In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in July 2011, Claimant Koh asserted causes of action including breach of contract, quantum meruit, and wrongful termination in connection with her former employment with Respondent Barclays Capital. Claimant sought $331,250 in compensatory damages, interest, costs, and attorneys' fees. At the hearing's close, Claimant sought a $230,000 bonus and $97,500 severance. In the Matter of the FINRA Arbitration Between Lori Shinsato Koh, Claimant, vs. Barclays Capital Inc., Respondent (FINRA Arbitration 11-02699, March 26, 2013).
Respondent Barclays generally denied the allegation and asserted various affirmative defenses.
By a 2:1 majority, the FINRA Arbitration Panel denied Claimant's claims and provided a detailed rationale, which I quote, in part, below:
a. Bonus: Both sides agreed that there was no issue of Respondent's right to terminate Claimant as an at-will employee pursuant to a Reduction in Force. At the outset of her employment, Claimant agreed in writing to be bound by all of Barclays' rules and policies, one of which stated unequivocally that any potential incentive or bonus compensation was wholly within the absolute discretion of Respondent. Although there was generally a practice of paying bonuses, evidence showed that regulators were pressuring Barclays at this time to put more compensation into the fixed portion as opposed to any incentive or bonus portion; the result was that for the year in dispute (2010), Claimant received total compensation of $242,500.00, an amount greater than the prior year which included a bonus award.
b. Severance: Respondent offered Claimant a severance payment of $97,500.00 (much more than required under Barclays' policies because Respondent credited all of Claimant's prior years of employment with her predecessor firm, Lehman) and gave her a full 60 days to consider accepting the offer; Claimant chose to "roll the dice" and rejected the offer. At her next job she negotiated a guaranteed bonus, so she clearly knew the difference between a discretionary bonus and a guaranteed one. . .
In a relatively rare published Dissent, one of the three arbitrators explained his disagreement:
[I]rrespective of Respondent's internal policies and what was presented as relevant case law, I felt that Respondent did not treat Claimant (a 13 year employee) with adequate fairness and equity during her termination process. It was my recommendation to my fellow panelists that Claimant receive her entire severance pay ($97,500.00) and some sort of bonus for her work in reaching significantly heightened departmental revenue goals for 2010. During the ensuing deliberative discussion, my fellow panelists disagreed.
Much of the evidence and testimony presented by both sides in this case involved justification for terminating Claimant's employment. Since she was an "at-will" employee, I found this testimony and related evidence to be unnecessarily repetitive, lacking relevance to the core issues. Claimant never stated that she could not be fired and was not contesting her termination. She was concerned more about equity and fair treatment regarding her compensation for work performed, as was this panelist.
While in hindsight Claimant may have made a poor decision in not accepting her severance agreement, had she done so she would have given up her right to pursue what she considered to be a bonus for reaching her 2010 revenue goal. Irrespective of testimony provided by Respondent, a reasonable person would believe that based on Respondent's past practice, Claimant would have received something in the form of a bonus for her 2010 performance had she remained an "active employee." I felt Respondent's argument that she was not an active employee at the time annual bonuses were awarded was self-serving and hung thinly on a technicality. Bonuses for 2010 were awarded only weeks after her departure from the company. A perception was also left with this panelist that Claimant may have been intentionally terminated in mid-January 2011 so that Respondent could rely on this technicality not to pay her the bonus.
Respondent's argument that bonuses were "discretionary" was weak since the evidence clearly indicated that annual bonuses were routinely expected and awarded. In fact, while bonus amounts may have varied from year to year, Respondent was hard pressed to identify any eligible employees who had not received an annual bonus. Clearly, awarding annual bonuses was and remains the Respondent's norm. Additionally, while Claimant did not receive an annual bonus for her 2010 performance, her supervisor admitted that his bonus for that same year was impacted in part by Claimant's 2010 positive performance. . .
Although the goal of an arbitration hearing panel should be to reach a consensus, there are times when a principled dissent must be voiced; and when confronted with such reservations by a panelist, I applaud that sincerity even if I do not always agree with the rationale or contrary conclusion. See, for example: FINRA Arbitration: Veni, Vidi - but a split Vici and Customer Settles Annuity Claim But Stockbroker Wins Expungement.
As a former registered representative myself and a long-time advocate for individual stockbrokers, I applaud FINRA Arbitration Panels that go the extra mile and delve below the mere surface of employer-employee disputes. Given that FINRA's rules mandate the arbitration of intra-industry disputes before FINRA's arbitration forum, I have long voiced my displeasure with forcing hundreds of thousands of registered persons to appear in a FINRA forum, which I perceive as largely supported and funded by the self-regulatory organization's member firms - who are the employer in any employer-employee equation.
To be a registered representative at a FINRA member firm is to be totally disenfranchised because only a member firm (in contradistinction to any individual registered person) is entitled to cast a vote in support of a proposed FINRA rule, a candidate for election to the FINRA Board, or for any nominee for FINRA elective office. Accordingly, in mandatory intra-industry arbitration, registered representatives appear before a forum whose rules were promulgated and approved by member firms (employers). Although Caesar's wife may, indeed, be upright and virtuous, the historic proscription was that she be above suspicion - I do not believe that FINRA's Arbitration forum passes that test in intra-industry disputes.
In Koh v. Barclays I was somewhat bemused by the dissenting panelist's premise that "Respondent did not treat Claimant (a 13 year employee) with adequate fairness and equity during her termination process." If anything, Wall Street has not and likely will never be about "fairness and equity." The Dissent did not address the fact that Claimant was relatively well compensated during her career by the very same "unfair" and "inequitable" compensation policies and practices. Welcome to the biz. Warts and all.
The Dissent explains that "I felt Respondent's argument that she was not an active employee at the time annual bonuses were awarded was self-serving and hung thinly on a technicality." As if what?… most arguments in litigation are not self-serving? And what lawyer will not cling to the merest of technicalities to avoid having a client's case go down in flames? If Respondent Barclay was not going to defend this case by arguing that Claimant Koh was an inactive employee and not entitled to a discretionary bonus, just what other defenses did the dissenting panelist expect would be raised? Further, should this case ever find itself before an appellate court, it is likely that a judge will focus on the issues of at-will employee, discretionary bonus, active employment status, and formal severance agreement.
As I have often admonished my own law firm clients: There is a difference between doing the right thing and having the right to do something. Judges, juries, and hearing panels must daily wrestle with that troubling conundrum; and the fair administration of justice demands that we leave our prejudices outside the room where we deliberate and try to reach a verdict based upon the facts. I admit, however, that such a task is far, far easier said than done. Compliments to the Dissent for having the courage of his convictions, but the more compelling rationale in this case was enunciated by the majority.