by Bill Singer
Armed OZM 4 anti-personnel mine in a minefield (Photo credit: Wikipedia)
In a Financial Industry Regulatory Authority (“FINRA”) Arbitration Statement of Claim filed in April 2011, Claimant Pavlovich alleged that on February 2, 2011, he was wrongfully terminated by Respondent Raymond James and the firm falsely reported the reason for his termination on his Uniform Termination Notice For Securities Industry Registration(“Form U5”) — such misinformation purportedly prevented him from being able to take his client accounts to another firm and caused irreparable harm to his business.
Among other claims, Pavlovich asserted intentional interference with prospective contractual relations and prospective economic advantage; defamation; breach of contract; and wrongful termination. Ultimately, Claimant sought $698,893 in “actual damages” plus punitive damages and $264,764 in attorneys’ fees and costs as provided for whistleblowers under applicable state law. In the Matter of the FINRA Arbitration Between Theodore Adam Pavlovich, Claimant, vs. Raymond James & Associates, Inc. and Mark Kevan Mekler, Respondents (FINRA Arbitration 11-01696, January 4, 2013).
Bill Singer
Respondent Raymond James and Respondent Mekler generally denied the allegations and asserted various affirmative defenses. Respondent Raymond James filed a Counterclaim asserting breach of contract, which the firm says arose in connection with the Loan Agreement(“Agreement”) and RJA Financial Advisor Instructions entered into with Claimant. Respondent Raymond James asserted that under the terms of the Loan Agreement, the entire amount of the remaining principal of the loan immediately became due and owing upon Claimant’s termination. Ultimately, Respondent Raymond James sought $60,033.18 in compensatory damages and $10,000 in attorneys’ fee as provided in the Loan Agreement.
Decision
The FINRA Arbitration Panel dismissed Claimant Pavlovich’s claims. Further, the Panel found Claimant liable and ordered him to pay to Respondent Raymond James:
Bill Singer's Comment
Frankly, what else can I say other than “ouch”?
These “wrongful termination” cases are tricky and as Pavlovichunderscores, sometimes the filing of such arbitration is akin to walking into a mine field. In some of the cases what we don’t know is whether the arbitration was filed by the registered person as a preemptive measure designed to extract settlement concessions aimed at reducing or eliminating off-setting potential employer claims. If that were the case here, the strategy didn’t work.
Is the takeaway from Pavlovich that aggressive tactics on behalf of a registered person are doomed to failure and should be abandoned? Absolutely not — FINRA arbitrations are notorious for their inconsistency; the decisions often seem just as dependent upon the composition of a particular panel of arbitrators as anything. Moreover, the facts in Pavlovichsimply have not been conducive to victory, whereas, in your case, similar allegations and facts may prove a winning combination. Regardless, keep in mind that the consequences of filing a FINRA wrongful termination claim could be that not only is your case dismissed but you also have to pay your attorney, and your filing fees, and the forum fees, and the respondent’s legal fees, and you could also be on the hook for a financial award in favor of your adversary replete with interest.
As with any minefield, tread carefully before entering.