Citigroup, Its Former Employee, A Breached Contract, Six Blind Men, One Elephant, and FINRA Arbitration

April 17, 2017

Today's Blog discusses a seemingly important FINRA Arbitration Decision in which Claimant Citigroup sought to recover about $270,000 in damages as a result of a former employee's alleged breach of contract. By a vote of 2:1, the arbitrators award nearly the full amount of what Citigroup sought but surprisingly off-set that amount by a hefty award to the former employee.

If you are an industry employee, you should be fascinated and intrigued by that outcome and certainly interested in learning what had happened and why the arbitrators ruled as they did. If you are FINRA, however, you seem to think it's best to present what's pretty much a blank document in a pitch-black room. Why does FINRA persist in this counter-productive pattern of conduct?

Case In Point

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in August 2015, Claimant Citigroup Global Markets asserted breach of contract and sought $266,666.67 plus 1.65% per annum interest; an additional $2,233.85; attorneys' fees, other fees and costs. In the Matter of the FINRA Arbitration Between Citigroup Global Markets, Inc., Claimant, vs. Thomas Marco Avitabile, Respondent (FINRA Arbitration 15-02192 April 12, 2017).

Respondent Avitabile generally denied the allegations, asserted various affirmative defense, and filed a Counterclaim seeking damages.


The FINRA Arbitration Panel found

  • Respondent Avitabile liable to and ordered him to pay to Respondent Citigroup $266,666.67 in compensatory damages plus $2,233.85 for unpaid taxes.
  • Claimant Citigroup liable to and ordered it to pay to Respondent Avitable $77,000.00 in compensatory damages.

Offsetting the awards, the Panel ordered Respondent Avitabile to pay to Claimant Citigroup $191,900.52 plus 1.65% per annum from March 6, 2015 until March 29, 2017.


The only Non-Public Arbitrator concurred in part and dissented in part, and offered this explanation:

My fellow arbitrators have voted to reduce the award to the Claimant by $77,000, the amount by which Respondent claimed that the Claimant had injured him. I do not agree that Claimant injured Respondent by $77,000, or that there is any legal basis for any other reduction to the award.

1. Respondent's loss did not amount to anything like $77,000. Most of the diminished revenue had been expected because Respondent's former clients would not rapidly follow him to his new position. In fact, their slowness accounted for most of the reduction in his revenue; but, the diminishment was in the nature of an investment in his new position. By the bank's conservative projections, that investment stood to become very profitable to him later on.

2. Respondent claimed that he had to leave Claimant's employment because, contrary to recruitment promises, the branch did not give him all its referrals, and other financial advisers remained there. But, Respondent's signed employment agreement contains a merger clause that explicitly denies the validity of any prior promise unless written in the employment agreement. But neither that agreement nor any other writing mentioned the alleged recruitment promises. Moreover, Respondent actually received the vast majority of the branch referrals, and evidently converted very few of those referrals into business. So whatever injury the breach of those promises caused Respondent was minimal.

3. Claimant clearly sought to retain Respondent, to ameliorate conditions at the bank branch, and help him succeed. The only legal basis for ignoring the terms of the employment agreement would be a showing that there was fraud in the inducement. But no such showing was made.

For these reasons, I dissent on the finding of an offset of compensatory damages. I concur with all other aspects of the award.

Bill Singer's Comment

Perhaps your initial response to the FINRA Arbitration Decision was something like mine: What the hell? What contract? What was Citigroup suing to recover? What was promised during the Respondent's recruitment?  What exactly did the $77,000 off-set award cover?

Citigroup v. Avitabile is an important arbitration given the fact that the Claimant employer sued its former Respondent employee for about $270,000-plus but the employee won an off-set award of $77,000.  We don't see that outcome every day and, as such, it's noteworthy.

Unfortunately, whatever the lessons of this arbitration, they are lost because the Decision lacks sufficient content and context so as to render it helpful or, at worst, intelligible. Buried somewhere in what was not said and what was not explained is important guidance for similarly situated industry employees who are confronted with a lawsuit by their former employer and have heard the so-called water-cooler wisdom that former employees can't win in a FINRA arbitration, or, you're not going to get awarded any damages as a Respondent, or, you should simply pay whatever the firm demands because the deck is stacked. As this arbitration shows, a lot of those know-it-alls in the branch don't necessarily know what they're talking about.

In Citigroup v. Avitabile, about the only substantive aspect of the dispute that the Majority Decision sets forth is that Claimant Citigroup sued about a "breach of contract." Wholly absent from the Majority Decision is any explanation of the nature of that purported contract, what was breached, and how the alleged misconduct took place. That is not merely absurd but borders on idiotic -- and begs the question as to whether anyone at FINRA read a draft of this ruling before it was published. Which then prompts us to wonder whether FINRA even cares about what it publishes.

At this point in my career, I've sort of run out of words to express my profound disappointment with FINRA's persistence in publishing the half-assed content typified by this FINRA Arbitration Decision. Pointedly, I am not blaming the arbitrators but I am blaming FINRA for failing to ensure the quality control that the industry and the investing public deserve.  The profound lack of content and context in this decision leaves us blinded and groping for explanations. All of which reminds me of the tale of the six blind men and the elephant:

I understand and appreciate that there is an expectation of privacy in the adjudication of arbitrations in contradistinction to the public forum of the court system. On the other hand, we must always be mindful that FINRA arbitration is largely a mandatory system for both investors and industry employees and, as such, we must temper some privacy expectations with the need to ensure that the published docket does not inappropriately "hide" facts and circumstances.