June 6, 2013
Was this arbitration started as a legal maneuver to preempt a former employer's filing of an arbitration to recover on a promissory note balance? Or was the claimant outraged at the circumstances of his employment and hoped to prevail on his causes of action? We may never have the answers to those questions but this case prompts us to wonder what was going on behind the scenes.
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in October 2009 and amended thereafter in January 2010 and February 2010, associated person Claimant Gomez asserted causes of action including employment discrimination, wrongful termination; breach of contract; libel; failure to supervise; and intentional and negligent interference with prospective economic relations as a result of the termination of his employment by Respondent Merrill Lynch, Pierce, Fenner & Smith Incorporated. In his amended Statements of Claim, Claimant withdrew his discrimination claims. Gomez sought general damages of not less than $1 million, actual damages in excess of $3,842,214; attorneys' fees; costs, and expungement of his Form U5. In the Matter of the FINRA Arbitration Between Paul G. Gomez, Claimant, vs. Merrill Lynch, Pierce, Fenner & Smith Incorporated; Merrill Lynch International Finance; Bank of America Corporation; and Merrill Lynch & Co., Inc., Respondents - AND- Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch International Finance, Counter Claimants, v. Paul G. Gomez, Counter-Respondent (FINRA Arbitration 09-05899, June 3, 2013).
Respondents generally denied the allegations, asserted various affirmative defenses, and filed a Counterclaim asserting breach of contract and unjust enrichment pertaining to an alleged balance owed on a Promissory Note executed by Gomez on January 7, 2009. In their Counterclaim, the Merrill Lynch Respondents requested the principal balance due on the Promissory Note of $1,162,790.76 plus 3% per annum interest from July 24, 2009 until paid ($96.90 per day); and attorneys' fees.
Not Part Of This Equation
Because Respondents Bank of America Corporation and Merrill Lynch & Co., Inc. are not FINRA member firms and did not voluntarily submit to arbitration, the FINRA Arbitration Panel made no determination with respect to Gomez's claims against those two respondents.
The FINRA Arbitration Panel denied Gomez's claims and his request for expungement.
The FINRA Arbitration Panel found Claimant Gomez liable to and ordered him to pay to Respondent Merrill Lynch, Pierce, Fenner & Smith Inc.:
Bill Singer's Comment
- $1,162,790.76 in compensatory damages;
- $127,035.90 in interest;
- $283,760.00 in attorneys' fees; and
- $33,660.00 in costs.
There are a lot of ways for us to look at this arbitration. Given the ensuing three-plus years of time that transpired from the filing of the initial Statement of Claim until the Panel ruled, it is likely that the parties were involved in failed negotiations concerning not only Claimant's claims but also Respondents' demands for repayment of the Promissory Note. We have absolutely no insight as to whether such discussions occurred or what they addressed, so that's merely conjecture on my part; however, one senses that more than one gambit was played by all parties -- judging by the results, Claimant lost in checkmate.
Claimant Gomez may well have filed his claims as a preemptive attack designed to buy negotiating time concerning his repayment of all/part/none of the Promissory Note. The Statement of Claim was filed way back in October 2009 -- so, if delay was Claimant's aim, he achieved some 3 1/2 years of it. Of course, when the Panel tallied the damages, that delay sort of cost him $127,000 in interest and you need to factor in the costs of not only his legal fees but also the nearly $300,000 in costs and attorneys' fees he was ordered to pay. As such, the cost of playing for time often comes with a sizable bill.
On the other hand, Claimant may not have been about any games but dead serious as to his causes of action and truly believed that he had a shot at winning nearly $4 million in damages. Unfortunately, the Panel didn't buy his arguments and he wound up with an Award against him of about $1.6 million.
For additional BrokeAndBroker coverage about promissory notes, READ: