by Bill Singer
In a Financial Industry Regulatory Authority (“FINRA”) Arbitration Statement of Claim filed in March 2010, Claimant Morgan Stanley Smith Barney asserted
Count I: unfair competition/raiding
Bill Singer
Count II: aiding and abetting a breach of fiduciary duty
Count III: misappropriation of confidential information
Count IV: tortious interference with advantageous business relationships and contracts; and,
Count V: breach of promissory note against Respondent Paul McWane
The causes of action relate to Respondent Baird’s recruitment and employment of several of Claimant’s Lynchburg, VA, branch employees and to Respondent McWane’s alleged failure to make repayment of the balance of a Promissory Note dated February 12, 2009 (“Note”). In the Matter of the FINRA Arbitration Between Morgan Stanley Smith Barney, LLC, Claimant, vs. Robert W. Baird & Co. Incorporated and Paul McWane, Respondents (FINRA Arbitration 10-01187, November 21, 2012).
Claimant sought compensatory damages, punitive damages, attorneys’ fees, and costs against Respondent Baird. Additionally, Claimant sought the return fof all documents relating to its Lynchburg office clients obtained by Respondent Baird. As to Respondent McWane, Claimant sought $107,448.90 in compensatory damages, plus interest, costs and attorneys’ fees as provided in the Note.
Respondent Baird generally denied the allegations and asserted various affirmative defenses.
One Down
Claimant voluntarily dismissed Count V ofStatement of Claim, and, accordingly, Respondent McWane was dismissed with prejudice.
Decision
The FINRA Arbitration Panel found Respondent Baird liable and ordered the firm to pay to Claimant Morgan Stanley Smith Barney $700,000.00 compensatory damages plus 6% per annum interest from December 1, 2012 until the Award is paid.
Bill Singer‘s Comment
My, my, my! How angered Morgan Stanley Smith Barney must have been with the audacity of Robert Baird. I mean, you know, an august firm of Morgan Stanley Smith Barney’s stature would never, ever stoop to such unsavory tactics as set forth in the Statement of Claim. Of course, after some 75 years, the name Smith Barney has been designated for the scrap heap but, hey, it was all a bit cumbersome anyway.
Now as for this Baird case, lemme see . . . when was it . . . oh, yeah, in September 2012, just around the time when the Morgan Stanley folks pulled the plug on the Smith Barney name, “Street Sweeper” reported about another FINRA Arbitration raiding case: Morgan Stanley Smith Barney Eviscerated In Fidelity Unfair Competition Case. In a FINRA ArbitrationStatement of Claim filed in October 2011, Claimant Fidelity detailed its dispute with Respondent Morgan Stanley Smith Barney (and another individual respondent) in connection with the alleged misappropriation of Fidelity’s confidential customer information, which was then purportedly used to unfairly compete with Claimant by soliciting its customers. After awarding to Claimant Fidelity about $81,000 in compensatory damages — the arbitrators tacked on punitive damages, attorneys’ fees, and costs, to the tune of an award of nearly $700,000! Amazing how that amount is nearly the same as the one awarded to Morgan Stanley Smith Barney in the case featured in this column. Will coincidences never cease?
To better explain the rationale of their award, the arbitrators in the Fidelity case drafted a compelling, 25-page “Arbitrators’ Report,” which included this nugget:
The conduct engaged in by MSSB in this case represents an unfair method of competition in the securities industry precisely because it attempted, either explicitly, implicitly or through nefarious and surreptitious means, to impose upon Fidelity, a non-Protocol firm, rules of commerce by which it never agreed to be bound. This isn’t fair competition; it’s an illicit and improper rigging of the rules — a stacking of the deck — to favor one competitor over another.
Wall Street‘s landscape has always been filled with contentious disputes between and among the likes of Merrill Lynch, JP Morgan, UBS, Morgan Stanley, Wells Fargo, and so many other names no longer with us, merged into the ranks of competitors, or still hanging in there. Firms come and go but among the constants are the impetus to cannibalize business; to engage in hardball tactics to jam up those who get in your way; and to pull out all the stops, legal or otherwise, compliant or otherwise, ethical or otherwise.
It’s a tough Street. Always has been. Always will be. Not the pavement for the faint of heart.