by Bill Singer
In a Financial Industry Regulatory Authority (“FINRA”) Arbitration Statement of Claim filed in April 2011, Claimant Wells FargoAdvisors alleged breach of a February 29, 2008, supplementary training agreement for a financial consultant. Claimant sought $56,250 plus interest, costs, and attorneys’ fees. In the Matter of the FINRA Arbitration Between Wells Fargo Advisors, LLC, Claimant, vs. Derek Dee Sanders,Respondent (FINRA Arbitration 11-01720, September 20, 2012).
Respondent Sanders generally denied the and asserted various affirmative defenses.
Award
Bill Singer
The sole FINRA Arbitrator hearing this case found Respondent Sanders liable and ordered him to pay to Claimant Wells Fargo $13,352.00 in compensatory damages, $2,607.99 in costs; and $15,241 in attorneys’ fees.
Bill Singer’s Comment
Inexplicably, the FINRA Arbitration Decision leaves out a lot of what I deem material background and facts.
According to online FINRA regulatory records as of September 25, 2012, Respondent Sanders was employed at Wachovia Securities from April 2008 through August 2010 and was registered with Claimant Wells Fargo Advisors from June 2008 through August 2010. Effective August 2010, Sanders joined Morgan Stanley Smith Barney. Might have helped us understand this case if theDecision include such basic information.
Referencing Claimant Wells Fargo demand for $56,250 in compensatory damages, the former employer was awarded less than 24% of what it sought. Unfortunately, the Panel tacked on to Respondent Sanders’s bill $2,600 in costs and over $15,000 in attorneys’ fee, resulting in a total Award of $31,200.99 — which adds up to about 55% of the demanded compensatory damages.
One thing that puzzles me with this Decision is why the FINRA Arbitration Panel rendered an award of compensatory damages for less than a quarter of what Wells Fargo demanded but then tacked on a hefty $15,000 in attorneys’ fee.
If Claimant Wells Fargo’s damages demand was deemed inflated by these arbitrators to the tune of four times what they felt appropriate, why didn’t they also decline to award attorneys’ fees? After all, if Wells Fargo had only sought $13,352 in damages during negotiations with Sanders, the former employee might have opted to write out that check. It seems that Sanders has, to some extent, been penalized for fighting the quadruple damages sought because the amount of the awarded attorneys’ fee exceeds the compensatory damages. If the Panel was compelled to award “reasonable attorneys’ fees” to the “prevailing party” pursuant to some contractual provision, that should have been disclosed; moreover, it should also have been noted what the requested attorneys’ fees as submitted by Claimant to the Panel so that we could understand whether all or part of the sought reimbursement was awarded.
Once upon a time, when Wall Street was rolling out the hiring carpet, major brokerage firms offered Employee Forgivable Loans to top producers and had trainee programs for wannabes. In more recent years, as Merrill Lynch, Bear Stearns, Lehman Brothers, Smith Barney, JP Morgan, and UBS fell upon hard times, those enticements faded. Moreover, those who walked upon Wall Street’s cushy welcome mat and into an entry-level job or highly compensated stockbroker position, often found themselves in a hostile work environment and, if they found themselves forced out or decided to quit, often on the receiving end of hardball collection efforts for the balances of EFLs or trainee fees. In many of these collection efforts, the former employers acted responsibly and were entitled to recoup their outlays or costs; other times, however, the whole collection effort took on unsavory overtones of victimizing folks who were laid off or forced out through no fault of their own.
In the case of collections of EFLs and trainee fees, the bulk of those cases historically settle. Wells Fargo seems to have a penchant for taking trainee fee cases to the mat – although some of these reported FINRA arbitrations may have been inherited through Wells Fargo’s 2008 acquisition of the old Wachovia brokerage business, which included A.G. Edwards. Of the five contested FINRA trainee fee arbitrations that resulted in decisions that I’ve recently written about, all involved either Wells Fargo, Wachovia, or A.G. Edwards. The reported FINRA arbitration decision in those five cases have not reflected an overwhelming record of victory for the former employer.
In only one FINRA arbitration that “Street Sweeper” reported did Wells Fargo get every penny it sought in its damages demand and that was against aformer employee who represented himself. In today’s case and another matter, the firm received less than half of the compensatory damages sought. In two cases, the former Wells Fargo employee walked away from the battle without having to pay a penny (as was also the case in an A.G. Edwards trainee fee case).
For more details, see these “Street Sweeper” columns: