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Allegations Of Intolerable Work Conditions Fail In Former Merrill Lynch Employee's Promissory Note Case
Written: April 11, 2012

The Charlotte Bobcats Ain't the Chicago Bulls. What's that got to do with FINRA arbitrations? More than you might realize.

In a Financial Industry Regulatory Authority (“FINRA”) Arbitration Statement of Claim filed in November 2009, Claimant Merrill Lynch asserted causes of action for breach of contract and unjust enrichment against former employees Respondents Bales and Nordmo. The claims arose in connection with Promissory Notes separately executed by the respondents. In the Matter of the FINRA Arbitration Between Merrill Lynch, Pierce, Fenner & Smith Incorporated, Claimant/Counter-Respondent, vs. Jolie Ann Bales and Kim Tracy Nordmo,Respondents/Counter-Claimants (FINRA Arbitration 09-06280, March 19, 2012).

In addition to attorneys’ fees, Claimant sought the following damages:

Bales: $697,056.93 in principal (includes $46,848.35 arrears) plus $100.26 daily interest from August 7, 2009, until paid in full; and

Nordmo: $911,960.67 in principal (includes $49,466.18 arrears) plus $118.68 daily interest from August 7, 2009, until paid in full.

Respondents generally denied the allegations, asserted various affirmative defenses, and filed Counterclaims for:

  • Fraud and deceit;
  • negligent misrepresentation;
  • constructive fraud;
  • intentional interference with contract relations and prospective economic advantage;
  • negligent interference with prospective economic advantage;
  • constructive discharge;
  • breach of contract; and
  • breach of implied covenant of good faith and fair dealing.

Respondent Bales sought:

  • at least $3 million in compensatory damages
  • damages for the loss of her home, her assets and the depletion of her retirement accounts;
  • expugement of the firm’s allegedly false comments on her Uniform Termination Notice For Securities Industry Registration (“Form U5″);
  • damages for the defamatory nature of the U5 comments;
  • punitive damages in an amount that is three times the amount of her compensatory damages;
  • costs and disbursements;
  • filing and forum fees; and
  • attorneys’ fees.

Respondent Nordmo sought:

  • at least $3 million in compensatory damages;
  • punitive damages in an amount that is three times the amount of her compensatory damages;
  • costs and disbursements;
  • filing and forum fees; and
  • attorneys’ fees.


On February 5, 2010, Respondents Bales and Nordmo filed a Motion to Sever their cases, which Claimant initially opposed but subsequently agreed to. Accordingly, this arbitration was severed with the original filing number retained for the case against Respondent Bales and a new number assigned to Respondent Nordmo’s separate matter.

Merrill Lynch v. Bales

The FINRA Arbitration Panel denied Claimant Merrill Lynch’s claims in their entirety and cancelled the Promissory Note executed by Respondent Bales.  The Panel also denied Bales’s Counterclaims.

Based upon a finding of defamation, the Panel recommended that the answer to Question 7B on Respondent Bales’s Form U5 as filed on August 19, 2009, by Claimant be changed from “Yes” to “No,” with the accompanying Disclosure Reporting Page  (“DRP”) expunged in its entirety.

SIDE BAR: Under the heading “Internal Review Disclosure,” Item 7B asks whether the terminated associated person: .

Currently is, or at termination was, the individual under internal review for fraud or wrongful taking of property, or violating investment-related statutes, regulations, rules or industry standards of conduct?

Merrill Lynch v. Nordmo

Pursuant to the agreement to sever the cases, the claims against Respondent Nordmo were arbitrated under the caption: In the Matter of the FINRA Arbitration Between Merrill Lynch, Pierce, Fenner & Smith Incorporated, Claimant/Counter-Respondent vs. Kim Tracy Nordmo,Respondent/Counter-Claimant (FINRA Arbitration 10-01727, April 4, 2012).

Respondent Nordmo claimed that her working conditions at Claimant were so intolerable that she had to quit, and, under the terms of the loan agreement, her repayment obligation was terminated.

In assessing the charges and counter-charges, the FINRA Arbitration Panel determined that Respondent Nordmo had sought out Claimant Merrill Lynch in 2007; and, in turn, Claimant recruited her.  Unfortunately, upon Respondent Nordmo’s arrival in early 2008, she was placed in the Private Banking and Investment Group (“PBIG”), that services ultrahigh net worth clients, and that decision turned out, in the Panel’s words, as “not a good fit.” As the Panel explained:

Respondent was searching for an environment where she could concentrate on refining and marketing her successful ETF investment strategy, but Claimant’s PBIG environment did not lend itself to that and both sides were unhappy with the situation.

Attempts by Respondent and also by Claimant’s management to find a solution for the various issues were not immediately successful, and the forced sale of Claimant in the Fall of 2008 to Bank of America, combined with the nationwide economic downturn, created a difficult environment that was not controlled by either party.

By mid-2009. Respondent began establishing her own Registered Investment Associate Firm, and in August 2009 she resigned from Claimant’s employ. Respondent made no arrangements regarding the transition loan that Claimant had provided her when she came on board in early 2008, and simply stopped making the required monthly payments that were already in arrears. 

The FINRA Arbitration Panel found Respondent Nordmo liable and ordered her to pay to Claimant Merrill Lynch $862,494.00 (the outstanding balance on the Promissory Note) plus 3.5% per annum from the date of service of this award for a total duration not to exceed 15 years.

15 years? Yeah, I was wondering where that came from too.

It seems that the Arbitration Panel provided for repayment of principal and interest by Respondent in the form of at least a $6,165.82 monthly payments to Claimant with the final payment to address any remaining shortages/overages. The payments were ordered to be made within the first ten days of each calendar month with Respondent retaining a right to make larger payments at any time without penalty.

Pointedly, the Panel stated that it had rejected “in its entirety Respondent’s Counterclaim relating to the ‘intolerable working conditions’ at Claimant’s offices.”

Bill Singer’s Comments

Compliments to this FINRA Arbitration Panel for providing us with meaningful background and rationale.  An interesting award with a bespoke payment solution.

In recent months, Merrill Lynch has not emerged unscathed in its efforts to secure repayment of outstanding employee loans. FINRA slapped the firm with an historic $1 million fine for circumventing the organization’s mandatory intra-industry arbitration rules.  Although the majority of these employment loan cases ultimately are resolved in the employer firm’s favor — be that by settlement or panel decision — the record has not been unblemished in recent times for Merrill Lynch or its ilk.  Whatever works against Merrill Lynch and whatever fails, is used as grist for many litigation mills on behalf of similarly situated former employees at the likes of JP Morgan, Wells Fargo, Morgan Stanley Smith Barney, UBS, and elsewhere.  One can hear the grinding wheels scraping as more swords are sharpened for upcoming battles.

What’s going on here with the joinder of the respondents?  It’s part of the gamesmanship of lawyering.  Consider this hypothetical:

Drive To The Playoffs: The New York Knicks have two games left in the season and must win one in order to make it into the playoffs.  Tonight they’re on the road against the Chicago Bulls with the best record in the game. Tomorrow, they play at home against the Charlotte Bobcats with the worst record in the game. What should the coach do. Candidly, the Knicks realize that they don’t have much chance beating the Bulls in Chicago but they will likely romp at Madison Square Garden against the Bobcats. Except, you know, it’s professional sports and there’s that old truth about how on any given night even the worst team can beat the best — so, who knows, maybe the Bobcats are energized to play spoilers and maybe the Bulls will field bench players and rest their veterans for the playoffs.  We’re playing to win at least one game. Should the Knicks field their best team and try for the win in Chicago or should they cut their losses and save their best effort for an easier victory over a lesser team?

That’s often how you approach the decision of whether to join respondents when you’re the claimant, or whether to seek out other claimants against a common respondent.  If there are multiple cases, perhaps you get some favorable aura effect that only slightly diminishes the better cases to the advantage of the weaker, which are enhanced by association with the more favorable claims — of course, the mirror image of all that ruminating applies with equal strength to the other side of the arbitration caption.

In considering Claimant Merrill Lynch’s strategy, it may well be that the former employer deemed Bales to be the Bulls and Nordmo to be the Bobcats.  Perhaps Merrill Lynch figured it had no chance with Bales but would benefit by having Nordmo’s lesser case detract from the former’s strength.  By trying the two employees together, maybe we can bang up Nordmo and eke out at least one win. As they say, hey, worth a shot.  Of course, the Arbitration Panel didn’t buy the play and blew the whistle — sending Nordmo’s case to a separate arbitration panel.

At the end of her game, Bales ran away with it and emerged the winner; on the other hand, Nordmo lost her contest but for the generous payment terms. The same lawyer represented both respondents, so he had a split. Why didn’t Merrill Lynch file these two cases separately to begin with? Was Nordmo happy with her lawyer’s decision to seek severance? Was there some grand strategy afoot or simply a fumbled gameplan? Hey, who knows. Nonetheless, welcome to the chalkboard of litigation.


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