In a Financial Industry Regulatory Authority (FINRA) Arbitration Statement of Claim filed in March 2007 (yes, four years ago!), Claimant Jean Hughes (who first became a registered person in the securities industry in 1992) asserted several causes of action against her former employer Respondent Cantor Fitzgerald, including fraud, breach of her employment agreement; and age and gender discrimination under both federal and Texas law.
According to FINRA records, Claimant Hughes joined Respondent Cantor Fitzgerald in February 2005 and departed in April 2007. Claimant alleges that when she was first employed, the Respondent promised her - and she relied upon that promise -- that she would keep her existing accounts. Notwithstanding, Claimant alleges that in May 2006, her largest account (which generated the majority of her commission-based income) was taken away from her and given to a younger male salesperson. It appears that Hughes sought $10 million in compensatory damages. In the Matter of the FINRA Arbitration Between Jean E. Hughes, Claimant, versus Cantor Fitzgerald & Co., Respondent (FINRA Arbitration 07-01043, February 9, 2011).
Respondent Cantor Fitzgerald generally denied the allegations and asserted various affirmative defenses. Among other explanations, Respondent claimed that the reallocation of Claimant's account was based solely upon proper business considerations.
The FINRA Arbitration Panel found Respondent Cantor Fitzgerald liable for and ordered it to pay to Claimant Hughes:
The FINRA Decisions advises us that one of the three arbitrators
[C]oncurred as to the assessment of hearing session fees and costs awarded and dissented as to whether Claimant prevailed in her breach of contract claim and attorneys' fees awarded.
Regular readers of my online content are familiar with my antagonism for FINRA's hide-and-seek style of reporting its arbitration decisions.
See, for example:
I detest FINRA's frequent lack of disclosure of the material facts in many arbitrations, and I become even more upset when the arbitrators fail to adequately explain the rationale for their decision. My beef with FINRA is a simple one -- and shared by many. First, I want a clear picture of what is alleged by the parties. Second, I want a clear understanding of why the arbitrators ruled as they did. I don't think that's asking for too much.
Why did the three FINRA arbitrators award only $100 in compensatory damages as against a $10 million claim?
Then there is the dichotomy between, on the one hand, a $100 award versus a $10 million claim; and, on the other hand, the awards of $55,000 in attorneys' fee and over $6,000 in additional costs. I fully appreciate that the Arbitrators may have felt compelled to award attorneys' fees if they found any evidence of discrimination, but maybe someone could have actually added some words to that effect in the Decision?
Ultimately, age and gender discrimination are very serious and long-festering problems on Wall Street. In recent decades, we have read about numerous cases alleging such misconduct, and with the onset of the Great Recession, the issues have become even more sensitive as brokerage firms have shedded staff in dramatic numbers.
None of which is to suggest that Cantor Fitzgerald was the bad guy here.
None of which is to suggest that Jean Hughes was or wasn't entitled to a larger monetary award.
All of which is to suggest that the FINRA Arbitration Panel failed both the public and the industry by publishing a decision that is bereft of meaningful explanation or detail.
In the seminal case of DiRussa v. Dean Witter Reynolds Inc. (2nd Circuit, 1997), the federal courts grappled with the problem of what happens when an age discrimination suit is brought in arbitration under both federal and state law, but the state law does not mandate the award of attorneys' fees to the prevailing party. In the NASD arbitration portion of DiRussa, the arbitrators refused to award attorneys' fees to DiRussa, the prevailing party. DiRussa's appeal to the federal courts ultimately failed when the NASD panel's ruling was sustained.
Although DiRussa has long been debated, many of the ruminations fail to comprehend the dynamic of how arbitration panels reach a consensus. An equally compelling explanation of the DiRussa non-award of attorneys' fees is that the NASD arbitrators intentionally declined to award attorneys' fee as part of an effort to reconcile their varying positions concerning Dean Witter's liability and whether DiRussa's conduct was contributory.
Sometimes an arbitration panel is split with one member voting for liability, one member voting against, and a third undecided. In resolving such impasses, arbitrators may find common ground by reducing/increasing a proposed monetary award or in eliminating/including certain awards altogether, such as attorneys' fee or forum fees. Similarly, arbitrators may give and take on specific findings among multiple causes of actions and/or as to the size of any financial award. For example, in DiRussa such a balancing act of liability and damages might have arisen if the employee were deemed partially at fault for the underlying circumstances but the panel was similarly troubled by the employer's conduct.
In DiRussa, when asked to rule under both federal and/or state law, the NASD arbitration panel might well have concluded that if there were a choice between the "shall" under the federal statute and the "may" under the state discrimination statute, that the award of lawyers' fee was not mandatory. The non-award of the lawyers' fee may have persuaded a dissenting arbitrator to join the fold and paved the way for a final decision. Unfortunately, NASD arbitration decisions from years back were even less forthcoming that today's FINRA decisions -- and the old NASD panels were instructed to keep their rulings very short and as close-to-the-vest as possible.