Major Raiding Case Goes to Arbitration

March 15, 2010

To get an idea about how complex a Financial Industry Regulatory Authority (FINRA) Arbitration can get, just consider this case caption: In the Matter of the Arbitration Between: Claimant / Counter-Respondent Piper Jaffray & Company, Incorporated vs. Respondents / Counter-Claimants Stifel Nicolaus & Company, Incorporated, David B. Holden, Lindsay L. Paine, Michael H. Pellicci, John L. Kuny, Zigmund C. Peret, Neil A. Koepcke, John S. Pinto, Christopher R. Peterson, Cole R. Ryba, Stephen A. Tufo, and Michael M. Loop (FINRA Arbitration 08-02601, March 5, 2010). 


All we need is Cecile B. DeMille, Charlton Heston, Sophia Loren, and the Spanish Army and we can film an old-fashioned 1960s epic. A cast of thousands. Filmed on the actual location where it all happened. No one will be admitted to the theater after the first twenty minutes.


Let me try to simplify things as best I can, so as to preserve the gist of this drama. 


Claimant Piper Jaffray alleged that Respondent Stifel Nicolaus engaged in a pre-meditated raid of Piper's entire Aircraft Group within Piper's High Yield and Structured Products Division. Piper alleged that eleven of these employees left within 24 hours of each other and that these employees were the most productive of this group and were necessary to operate the business. Piper also stated that Respondents took with them confidential and proprietary documents when leaving their employment and that such documents should be returned to Claimant.  If you want to see the blood and guts of this pleading, consider that Piper asserted the following causes of action:

  • violation of FINRA Conduct Rules;
  • unfair competition;
  • unjust enrichment;
  • breach of fiduciary duty and duty of loyalty;
  • aiding and abetting;
  • tortious interference; and
  • conversion.  

The Respondents pretty much denied the above allegations They too threw in a whole batch of legal mumbo jumbo, but, let it suffice to say that the end result was a pooh-poohing of Piper's claims.  Further, Respondents hit back with their own Counterclaim that alleged a failure to fulfill certain specific compensation promises; and interference with Respondent's prospective economic advantage.  Specifically, Respondents Pellicci and Loop alleged that Piper failed to pay promised compensation totaling almost $5,000,000.00. Similarly, Respondent Pinto alleged that Piper created or knowingly permitted intolerable work conditions for his unwillingness to testify in a lawsuit in which Pinto stated that Piper commanded him to give untruthful testimony, and as a result, Pinto was forced to resign.


More generally, the individual Respondents alleged that there were no restrictive covenants that precluded them from accepting employment from a competitor and that they were free to leave for any reason. For good measure, the individual Respondents also stated that Piper was well aware that they were unhappy with the management and direction of the High Yield and Structured Products Department and as a result the department's mismanagement, they were forced to look for employment elsewhere. In keeping with my commentary above, let's just say that Piper pooh-poohed all those allegations.

Waving off claims or not, Claimant Piper sought an award in the amount of $15,000,000.  Respondents ponied up to the table demanding nearly $5,000,000 spread among two individuals. 


At the arbitration hearing. Claimant withdrew all claims asserted against Respondents, John L. Kuny, Zigmund C. Peret, Neil A. Koepcke, John S. Pinto, Cole R. Ryba and Stephen A. Tufo. In addition. Respondent John S. Pinto withdrew his counterclaim against Piper Jaffray. Accordingly, all claims against the above-named individual Respondents were dismissed with prejudice and Respondent Pinto's counterclaim will also be dismissed with prejudice.


By and large, the FINRA Arbitration Panel determined that:

  • Respondents, Stifel Nicolaus & Company and Christopher R. Peterson, are jointly and severally liable for and shall pay to Claimant, Piper Jaffray & Company, Incorporated, the sum of $500,000.00 in compensatory damages;
  • Respondents, Stifel Nicolaus & Company, Incorporated and Christopher R. Peterson, are jointly and severally liable for and shall pay to Claimant, Piper Jaffray & Company, Incorporated, Interest on the above-stated sum at the rate of 4% per annum from and including the date of service of this Award through and including the date this Award is paid in full;
  • All confidential documents identified as exhibits in the arbitration hearing, and any other copies thereof, in any form, in the possession of Respondents shall be returned to Claimant.

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