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In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in November 2009, Claimant Merrill Lynch asserted causes of action for breach of contract and unjust enrichment against former employees Respondents Bales and Nordmo. The claims arose in connection with Promissory Notes separately executed by the respondents. In the Matter of the FINRA Arbitration Between Merrill Lynch, Pierce, Fenner & Smith Incorporated, Claimant/Counter-Respondent, vs. Jolie Ann Bales and Kim Tracy Nordmo,Respondents/Counter-Claimants (FINRA Arbitration 09-06280, March 19, 2012).

In addition to attorneys' fees, Claimant sought the following damages:

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Bales: $697,056.93 in principal (includes $46,848.35 arrears) plus $100.26 daily interest from August 7, 2009, until paid in full; and

Nordmo: $911,960.67 in principal (includes $49,466.18 arrears) plus $118.68 daily interest from August 7, 2009, until paid in full.

Respondents generally denied the allegations, asserted various affirmative defenses, and filed Counterclaims for:

• Fraud and deceit;
• negligent misrepresentation;
• constructive fraud;
• intentional interference with contract relations and prospective economic advantage;
• negligent interference with prospective economic advantage;
• constructive discharge;
• breach of contract; and
• breach of implied covenant of good faith and fair dealing.

Respondent Bales sought:

• at least $3 million in compensatory damages
• damages for the loss of her home, her assets and the depletion of her retirement accounts;
• expugement of the firm's allegedly false comments on her Uniform Termination Notice For Securities Industry Registration ("Form U5″);
• damages for the defamatory nature of the U5 comments;
• punitive damages in an amount that is three times the amount of her compensatory damages;
• costs and disbursements;
• filing and forum fees; and
• attorneys' fees.

Respondent Nordmo sought:

• at least $3 million in compensatory damages;
• punitive damages in an amount that is three times the amount of her compensatory damages;
• costs and disbursements;
• filing and forum fees; and
• attorneys' fees.

Severance

On February 5, 2010, Respondents Bales and Nordmo filed a Motion to Sever their cases, which Claimant initially opposed but subsequently agreed to. Accordingly, this arbitration was severed with the original filing number retained for the case against Respondent Bales and a new number assigned to Respondent Nordmo's separate matter.

Merrill Lynch v. Bales

The FINRA Arbitration Panel denied Claimant Merrill Lynch's claims in their entirety and cancelled the Promissory Note executed by Respondent Bales.  The Panel also denied Bales's Counterclaims.

Based upon a finding of defamation, the Panel recommended that the answer to Question 7B on Respondent Bales's Form U5 as filed on August 19, 2009, by Claimant be changed from "Yes" to "No," with the accompanying Disclosure Reporting Page  ("DRP") expunged in its entirety.

SIDE BAR: Under the heading "Internal Review Disclosure," Item 7B asks whether the terminated associated person: .

Merrill Lynch v. Nordmo

Pursuant to the agreement to sever the cases, the claims against Respondent Nordmo were arbitrated under the caption: In the Matter of the FINRA Arbitration Between Merrill Lynch, Pierce, Fenner & Smith Incorporated, Claimant/Counter-Respondent vs. Kim Tracy Nordmo,Respondent/Counter-Claimant (FINRA Arbitration 10-01727, April 4, 2012).

Respondent Nordmo claimed that her working conditions at Claimant were so intolerable that she had to quit, and, under the terms of the loan agreement, her repayment obligation was terminated.

In assessing the charges and counter-charges, the FINRA Arbitration Panel determined that Respondent Nordmo had sought out Claimant Merrill Lynch in 2007; and, in turn, Claimant recruited her.  Unfortunately, upon Respondent Nordmo's arrival in early 2008, she was placed in the Private Banking and Investment Group ("PBIG"), that services ultrahigh net worth clients, and that decision turned out, in the Panel's words, as "not a good fit." As the Panel explained:

Respondent was searching for an environment where she could concentrate on refining and marketing her successful ETF investment strategy, but Claimant's PBIG environment did not lend itself to that and both sides were unhappy with the situation.

Attempts by Respondent and also by Claimant's management to find a solution for the various issues were not immediately successful, and the forced sale of Claimant in the Fall of 2008 to Bank of America, combined with the nationwide economic downturn, created a difficult environment that was not controlled by either party.