April 10, 2014
Citigroup goes after another former employer to recover a balance on a promissory note. Nothing new here. In this case, the former registered person fights back with a counterclaim seeking his own damages. What we wind up with is an interesting split decision of sorts.
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in February 2012, Claimant Citigroup Global Markets, Inc. asserted breach of contract for failure to pay the balance due on a promissory note. Claimant Citigroup sought $141,354.86 plus interest at the rate of prime plus 6% per annum from October 15, 2008, attorneys' fees, and costs. In the Matter of the FINRA Arbitration Between Citigroup Global Markets, Inc., Claimant, vs. Steven J. Greenberg, Respondent (FINRA Arbitration 12-00416, April 1, 2014).
Respondent Greenberg generally denied the allegations; asserted various affirmative defenses, and counter-claim asserting breach of agreement. Respondent Greenberg ultimately sought $106,736.00 in compensatory damages plus interest at the rate of prime plus 6% per annum from August 31, 2008, attorneys' fees, and costs.
The sole FINRA Arbitrator hearing this case found:
- Respondent Greenberg liable and ordered him to pay to Claimant Citigroup $141,354.86 in compensatory damages plus 6% interest from October 15, 2008 until the award is paid in full, and $15,000 in attorneys fees
- Claimant Citigroup liable and ordered it to pay to Respondent Greenberg $106,736.00 compensatory damages plus 6% interest from October 15, 2008 until the award is paid in full, and $12,000 in attorneys fees
NOTE: The Arbitrator netted the above compensatory damages awards, resulting in a net balance due from Respondent Greenberg to Claimant Citigroup of $34,618.86 in compensatory damages.
Bill Singer's Comment
Not much meat on these bones but, nevertheless, an interesting takeaway for registered persons on the receiving end of a demand for repayment of a balance due on a promissory note, employee forgivable loan, bonus, or other employment incentive or retention sums. This was an arbitration initiated by Claimant Citigroup and in defense of his former employer's claims, Respondent Greenberg not only raised defenses but he also counterclaimed for his own purported damages. In more common parlance, the respondent chose to go down swinging.
Was that battle by the former registered person worth it?
At first blush it appears that Greenberg reduced Citigroup's roughly $141,000 plus demand down to about $35,000 -- plus a $3,000 net payment on the competing attorneys' fees and the carry charge of the 6% interest. Then you have to also factor in the expenses, costs, and aggravation not reflected in the FINRA award. If we're ballparking the likely bottom line, let's just say Respondent Greenberg's tab is about $40,000 or so.
When you get done adding this to that, subtracting the remainder and carrying over the balance to the other column, Respondent Greenberg likely did himself a solid by putting on the gloves. What we don't know was whether Citigroup was prepared to settle the case for $40,000 or less. My guess is that the final offer never got that low.
You do your own math and weigh the competing factors as you prefer. The point of this analysis is to remind you that sometimes it pays to fight the good fight. Sometimes it may just be worth battling over the principle of the thing; however, remember the old saying that "Principle comes with interest."