March 14, 2016
You've likely heard about a so-called "wrongful termination" in which a former employee alleges an improper firing; in today's BrokeAndBroker.com Blog, however, we have a rare mirror-image of that allegation: wrongful resignation. If you think about it, why not? After all, what's good for the goose is good for the gander, except . . . ahhh, there's that one word that causes so much friction . . . except, we have all come to accept that there are laws and rules imposed upon employers as to whom they may fire and when and under what circumstances. The fact that we all may have a good laugh about how someone gave the boss the finger on the way out the door doesn't mean that all resignations are without legal and/or financial consequence. Consider two FINRA consolidated arbitrations in which the cost of a disputed resignation ran into seven figures.
In a Financial Industry
Regulatory Authority ("FINRA") Arbitration Statement of Claim filed
in January 2011, Claimant Meridian Equity Partners asserted breaches of
contract, fiduciary duties, and implied covenants of good faith and fair
dealing; tortious interference; and indemnification. In Amended
and Second Amended Statements of Claim, Claimant
Meridian added causes of action for promissory estoppel and unjust enrichment.
In addition to seeking permanent
injunctive relief, Claimant Meridian ultimately sought at least $1.665 million compensatory
damages with respect to Respondent Niles's allegedly "wrongful resignation from
Claimant four months into his two year contract term." Claimant Meridian
asserted that Respondent Niles had allegedly committed a "breach of his duty of
loyalty to Claimant, such as his interference
with and/or solicitation of Claimant's relationships with its associated
persons . . ." Claimant sought to enforce the indemnification provision in
Respondent Niles's employment agreement; and also asked for attorneys' fees,
costs, and 9% interest. In the Matter of the FINRA Arbitrations Between
Meridian Equity Partners, Inc., Claimant, vs. Joseph W.
Niles, New Albion Partners LLC (f/k/a Casey Professional Services, LLC) and
Casey Securities, LLC, Respondents (FINRA
Arbitration 11-00248, March 2, 2016) (the "Meridian
Respondent Niles, New Albion, and Casey Securities generally denied the allegations and
asserted various affirmative defenses. Respondent Niles filed an initial and
Amended Counterclaim asserting
violations of California Labor Code Section 970; California Business and Professions Code Section
17200 (unfair competition: negligent misrepresentation; fraud, and unfair
business practices); and New York Law Section 190 et seq. (for unpaid
In a FINRA Arbitration Statement
of Claim filed in April 2011, Claimant Casey Professional Services asserted intentional interference
with contract and misappropriation of trade secrets. Claimant Niles sought
unspecified damages. In the
Matter of the FINRA Arbitrations Between Casey Professional
Claimant, vs. Meridian Equity
Partners, Inc., Respondent (FINRA Arbitration 11-01631 (March 2, 2016).
Respondent Meridian generally denied the allegations, asserted various affirmative
defenses, and filed a Counterclaim asserting indemnification and intentional
The FINRA Arbitration Decision
characterizes the Meridian Claim and the Casey Claim as constituting the following characteristics:
11-00248: Member vs. Member, Associated Person, and
11-01631: Member vs.
dated August 3, 2011, the FINRA Arbitration Panel consolidated the
The FINRA Arbitration Panel
- Niles, New Albion, and
Casey Securities jointly and severally liable to and ordered them to
- $1,351,339.00 compensatory damages plus
4.5% interest from December 14, 2010 until the date of the award and,
thereafter, 9% interest until the award is paid.
liable to and ordered him to pay
- $449,975.88 in attorneys'
fees pursuant to that provision in his employment contract.
The Panel offset
its $112,051.25 award ($91,250 plus $20, 801.25) to Niles by the $449,975.88
attorneys' fees awarded against Niles to Meridian; consequently, the Panel
deemed Niles solely liable to and ordered him to pay to Meridian the net amount
of $337,924.63 ($449,975.88 -
$112,051.25). This offsetting was in addition to Niles's joint and several liability to Meridian for the $1.35 million plus interest Award.
- Meridian liable to and ordered it to pay to
compensatory damages plus $20,801.25 interest on that
By way of a glimpse behind the
curtain of FINRA intra-industry arbitration, consider that these consolidated
cases required three pre-hearing sessions before one arbitrator in June and
September 2012; followed by 12 pre-hearing sessions before the three-member
Panel from June 2011 through March 2014; and 72 full-fledged hearing sessions from January 2013 through August 2015. The cost to the parties of various hearing sessions was a whopping $102,150.00, which was essentially
divided on the basis of 50% to Meridian and 50% to the other parties.
I truly wish
that we learned more about the underlying disputes than is presented in the
FINRA Arbitration Decision. About all that we can infer is that Niles left the
employ of Meridian after a mere five months on terms that were not satisfactory
to his former employer. Although there are assertions that Niles attempted to
interfere with Meridian's relationship with other employees, there is no
statement by the arbitrators that they found such misconduct had actually
occurred. We are told virtually nothing about what prompted Niles's resignation
and what constituted the facts attendant to the "wrongful" nature of
that departure. Sure, we have conclusory allegations of purportedly improper
contacts with Meridian's employees but that comes off more as titillation than
revelation. How exactly
did Niles injure Meridian and how did those injuries rise to the
astronomical sum of $1.7 million?
To be clear -- to be very clear
-- I am NOT even remotely suggesting that Niles may not have engaged in
injurious conduct or that the Panel got anything wrong in terms of liability or damages. I have personally handled many cases during my three-decades
of Wall Street lawyering where a former employee has grievously harmed a former
employer. What I am asserting is that this FINRA Arbitration Decision fails to
spell out what happened and fails to offer the calculus by which the damages
were computed. As I often lament, this Decision suffers
from a lack of content and context. If you think that I am overstating the
matter, please read the FINRA Arbitration Decision for yourself
If you read the
Decision, let me try to make my point by asking you to answer two questions:
- What was Niles job title at Meridian -- what was he supposed to do?
- Why did Niles resign?
2003 to September 2010, he was an "Equity Derivatives Sales Trader"
with Casey Professional Services;
- August 2010 to December 2010, he was "Managing Director Equity Derivatives"
for Meridian Equity Partners;
- December 2010 to January 2015, he was a
"Partner/CEO" at New Albion Partners; and
- currently "Director - Equity Derivatives" at