In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in October 2010, Claimant Lehman Brothers asserted breach of contract and unjust enrichment in connection with Respondent Tanner's alleged failure to repay a promissory note dated May 6, 2004, and revised June 21, 2004 (the "Note"). Claimant Lehman Brothers sought $366,368.77 in principal and accrued interest, plus additional interest, costs, and attorneys' fees. In the Matter of the FINRA Arbitration Between Lehman Brothers Holdings Inc.. as assignee of Lehman Brothers Inc., Claimant, vs. Paul Corkin Tanner, Respondent (FINRA Arbitration 10-04635, March 4, 2013).
Respondent Tanner generally denied the allegations, asserted various affirmative defenses, and filed a Counterclaim in which he asserted unpaid commissions; wrongful termination; defamation; and incorrect calculation of amounts owed. In his Counterclaim, Tanner sought $1,748,000 in compensatory damages, damages for unjust enrichment, reasonable commissions, damages for Form U4 defamation, attorneys' fees (withdrawn with prejudice at hearing), and costs.
The FINRA Arbitration Panel ruled that:
Respondent shall pay nothing to Claimant on the Statement of Claim. The Panel determined that the set-offs of Respondent exceeded the total damages claimed by Claimant which consisted of principal, interest, attorneys' fees, and costs.
Claimant shall pay nothing to Respondent on the Counterclaim. The Panel treated the Counterclaim solely as setoff against the assigned promissory note.
The Panel determined that Claimant's request for attorneys' fees was moot because Respondent's set-offs exceeded the total amount of Claimant's requested damages including the amount Claimant requested in attorneys' fees.
Claimant is liable and shall pay to Respondent the sum of $600.00 representing reimbursement of the non-refundable portion of the counterclaim filing fee previously paid by Respondent to FINRA Dispute Resolution. . .
The setoffs? What the hell? What setoffs? For what? And, no, don't pester me with even more questions. I have no idea what the Panel was referring to or how it calculated it. Why? Well, as usual, FINRA has delivered to us what amounts to a conclusory Decision devoid of much meaningful explanation.
Frankly, this seems like a fascinating case in which a put-upon former Lehman employee not only got to retain the alleged six-figure balance on his note, but he also seems to have prevailed on some or all aspects of his claims about wrongful termination and/or defamation and/or . . . well, then again, maybe, maybe not. Hey, welcome to my world.
Once upon a time, way back when as it now seems, Lehman Brothers was one of the big four of Wall Street - alongside Goldman Sachs, Morgan Stanley, and Merrill Lynch. Then, life as we knew it, ended. And after the lives of far too many folks were upended by the Great Recession, the clean-up crews started the dirty job of finding the bucks to pay the bills - which prompted many Wall Street firms to go after the balances on retention bonuses, employee forgivable loans, and a whole host of promissory notes. "Street Sweeper" has reported on Lehman Brothers, Inc.'s attempts to collect on millions of dollars in promissory notes that it had extended to a number of its employees:
In the once halcyon days of Wall Street, Lehman Brothers Inc. (LBI), the broker-dealer subsidiary of Lehman Brothers Holding, Inc. (LBHI), gave 113 of its employees about $80 million in loans. If you look at the dates of the promissory notes involved, they go as far back as 1998 and as recently as August 2008, just before Wall Street imploded. On September 15, 2008, LBHI filed for Chapter 11 bankruptcy, which was the largest in the nation's history. However, before that enormous blast, those 113 LBI employees managed to get about $700,000 each. . .
Comes December 2009, amidst the shards of what once was, LBHI entered into a stipulation with its debtors and LBI as part of the Securities Investors Protection Act (SIPA) liquidation of LBI. Based upon court papers, those 113 notes had a net balance due of about $51 million and were deemed to be LBHI's to collect. Pre- or post-Great Recession, no one is going to walk away from $51 million. "High Noon for 113 Former Lehman Employees" ("Street Sweeper" February 15, 2011).
Also see, "Lehman Seeks To Collect Unpaid Loans From Furious Former Employees" ("Street Sweeper" November 19, 2010).
I have made it a point of disclosing my bias on this issue. I don't like Lehman's efforts. I think it's victimizing victims and, frankly, unsavory, to say the least. As such, I root for those who lost their jobs to keep their loans, regardless of the legal issues involved. The likes of Lehman should be squeezing blood out of other rocks. It irks me to see that there isn't more of a sense of fairplay in the industry - particularly when it comes to folks who intended to go to work but for the fact that their place of work no longer existed.
Tempering that position, I am mindful that the creditors of LBHI were also victimized and that the recovered funds from the disputed promissory notes will benefit those individuals and entities; nonetheless, when I ultimately weight the merits of the battle between these two sets of victims in this specific matter, my sympathies generally fall into the camp of the former employees. Which is not to say that blood ought not be drawn from former in-house Lehman folks to restore the financial health of the firm's creditors. My position is go after the senior executives and board members, who were more culpable for causing the mess than the unemployed workers.