets.  Additionally, Claimant alleged that its former employee solicited its customers in an effort to get them to end their relationship with Edward Jones and to transfer their business to Respondent MSSB.

Not content to simply wait around for a FINRA Arbitration Panel to hold hearings and reach a verdict, Claimant sought a temporary injunction against Respondents in court, but around December 15, 2010, FINRA was notified that the motion had been denied – I’m guessing that Respondents had a happier Christmas ten days hence.

As to the measure of Claimant’s fury, keep in mind that it initially sought $5,000,000 in compensatory damages plus punitive damages, costs, and fees. By the time of the hearing, however, the demand for compensatory damages had been reduced to  $177,217.00. In the Matter of the FINRA Arbitration Between Edward D. Jones & Co., LP,Claimant, vs. Morgan Stanley Smith Barney and Jerome Allen Callahan, Respondents (FINRA Arbitration 10-05128, March 12, 2012).

Respondents MSSB and Callahan generally denied the allegations and asserted various affirmative defenses.

DECISION

The FINRA Arbitration Panel denied and dismissed with prejudice Claimant Edward Jones’ claims.

Bill Singer’s Comment

Now, it’s not exactly unheard of for registered persons on Wall Street to quit.  Come to think of it, it’s not exactly unheard of for brokerage firms to go out of business with little, if any, notice to their employees – and, frankly, many brokerage firms have a penchant for mass layoffs with little prior warning.  If you’re unfamiliar with that fact, reach out to the former employees of Bear Stearns or Lehman Brothers, or maybe call up some of the former staff at Bank of America, JP Morgan, Citigroup, or Goldman Sachs.  Well, okay, maybe not Goldman Sachs, that firm’s having a bad enough time in the media today.

To Edward Jones’s credit, it doesn’t have the reputation for layoffs.  To the contrary, it has a reputation for its own unique, somewhat insular corporate culture. Regardless, the firm went hammer and tong after Callahan and, in the end, doesn’t have much to show for it beyond this rebuke by a FINRA Arbitration Panel.