Wells Fargo Hit With Punitive Damages in FINRA U5 Defamation Case

December 15, 2011

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in October 2010, Claimant Minevich asserted that he had been defamed on his Form U4 and Form U5 by Respondent Wells Fargo. At the close of the hearing, Claimant sought :

  • $271,500.00 in compensatory damages;
  • $1,500,000.00 in punitive damages;
  • $350,000.00 in lost value of benefits;
  • $500,000.00 for severe emotional distress;
  • $1,800.00 for reimbursement of the FINRA Arbitration filing fee;
  • $2,250.00 in expert witness fees;
  • $31,600.00 in attorneys' fees; and,
  • a recommendation to expunge or amend his Form U5.

In the Matter of the FINRA Arbitration Between Maxim Minevich, Claimant, vs. Wells Fargo Advisors, LLC, Respondent (FINRA Arbitration 10-04973, December 12, 2011).

Respondent Wells Fargo generally denied the allegations and asserted various affirmative defenses.

The Cost of Tardiness

At the FINRA Arbitration evidentiary hearing. Respondent Wells Fargo asserted a Motion in Limine requesting that the Claimant be precluded from introducing certain evidence because the materials were not timely produced. The FINRA Arbitration Panel granted the motion.

SIDE BAR: The Panel ordered the exclusion (covering both any attempted introduction of or testimony about) six attachments on a September 1, 2010, email. Apparently, those materials were not produced by Claimant until October 13, 2011, which the Panel deemed as unacceptably late. Notwithstanding the ruling, the Panel allowed that the excluded evidence might still be introduced for the sole purpose of impeachment. Among the excluded items were:

  1. Agreement to Repay Costs of Training.pdf;
  2. Employment Agreement with Restrictive Covenants (12-09).pdf;
  3. GWIM Designated Broker Policy;
  4. PMD_Program_Summary_Final.pdf;
  5. GWIM Confidentiality Document (12-17-09).pdf; and
  6. Maxim Minevich.pdf.
Additionally, the Panel excluded Claimant's two August 2010 email correspondences with PNC, first produced to Respondent on October 18, 2011.


The FINRA Arbitration Panel found that Claimant's allegations were true and concluded that his termination by Respondent was unwarranted. Pointedly, the Panel noted that Claimant's immediate supervisor, Wells FargoStore Manager (Branch Manager), previously showed personal animus against Claimant. The Manager used a single customer complaint (that was quickly and easily resolved to the complete satisfaction of the customer) as the single incident that led to the internal bank review that resulted in the termination of Claimant. The Manager knowingly and willfully presented false, misleading and inaccurate information to the Manager's direct supervisor as well as to the Panel. That information supplied by the bank manager to the bank officials investigating the incident was not questioned, verified or even discussed with Claimant by any bank officer (including a Senior VP Regional Director) nor by the Legal or Compliance Department of Respondent.

Accordingly, the Panel found Respondent Wells Fargo liable and ordered the firm to pay to Claimant:

  • $100,000.00 for lost wages and loss of career;
  • $400,000.00 in punitive damages;
  • $31,600.00 in attorneys' fees; and
  • $600.00 reimbursement of the non-refundable portion of Claimant's FINRA filing fee.

Further, based upon a finding of defamation by Respondent, the Panel recommended the expungement of Claimant's July 8, 2010, Form U5 (although the Reason for Termination: Discharged would remain) and the insertion of the following language:

Discharged by Wachovia Bank for conduct unrelated to the business of Wells Fargo Advisors. FINRA Arbitrators found the termination was unwarranted. It was based upon one customer verbal complaint that was resolved to the satisfaction of the customer. The Manager, who had a personal animus against Mr. Minevich, presented false and inaccurate information to the Manager's supervisor, which led to the termination. The Manager willingly and knowingly under oath presented false testimony to the Panel.

Bill Singer's Comment

A pretty damn impressive win by a former Wells Fargo employee. Even allowing for the fact that Claimant sought nearly $3 million in damages and attendant costs/fees, by no measure is a half a million dollar award chump change under these circumstances.

Of course, you have to wonder what, if any, negative impact was caused by Claimant's dilatory document production and whether that was symptomatic of other Claimant shortcomings in this matter (or if it was isolated and a one-up situation). Arbitration panels are composed of human beings and having argued before arbitrators for both Claimants and Respondents, having served as a panelist, and having served as panel Chair on far more cases than I can remember, I know that the way the parties conduct their cases has an influence on the ultimate award and decision.

There is a residue of good or ill will that many arbitrators take into their post-hearing deliberations. If they "like" one party or that party's lawyer, or if they "dislike" those players, that could influence whether punitive damages are even awarded, and certainly impacts how the final dollars of damages are calculated. If you're going to play hard-ball with your adversary during the discovery phase and hearing phase of an arbitration, you also need to factor in whether your tough-guy attitude is alienating the Panel. On the other hand, you also need to weigh the downside of dragging your heels during discovery against the degree to which it may weaken your opponent's ability to put on its own case. As such, sometimes you're willing to incur some unhappiness from the Panel if it is outweighed by a more important disadvantage imposed upon your opponent.

The role of a good lawyer is more than that of a mere advocate. A wily, veteran, arbitration lawyer knows where the boundaries are, often pushes them, but also knows that you don't want to cross the line between being seen by the Panel as "aggressive and tough," on the one hand, and "disrespectful and dishonest," on the other. Sometimes that's a very fine line in the heat of battle. Less experienced lawyers often fail to recognize the sensibilities of a particular Panel and the cost-benefits of engaging in to-the-mat litigation tactics. The obvious downside is that failing to avoid offending three arbitrators can result in a losing verdict - the more subtle downside is that you "win" your case but are awarded far less than your client deserved because of your or your client's misconduct.

This has been a tough year for Wall Street companies in arbitrations against their former employees. I've reported on some FINRA employment disputes against Merrill Lynch, RBC, Wells Fargo, TD Ameritrade, UBS that didn't end well for those employers. In part, those big firms may have paid the price for a markedly anti-Wall Street bias and the likelihood that many arbitrators in the pool of panelists know of someone laid off by a major broker-dealer or who lost a significant sum of money in investments recommended by those firms. Whatever feel-good aura Wall Street had - with the public and even among FINRA arbitrators - seems dimmed and tarnished these days.

In Minevich, we see just how the sensitive gears, weights, and balances of arbitration come into play. Claimant Minevich lost what would normally be a very critical Motion in Limine and was subjected to the rare order of exclusion by the Panel. That normally does not bode well in terms of the eventual Decision. I think that a fair inference here is that the Panel was not amused and did not like Claimant's tactics during discovery.

On the other hand, the Decision was in Claimant's favor, and dramatically so - both in terms of a massive punitive damage award that was four times the awarded compensatory damages, and in recommending an expungement of the U5. Moreover, the Panel's explanation of the events surrounding Claimant's termination render an unflattering picture of Respondent Wells Fargo and its manager. Frankly, the Panel called the manager a liar under oath - a devastating finding in a FINRA Arbitration.

Reading between the lines, there was a lot of bad blood in this case. It's quite likely that Claimant took this very personally and the prosecution of his case was influenced by a take-no-prisoners directive from him to his lawyer. On the other hand, Respondent's counsel seems to have done the best possible with a horrendous set of facts and the apparently damaging testimony of a key witness who was deemed a liar.