Brokerage Firm Demands $2.6 Million Damages From Former Employees

July 28, 2016

In the song "The End of The Innocence" the lyrics lament that: 

When happily ever after fails
And we've been poisoned by these fairy tales
The lawyers dwell on small details

As always, we lawyers get cast in a less than flattering light but, hey, that's life and it sort of comes with the big bucks that we charge and the fact that we're often dealing with situations where lives are falling apart or careers in danger. In today's Blog, we consider a lawsuit in which several long-term employees leave their employer and all hell breaks loose. The good times, the old team-work, the hanging in there there when things were rough -- that's all forgotten and the knives come out.  It's not a pretty picture. Frankly, it's sad that this is too often how relationships on Wall Street end. Regardless, there are lessons to be learned for those thinking of packing it up and taking their show on another road.

Case In Point

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim, Claimant David A. Noyes & Company asserted breaches of fiduciary duty and of the duty of loyalty; aiding and abetting breach of fiduciary duty and duty of loyalty; unfair competition/raiding; infringement of Claimant's intellectual property, trademarks, and service marks; misappropriation of trade secrets and/or confidential information; violations of FINRA Rule 2010; and tortious business interference. By the time of the hearing, Claimant sought $2,384,970.00 compensatory damages; $201,874.00 attorneys' fee; $6,558 in costs, and punitive damages. In the Matter of the FINRA Arbitration Between David A. Noyes & Company, Claimants, vs. Monere Investments, Inc., John G. Bouckaert, Peter Vick, Anthony Falco, and Thomas Bono, Respondents - AND -- Peter Vick, Anthony Falco, and Thomas Bono, Counter-Claimants, v. David A. Noyes & Company, Counter-Respondent (FINRA Arbitration 15-01217, July 12, 2016).

SIDE BAR: Oddly, the Decision does not state the date on which the initial Statement of Claim was filed but only references a "Second Amended Statement of Claim filed on or about: May 26, 2015." 

The FINRA Arbitration Decision asserts that the claims were related to the Respondents planning to leave Claimant's employ and, thereafter, creating a new brokerage firm. Said planning purportedly occurred at a time when three of the four individual Respondents were still employed at the firm; and included the alleged involvement of both current and former Noyes' employees. 

Going On the Counter-Attack

Respondents Monere, Bouckaert, Vick, Falco, and Bono generally denied the allegations and asserted various affirmative defenses.

Vick and Falco filed a Counterclaim alleging that they were forced to leave Noyes's employ for reasons including:

Claimant's long-term plan to convert their customers to fee-based assets, Claimant's compliance philosophy and compliance issues, a fear that that their customers' accounts would be frozen by FINRA or the SEC, and Claimant's alleged inept management.

Vick and Falco's Counterclaim sought $1,389,000.00 compensatory damages plus attorneys' fees and costs. 

Bono filed a Counterclaim alleging retaliation disparagement, and tortious interference with customer relationships. Bono alleged that:

[H]e was stripped of his title and duties in retaliation for his complaints about Claimant's regulatory non-compliance and the perception of possible whistle-blowing. In addition, Bono alleged that after his resignation, Claimant's employees made untrue statements to customers that Bono had overcharged them on commissions.

Bono's Counterclaim sought $954,000.00 compensatory damages.

Expungement Request

Respondents Monere and Bouckaert requested that the Panel recommend the
expungement of this arbitration case from Bouckaert's registration records maintained
by the Central Registration Depository ("CRD").

Spousal Emails

On May 17, 2016, the Panel granted Claimant's Motion to Compel Non-Privileged Emails and required Respondent Bono to produce the requested emails showing his wife as recipient by May 19, 2016. Following Bono's motion for reconsideration, the Panel ruled that he had to produce to one of the arbitrators certain emails listed on the privilege log for an in camera inspection to determine if they were privileged. 

Following the arbitrator's review of the submitted emails, the Panel ruled that the emails to Bono's wife would be treated as attorney-client privileged or as attorney work product, but certain attachments and forwarded emails were not protected and had to be produced to Claimant by May 24, 2016


The FINRA Arbitration Panel found Respondents Monere Investments, Bouckaert, Falco, Vick, and Bono jointly and severally liable to and ordered them to pay Claimant David A. Noyes & Company $640,000.00 in compensatory damages and $40,000 in monetary sanctions for discovery abuse.

Separately, the Panel found individual liability for Respondents Vick and Bono and ordered them to pay to Claimant Noyes the following compensatory damages:
  • Vick: $44,200.00; and
  • Bono: $70,500.00
Bill Singer's Comment

Online FINRA BrokerCheck records as of July 28, 2016 disclose Respondents had the following employment histories at Claimant David A Noyes: 
  • Bono: from 1977 until May 2015;
  • Bouckaert: from 1979 until December 2011;
  • Vick: from 1997 until April 2015; and 
  • Falco from 1997 until April 2015
News reports indicate that in 2008, Respondent Bouckaert, who had been Claimant's Executive Vice President and Chief Administrative Officer, was named President of the firm. In 2011, Claimant appointed James Guthrie as President upon the purported announcement by Bouckaert that he was retiring. In 2009, Claimant promoted Respondent Bono from Vice President to Vice-Chief Executive Officer.

Also, BrokerCheck discloses the following concerning FINRA member firm Monere Investments Inc.:
  • 75% or more of the member firm is owned by Monere Holdings, Inc. since August 2014;
  • Thomas Bono is the Chairman 
  • Peter Vick is Vice Chairman
  • John Bouckaert is the President 
  • Anthony Falco is a Director 
Once we step back and flesh out some of the prior relationships, we see that we had a number of long-term Noyes employees who left and wound up at Monere Investments -- and to merely characterize a former President and a former Vice-CEO as mere "employees" doesn't do justice to their former roles. What likely happened among the Claimant and Respondents was not merely a parting of the ways but what must have been the shifting of tectonic plates. The allegations and recriminations on both sides of this arbitration spell out how intense the dispute was. Clearly, we are entitled to infer from the facts and awards that "betrayal" was the emotion at the heart of the claims and cross-claims.

How, then, do we determine who actually won this case?  Judging from Claimant's demands for damages, which amounted to something around $2.6 million, the net awards of just under $800,000 came to about one-third of what was sought. As to which side of the lawsuit came away truly victorious would depend, in part, on where settlement negotiations (if they occurred) concluded: the over/under is $800,000. Beyond that cost-benefits analysis, it seems clear that the arbitrators were none too happy with Respondents' conduct prior to and following their departure from Claimant; and the $40,000 discovery sanction further reflects that the arbitrators weren't enamored with Respondents' conduct during the litigation. 

The takeaway from this dispute is that it's not exactly a free country, as lawyers often hear their defendant/respondent clients argue. You have the right to tell a boss to drop dead and shove the job. You may -- and this is an important qualification for those with non-compete agreements -- have the right to set up a competing business. You may -- and this is another important qualification for those with non-solicit agreements -- have the right to recruit your former colleagues and/or clients. The thing with injecting "may" into the equation of leaving and starting your own business is that some of the issues aren't amenable to commonsense but fall under the ambit of quirky common laws and arcane statutes. 

In many instances, it pays to retain a lawyer to review your existing affiliation agreements and to work with you on preparing a checklist of Do's and Don'ts for how best to leave an employer and how best to start your new business. Are you going to get hosed by such a lawyer with thousands of dollars in legal fees? Perhaps. Is that cost worth it? Well, in this case, you would have had some $800,000 to work with before the answer would have been "no."