Wedbush Didn't Know What It Lost Till Its Employee Was Gone to Stifel

May 16, 2016

Many popular songs contain a nugget of wisdom; however, we often find ourselves humming the tune but forgetting the lyrics. On that busy byway of Wall Street, the formidable warning of Joni Mitchell's classic "Big Yellow Taxi" is regularly lost upon management. Oh sure, those in the C-suites may remember something about a big yellow taxi or the paving over of paradise, but it's that critical line about not knowing what you've got till it's gone that they just don't quite recall. That's a shame because if you ask former industry employees, you will frequently hear their refrain about how they quit their job because they never felt appreciated -- and when that yellow cab pulled up, they jumped in and gladly paid the fare and added a nice tip for the ride to a new employer.

Case In Point

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in May 2014, Claimant Wedbush Securities alleged breaches of and aiding and abetting breaches of fiduciary duty and duty of loyalty; violation of FINRA Rules of Conduct; and interference with prospective economic advantage. Claimant Wedbush sought from former employee Respondent Whinery disgorgement and return of all compensation, expense reimbursements, and benefits paid to him during his employment with the firm. Additionally, Claimant sought interest and punitive damages. At the hearing's close, Claimant sought $1,420,600.00 in compensatory damages and $500,000 in exemplary damages. In the Matter of the FINRA Arbitration Between Wedbush Securities Inc.,Claimant, vs. Stifel, Nicolaus & Company, Incorporated and Gary Robert Whinery, Respondent(FINRA Arbitration 14-01676, May 12, 2016.

Respondents Whinery and Stifel, Nicolaus & Co. generally denied the allegations and asserted various affirmative defenses.

 John Does I - XX

In filing its Claim, Wedbush apparently included in the caption 20 Respondents John Doe. During the hearing, Claimant moved to dismiss those 20 fictitious respondents, which the FINRA Arbitration Panel granted without opposition from Respondents Stifel and Whinery.

SIDE BAR: 20 Respondents John Doe; twenty strikes me as a nice round number. As best I can tell from the relatively sparse fact pattern provided in the FINRA Arbitration Decision, what we got going on here is a likely garden-variety post-employment dispute in which the former employer is pissed off at former employee Whinery and the former employee's new employer Stifel Nicolaus. Hey, you know, it happens on Wall Street -- everyday lots of folks get pissed off at lots of other folks. Welcome to the biz.

Using all my powers of inference, I'm guessing that this arbitration sort of reflects some remorse by Claimant Wedbush about the departure of its former employee Whinery and a suspicion by Claimant that Whinery's new employer Stifel Nicolaus and a cast of at least 20 unidentified folks conspired to improperly entice, lure, or otherwise attract Whinery away from the confines of his former job. Frankly, if it took 20-plus folks and/or entities to pry Whinery away from Wedbush, the former employee likely agonized about the stay-or-go thing. 

Panel Award

The FINRA Arbitration Panel denied Claimant Wedbush's claims and found the firm liable to Respondents for $9,998.16 in costs with 5% interest accruing 30 days from the service of the Award until paid in full. Of the $12,000 in hearing session fees, the Panel assessed $11,500 against Claimant Wedbush and the balance against Respondents jointly and severally.

Bill Singer's Comment

Ouch! That must have smarted. Can't be a lot of happy faces at Wedbush after this verdict.

In my opinion, when you sue a former employee and his new firm for nearly $2 million in damages and a FINRA Arbitration Panel dismisses your claims and awards that former employee and his new firm just shy of $10,000 plus interest in costs and you're charged with about 96% of the arbitration hearing session fees, you haven't just lost your case but you've emerged somewhat humiliated.

The lesson for Webush and for all Wall Street employers is that maintaining valued employees is not something that you accomplish through neglect or indifference. Quite often the time and money you spend in trying to get some measure of revenge post-employment would have been better spent during the employment in a meaningful effort to communicate with the employee and determine what would keep that individual happy, content, and in your employ. By the time that big yellow taxi pulls up outside your offices and takes away Mr. Whinery, it's too late.  And if you only figure out after the cab has pulled away from the curb how valued an employee it was that you allowed to leave, well, you know, whose fault is that?

Late last night

I heard the screen door slam

And a big yellow taxi

Come and took away my old man

Don't it always seem to go

That you don't know what you've got

‘Til it's gone

They paved paradise

And put up a parking lot