An irreverent Wall Street Blog
by Bill Singer
Join BrokeAndBroker blog on Facebook  Follow the BrokeAndBroker blog on Twitter  Connect with BrokeAndBroker on LinkedIn  Join Bill Singer on Google+  Subscribe to RSS Feed

Former Morgan Stanley Branch Manager Litigates Hobson's Choice
Written: January 9, 2013

Thomas Hobson (1544-1631) Français : ...

Thomas Hobson (1544-1631) (Photo credit: Wikipedia)

In a Financial Industry Regulatory Authority (“FINRA”) Arbitration Statement of Claim filed in October 2011, Claimant Stroker alleged that Respondent Morgan Stanley Smith Barney had unilaterally altered his compensation – resulting in what he perceived as akin to a Hobson’s Choice: delay his retirement or relinquish a material portion of his earned compensation.  In the face of the perceived arbitrary demand, Claimant opted to resign from the firm on May 9, 2011, and filed claims asserting breach of contract and failure to pay compensation. Stroker sought $300,000 in compensatory damages plus interest, fees, and costs.  In the Matter of the FINRA Arbitration Between Steven W. Stroker, Claimant / Counter-Respondent, vs. Morgan Stanley Smith Barney, LLC, Respondent / Counter-Claimant (FINRA Arbitration 11-03896, January 2, 2013).

SIDE BAR: According to online FINRA records as of January 9, 2013, Claimant Stroker first entered the securities industry in 1983 and prior to filing his arbitration claim was registered with E.F. Hutton & Co., Lehman Brothers  Inc., Citigroup Global Markets Inc., and Morgan Stanley Smith Barney.

Respondent Morgan Stanley Smith Barney generally denied the allegations, asserted affirmative defenses, and filed a counterclaim asserting breach of contract, conversion, and unjust enrichment.  Respondent argued that pursuant to the terms of its Branch Manager Compensation Program,  in the first quarter of 2011, Claimant was paid an advance and that his resignation constituted a breach of that program and triggered a repayment obligation of a $27,446.24 balance.  In its counterclaim, the firm also sought interest and costs.


The FINRA Arbitration Panel found Respondent Morgan Stanley Smith Barney liable and ordered it to pay to Claimant Stroker $167,134.00 in compensatory damages.

Separately, the Panel found Stroker liable and ordered him to pay to Respondent Morgan Stanley Smith Barney $27,446.24 in compensatory damages plus 5% per annum interest from May 23, 2011 through December 12, 2012.

Bill Singer‘s Comment

This Decision sort of took all the fun out of the matter by not providing us with a tad more in the way of meaningful facts and rationale.  For starters, what constituted Claimant Stroker’s calculation of his $300,000 claim for compensatory damages and why did the Panel only award a smidgen over half? Further, what exactly was the “earned compensation” that Claimant was asked to give back and why had Morgan Stanley Smith Barney insisted upon such a clawback?

It’s always frustrating to me when I come across such an arbitration decision because industry participants would truly benefit from a more substantive presentation of the dispute and the basis upon which the arbitrators resolved it.  Moreover, when a panel rules in favor of both the claimant and the respondent, I’m always intrigued as to how everyone can be right yet be wrong — I understand how and why such cases present themselves but believe there is an obligation upon FINRA arbitrators to explain the unusual outcome.

Based solely upon what I infer from the Decision,this arbitration seems to have largely been a victory for Claimant Stroker, if for no other reason that he netted about $140,000 in damages.  As to whether Stroker considers the resolution of his dispute a victory remains to be seen.

In filing his claims, Stroker raises a complaint that is becoming more common these days: an employing brokerage firm is no longer “negotiating” the terms of employment-related contracts or “renegotiating” existing agreements; but, to the contrary, is engaged in delivering ultimatumsintended to force concessions from vulnerable employees.  In my law practice, such is becoming a more frequent query from potential clients and I know that in conversations with other industry lawyers, the issue is being raised with increasing frequency.

“Take it or leave it” is antithetical to the core concept that a contract is derived from bargaining between parties. Of course on Wall Street there is this frequently argued point that there are no “contracts” between the employer/employee or the principal/independent contractor — the legalese and mumbo-jumbo is that there are mere “understandings” and “agreements.” Next time a brokerage firm puts a paper in front of you to sign, see if they call it a contract.

As any first-year law student should know, courts generally refuse to enforce so-called “contracts of adhesion” where one party has effectively compromised the ability of the other party to negotiate in good faith.  Putting a gun to the other party’s head is not considered negotiation but ultimatum.  Of course, in a commercial context, contracts are rarely negotiated between parties with equal bargaining power but, at some point, you cross the line between limited choices and none whatsoever.  Similarly, it’s one thing to insist upon certain terms as conditions precedent to employment; but it’s quite another thing to make similar demands upon an employee after he or she has left a prior employer, joined your firm, and developed a book of business.  It’s not as if we’re all playing a friendly game of golf and you can simply offer a Mulligan.

And now for a bit of trivia for my “Street Sweeper” readers:

Thomas Hobson (1544 to 1631) was an English mail carrier who rented his horses from his stable. Upon realizing that his fastest steeds were in demand, resulting in the uneven use of his fleet that overworked his best mounts, Hobson devised a rotation to preserve the lifespan of his stock.  Consequently, a customer had the option of renting whichever horse was in the nearest stall – and Hobson regularly rotated his mounts to ensure that each horse was moved, next in line, into the renting stall.  Purportedly, Hobson’s policy was “this one or none,” which gave renters the choice of riding the horse in the first stall or effectively taking a hike.  The term “Hobson’s Choice,” has come to represent the appearance of a choice under circumstances where it is essentially a take-it-or-leave-it proposition.

My wife tells me the story of a time when she and her colleagues were in a local diner ordering dinner. One of her colleagues ordered a dinner that include “choice of soup.” When he asked what the soups were, the waiter said “Chicken Noodle.” Apparently inferring from the term choice on the menu that there were other soups to pick from, my wife’s colleague asked “What’s the choice?” In the wry, somewhat joking style of delivery that has become the hallmark of crusty waiters, the answer was “Have it or not.”

Have it or not, Morgan Stanley Smith Barney apparently told Branch Manager Stroker. Not seems to have been his choice.  Frankly, I like the fact that Stroker took this dispute to the mat.


Previous Entries
July 1, 2015
If you're going to promise a Wall Street regulator that you will fix a problem, you better make certain -- in fact, you better make damn cer... Read On
June 30, 2015
In "SEC Commissioner Gallagher Rages Against The Dying Light In Two Dissents" (, June 18, 2015), I noted that:After four years ... Read On
June 30, 2015
Stockbroker, Compliance, Legal, and Regulatory JobsEmployment Page Jobs#wallstreetjobs @brokeandbrokerNOTICE TO EMPLOYERS: Brok... Read On
June 29, 2015
On June 26, 2015, the Financial Industry Regulatory Authority ("FINRA") published this somewhat unusual and intriguing press release:FINRA Supports NA... Read On
June 27, 2015
BREAKING NEWS: Supreme Court Rules On Gay MarriageIn Obergefell et al. v. Hodges, Director, Ohio Department Of Health, et. al (Slip Opinion,... Read On
June 26, 2015
In Obergefell et al. v. Hodges, Director, Ohio Department Of Health, et. al (Slip Opinion, Supreme Court, No. 14–556; 576 U. S. ____ / June ... Read On
June 26, 2015
During my three decades on Wall Street (which has included stints as an industry regulator, industry defense lawyer, and public customers' lawyer), I'... Read On
June 25, 2015
You ever heard of PPAC Act -- a Congressional Act passed in March 2010?  That law is formally known as the "Patient Protection and Affo... Read On
June 25, 2015
If there is a hallmark of the Financial Industry Regulatory Authority's ("FINRA's") approach to Wall Street regulation, it is likely found in the se... Read On
June 24, 2015
It has been said that lawyers' fees are like a gas, which expands to fill any size container. Sometimes you get what you pay for and your lawyer think... Read On
June 24, 2015
You can't do something about something that you don't know anything about. Yeah, I know, not exactly profound words but they are at the heart of today... Read On Job Search

Related Topics
Tag Cloud
Internet FINRA Bear Stearns Bloomberg SEC NASD NYSE Money Laundering Due Diligence Waiver Forbes China Broy Woody Allen Madoff NAC NPR Marketplace Stanford UBS Ketchum Antitrust NASDAQ RRBDLAW Schapiro Bill Singer BrokerAndBroker USERRA Morgan Keegan Arbitration Counterclaim Khuzami BrokeAndBroker Aleynikov Goldman Sachs brokeandbroker Promissory Note U4 Bill SInger EFL CFTC Huffington Post Flash Crash arbitration RBC Ponzi Affinity Fraud Wachovia Criminal Raymond James Expungement Fraud Securities Fraud Outside Business Activity Registered Rep Magazine FOREX FBI Banc of America Pro Se PCAOB Supreme Court Morgan Stanley Smith Barney E*Trade Margin email Galleon Penson U5 Defamation Protocol Wells Fargo Punitive Damages Citigroup Merrill Lynch ARS Employee Forgivable Loan Street Legal Morgan Stanley AWC Fidelity Bankruptcy Broke And Broker HFT David Sobel Day Trading Ameriprise Commissions Spouse Schwab Commission CRD Kenneth Starr IRS CNBC Complaint ATM Skimming Hacking Phishing Malware Naskovets Poteroba Koval Lincoln Financial Selling Away Outside Business Activities Rakoff 2nd Circuit Second Circuit IRA 401k Forgery Tax Email Netschi Moore Whistleblower Street Sweeper Countrywide Tran Bharara Facebook Online Severance Bonus Eligibility Rule TD Ameritrade Hedge Fund SAC 1099 Smith Barney Lehman Brothers SIPC IC3 Scottrade AIG Lehman JPMorgan Chase Hertz Insider Trading Bank of America Department of Justice Elles Bribe Auction Rate Securities Raiding Spam Edward Jones Medicare Diabetes Dow Schumer Thain Walter Bid Rigging Real Estate Discrimination Wall Street Statutory Disqualification Form U4 Form U5 Indictment Boyland DOJ Corruption bill singer FTC Do Not Call FINRA Arbitration Costa Rica Settlement LIBOR Varney Plea Rule 8210 Eligibility RRBDlaw 8210 Appeal Fowler LPL Johnson Cellphone US Airways JPM BrokeandBroker Reg D MSSB Vault Loan SunTrust Discovery Employment Rosenthal Recruiting Lawyer Trading Platform JP Morgan Employment Tuesday Wrongful Termination Bank Guarantee WaMu Solicitation REIT Martin Credit Cards Rule 3050 Away Account Credit Repair PN Advisor Placement Group Fifth Amendment Forex Mortgage Private Placement Moon CGMI Failure to Supervise Merrill Anderson Exam Lee Borrowing Tax Lien Charity Conversion Oppenheimer Wedbush Felony Misdemeanor Expenses ING Lien OTR Estate Jobs Florida Credit Card Elderly Flash Drive Annuity Expense Reimbursement FNMA BrokeAndBroke TIC DWI Promissory Notes Suitability Will POA Power of Attorney Casino NSF MF Global Counterfeit Preet Bharara Corzine Hacker Deferred Compensation RIA Prison Disclosure NASAA Aguilar FCPA Subway Testimony Identity Theft Gold Dell Bar Injunction Bank Deutsche Bank Hospital Retirement Due Process God HSBC Private Placements Eric Stein Wire Fraud FINOP CCO Compliance Audit Test Examination Cheating Joshua Brown Backstage Wall Street Obstruction of Justice Reuters Retaliation Variable Annuity Arbitraiton Outside Account Options Telephone Wine Series 7 Social Media ADA Pacifico Non-Prosecution Agreement Confirm Tax Fraud OBA Equity Indexed Annuities EIA Disability MetLife Continuing Education OIP Tax Liens Willful CE Unregistered Impersonation Annuities BBVA Business Expenses ETF JOBS Act Mail Fraud Parking Variable Annuities Signatures BitTorrent Impersonator Wire Transfer Wire Crowdfunding Nasdaq Away Accounts WSP Laptop Dodd Frank Checks RMBS AML PST Solicited Unsolicited Congress SRO Password Wife Discretion Non-Solicitation Restaurant Commodities Private Securities Transaction Offer of Settlement Money Market employment jobs Great Recession Chase Investment Services Arrest Barclays Liens Obamacare Failure To Supervise Apple Time And Price T&P Willfully Husband Letter of Authorization LOA Sexism Debit Card Knight Practice Sale Unfair Competition Signature Judgments Data Undisclosed Settlement Trainee Fee Trust Laser Side Bar Mattera Female Sales Assistant Kennedy Charge Sexist NML Argentina Embezzlement Silver Investor Alert Evidence Judgment Bank Fraud Deceased Bill Singer BrokeAndBroker TSSB OHO Leveraged ETF Mary Jo White Trustee FINRA AWC Motion To Dismiss Frumento Conspiracy 6th Circuit Proctor Commissioner Stein 401(k) Rule 3040 Customer Files Class Action Beneficiary NYAG Schneiderman 11th Circuit Insurance Gallagher White Self Regulation Short Sale Compromise Website Rule 2010 Check TRO Supervision Vacatur Remand SDNY Rule 12206 BrokeAndBroker Bill Singer Piwowar Stifel Rule 1122 Article V signature Confidential Inside Information Reg SP VA Leveraged ETFs Regulation SP Fees Cease And Desist Customer Rule 3270 Rule 3240 Annual Compliance Questionnaire OWB 2Cir Red Flags Payroll Stockbrokers ALJ Cybercrime Loans BrokerCheck Altered Records
Email Bill Singer Connect with Bill Singer on Facebook Follow Bill Singer on Twitter Link up with Bill Singer on LinkedIn Join Bill Singer on Google+