An irreverent Wall Street Blog
by Bill Singer
by Bill Singer
Jefferies Wins FINRA Arbitration Injunction Against Criticism and Adverse Comments
May 7, 2019
Imagine that a former employee has been saying nasty things about your brokerage firm. In response, you file an arbitration complaint to enjoin that individual from making further statements that slander, libel, or otherwise defame your firm. When the former employee doesn't file an Answer and doesn't show up for the hearings, maybe you ask the arbitrators to take things a bit further. Maybe you ask for a permanent injunction to prohibit the former employee from making comments that disparage, criticize or otherwise reflect adversely upon the firm. Maybe the arbitrators hear your arguments, hear none from the absent former employee, and, hell, they give you what you asked for. That seems fair. Except, you know, should a FINRA Arbitration Panel restrain mere criticism? Should arbitrators restrain mere adverse comments?
Case In Point
In a FINRA Arbitration Statement of Claim filed in September 2018, FINRA member firm Claimant Jefferies LLC asserted breach of contract; tortious interference with business relations; and defamation against former associated person Respondent Truong. Claimant sought compensatory and punitive damages, costs, and fees; and further requested an Order permanently Respondent, or anyone acting in
concert with her, from engaging in the unlawful conduct set forth in the Statement of Claim . . ." Respondent Truong did not submit an Answer and did not appear at the hearing. In the Matter of the Arbitration Between Jefferies LLC, Claimant, v. Vy Truong, Respondent (FINRA Arbitration Decision 18-03295) http://www.finra.org/sites/default/files/aao_documents/18-03295.pdf
The FINRA Arbitration Decision asserts that:
By correspondence dated April 19, 2019, Claimant withdrew its request for compensatory and punitive damages and informed FINRA Dispute Resolution that it will not submit a request for fees and costs. The only relief Claimant is seeking is permanent injunctive relief.
Award
The FINRA Arbitration Panel rendered the following Award in pertinent part:
Claimant's request for permanent injunction is granted. Respondent shall refrain from making or publishing any statements or communications, written or otherwise, relating to the Claimant, or any of its employees, that disparage, criticize or otherwise reflect adversely upon Claimant; and Respondent is enjoined from using any proprietary or confidential information belonging to Claimant for any purpose, including, but not limited to the use of identities and contact information for any clients of Claimant; and Respondent is enjoined from sending communications to Claimant and its employees.
Bill Singer's Comment
The FINRA Arbitration Decision never sets out the objectionable prior "statements" or "communications" attributed by Claimant Jefferies to Respondent Truong. Assuming that Respondent Truong's commentaries were replete with defamatory references, it would be understandable for the victim of such attacks to not want to publicize the language in a Decision in the firm's favor. That much I get. That much I appreciate.
Regardless of my concessions and allowances, the FINRA Arbitration Panel granted Jefferies an all-powerful "permanent injunction" against the making or publishing any statements or communications, written or otherwise, relating to the Claimant, or any of its employees, that disparage, criticize or otherwise reflect adversely upon Claimant. Given the uncontested and default nature of this case, I would have preferred if the Panel had merely enjoined acts of defamation, slander, and/or libel. Where I get antsy as a lawyer is when the permanent injunction is directed against future comments that may disparage, criticize, or otherwise reflect adversely. In contrast to common law and statutory bases for law suits, I'm not quite sure why any FINRA member firm is entitled to be immunized against legitimate criticism or adverse comments.
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