Texas Two-Step: 2 FINRA Arbitrations, 2 Texas State Courts, and 2 Texas Federal Courts

October 16, 2019

In today's featured Wall Street legal drama, a former Ameriprise stockbroker was likely not a happy Ameriprise camper and broke up his partnership and left the firm. Likely, the former employer was not happy with the former employee's alleged use of confidential customer information as part of the launch of his new biz. Likely, the former employee's former partner wasn't all that happy a camper when his former partner moved on. What ensued was a fast-paced Texas Two-Step. Two FINRA arbitrations. Two state courts. Two federal courts. Wow . . . let's grab a beer and sit ourselves down.

2015: Miller/Ameriprise v. Walker FINRA Arbitration #15-01325

In a FINRA Arbitration Statement of Claim filed in June 2015, associated person Claimant Miller and FINRA member firm Claimant Ameriprise asserted misappropriation of trade secrets; breach of contract; breach of fiduciary duty; conversion; unfair competition; unjust enrichment; and punitive damages. In In the Matter of the Arbitration Between Scott A. Miller and Ameriprise Financial Services, Inc., Claimants, v. Jeremy J. Walker, Kelly G. Montgomery, and Maverick Wealth Management, LLC, Respondents (FINRA Arbitration Decision 15-01325 / September 1, 2015) (the "2015 FINRA Arbitration #15-01325")
https://www.finra.org/sites/default/files/aao_documents/15-01325-Award-FINRA-20150901.pdf. As characterized in the 2015 FINRA Arbitration #15-01325 Decision, Claimants causes of action related to their allegation that Respondent Walker had begun "operating a competing business after resigning from his position with Ameriprise. Claimants alleged that Walker used confidential information he gained while affiliated with Ameriprise to gain a competitive advantage for his competing business in violation of written agreements he made with Ameriprise."

Respondent Montgomery did not appear at the hearing. Respondent Maverick did not appear but after the Statement of Claim was amended in June 2015, the only named respondent was "Jeremy J. Walker d/b/a Maverick Wealth Management, LLC." Walker filed an answer and attended the hearings. Respondent Walker generally denied the allegations and asserted affirmative defenses. 

In June 2015, the FINRA Arbitration Panel held hearings on Claimants' request for permanent injunctive relief, which the Panel granted with the exception that Respondent Walker could taker/retain client information (as defined in the "Protocol for Broker Recruiting") for clients he had introduced to either of the two Claimants -- and he could also solicit those introduced clients. 

The FINRA Arbitration Panel found Respondent Walker liable and ordered him to pay to Respondent Miller $76,238.49 in compensatory damages with interest and $95,965.50 in attorneys' fees pursuant to Texas Civil Practice and Remedies Code Section 38.001. As to the issue of Respondent Walker's ability to solicit certain "disputed" customers, the Panel ruled as follows:

[T]he Disputed Customers were not introduced to Claimants by Respondent Jeremy J. Walker, but were either introduced to the Claimants or to a partnership co-owned by Claimant Scott A. Miller and Respondent Jeremy J. Walker by independent financial advisors, or, in one case, had a pre-existing non-securities business relationship with Respondent Jeremy J. Walker. The Panel finds that all of the Disputed Customers were being serviced by Respondent Jeremy J. Walker as their financial advisor prior to his resignation on May 7, 2015. 

5. The Panel further finds that Respondent Jeremy J. Walker's request to solicit the Disputed Customers is in compliance with the Protocol for Broker Recruiting and should be excepted from the proscriptions contained in the Panel's June 24, 2015, Permanent Injunctive Order. Nothing contained in this finding shall prohibit Claimant Scott A. Miller from soliciting the Disputed Customers, or shall otherwise alter or modify the scope of the previous order, and nothing contained herein shall be affected by the Panel's award of damages, costs and attorneys' fees. 

2017: Texas State District Court

As with all messy lawsuits, these were not going to die a quiet death. What ensued was another round of battles over whether the 2015 FINRA Arbitration #15-01325 should be confirmed or vacated. We next come upon Jeremy J. Walker, d/b/a Maverick Wealth Management, Plaintiff, v. Scott A. Miller, Defendant  (Judgment, Texas District Court, 236-281183-15/ May 26, 2017).  http://brokeandbroker.com/PDF/MillerTxDistCt170526.pdf
In this round of hostilities, Walker moved to vacate the 2015 FINRA Arbitration #15-01325 only as to the $95,965.50 in attorneys' fees awarded pursuant to Texas Civil Practice & Remedies Code Section 38.001; or, in the alternative, for a modification/correction of said Award. Miller moved to confirm the Award and to sanction Walker for filing a frivolous motion to vacate. 

The District Court vacated the FINRA Award by striking the attorneys' fees at issue, confirming the remainder of the Award, and declining to sanction Walker for his motion to vacate.

2018: Texas State Court of Appeals

Scott A. Miller, Appellee, v. Jeremy J. Walker, d/b/a Maverick Wealth Mangement, Appellant  (Judgment/Opinion, Texas Court of Appeals, Second District, 02-17-00035 / February 15, 2018). http://brokeandbroker.com/PDF/MillerTxApp180215.pdf On appeal to the Texas Court of Appeals, Miller challenges the lower court's rulings. Following its deliberations, the Court of Appeals succinctly found that the FINRA Arbitration Panel:

was authorized to award Miller attorneys' fees in light of the parties' submissions requesting attorneys' fees and Walker's failure to advise the panel that it lacked the authority to award Miller attorneys' fees. We also conclude, however, that the trial court did not abuse its discretion by denying Miller's motion for sanctions. Therefore, we will affirm the trial court's judgment insofar as it denied Miller's motion for sanctions, but we will reverse the trial court's judgment vacating the attorneys' fees and render judgment confirming the arbitration award. 

at page 2 of the Court of Appeals Opinion

In offering its rationale for its ruling, the Court of Appeals noted that Walker and Miller had submitted written requests to the FINRA Panel for attorneys' fees. Pointedly, the Court noted that before raising the fees in his Petition to Vacate, Walker never objected to the FINRA Panel about their authority to award attorneys' fees. In summing up its analysis, the Court of Appeals explains that:

[I]n light of the parties' requests for attorneys' fees, and in the absence of any objection to the panel's authority to award attorneys' fees, the panel rationally could have concluded that it had the authority to award Miller attorneys' fees. . . .

at page 12 of the Court of Appeals Opinion

Further, the Appellate Court noted references Ameriprise's Associate Financial Advisor Agreement (the "AFA Agreement"):

[E]ven if we assumed that the arbitration was conducted under the AFA Agreement instead of by the FINRA rules, although the AFA Agreement did not expressly permit an award of attorneys' fees to an Independent Advisor like Miller, it also did not expressly prohibit such an award. As in any other instance in which parties deem a matter arbitrable via their submissions, the parties' submissions to the panel here 13 effectively amended the AFA Agreement to expressly authorize an award of attorneys' fees to Miller. . . .

at pages 12 - 13 of the Court of Appeals Opinion

2017: Walker v. Ameriprise FINRA Arbitration #17-01226

Having gone two to the right and two to the left and two back, former FINRA Arbitration Respondent Walker steps boldly forward twice and twirls: He files his own claims against former FINRA Arbitration Claimant Ameriprise. Now, we have the parties in reversed roles -- perhaps a new version of the Texas Two-Step?

In a FINRA Arbitration Statement of Claim filed in May 2017, associated person Claimant Walker asserted breach of contract, breach of fiduciary duty, negligence, gross negligence, reckless disregard of the truth, negligent misrepresentation, civil conspiracy, tortious interference with contractual relationships past and future, misrepresentation, fraud, disparagement, defamation (libel and slander), discrimination and harassment, and unjust enrichment. In the Matter of the Arbitration Between Jeremy J. Walker, Claimant, v. Ameriprise Financial Services, Respondent (FINRA Arbitration Decision 17-01226 / April 9, 2018) ( the "2017 FINRA Arbitration #17-01226") https://www.finra.org/sites/default/files/aao_documents/17-01226.pdf. As characterized in the 2017 FINRA Arbitration #17-01226 Decision, Claimant Walker's causes of action related to his allegation that Respondent Ameriprise had "accused him of egregious acts of broker compliance violations, causing him to lose clients and incur damages, past and future." Claimant sought at least $3,750,000 in compensatory damages, $3,000,000 in punitive damages/sanction; interest; fees; and costs.

Respondent Ameriprise generally denied the allegations and asserted various affirmative defenses.

In June 2017, Respondent Ameriprise moved to consolidate the then-current 2017 FINRA Arbitration #17-01226 with the previously decided 2015 FINRA Arbitration #15-01325, which Claimant opposed. The Director of Arbitration denied the motion and referred the issue to the FINRA Arbitration Panel. In January 2018, Respondent filed a Motion to Dismiss, or, in the alternative, a Motion to Consolidate, which Claimant opposed. Following a March 2018 telephonic hearing, the FINRA Arbitration Panel granted Respondent's Motion to Dismiss/Consolidate and offered this rationale:

[C]laimant previously brought the same claims regarding the same dispute against the same party, and the claims were fully and finally adjudicated on the merits and memorialized in the Award entered in FINRA Arbitration Number 15-01325.

Accordingly, the Panel dismissed Claimant Walker's claims pursuant to FINRA Rule 13504; and the Panel ordered Claimant to pay to Respondent Ameriprise the sanction of $15,000 in attorneys' fees and costs pursuant to FINRA Rule 13212.

Bill Singer's Comment: Ummm . . . you know, I can't say that the arbitrators got it right or wrong with granting the motion, but, I can say that I have no idea whatsoever as to anything about case #15-01325. No sense of the parties. No sense of the dates at issue. No sense of the conduct at issue. No sense of the outcome. I mean, geez, wouldn't even a few words have been appropriate here?

2018: DNTX Motion to Vacate

Unhappy with the outcome of In the Matter of the Arbitration Between Jeremy J. Walker, Claimant, v. Ameriprise Financial Services, Respondent (FINRA Arbitration Decision 17-01226 / April 9, 2018) 
https://www.finra.org/sites/default/files/aao_documents/17-01226.pdf,  Walker headed over to the United States District Court for the Northern District of Texas ("DNTX"), where he asked the federal court to vacate the 2017 FINRA Arbitration #17-01226 Award in favor of Ameriprise based upon the Panel's alleged misconduct and exceeding of its powers. Jeremy J. Walker, Petitioner, v. Ameriprise Financial Services, Inc., Respondent (Order, DNTX, 18-CV-01675 / November 29, 2018) 

DNTX denied Walker's petition to vacate and granted Ameriprise's motion to confirm. The federal court did not find any evidence that the Panel had exceeded its powers/authority when it dismissed his 2017 FINRA arbitration claims. As to the awarded attorneys' fee/expenses, DNTX found that Ameriprise was entitled to reasonable and necessary attorneys' fees and costs, and found $13,662 in attorneys' fees to satisfy the criteria; however, because Ameriprise provided "no legal support for its request for transportation expenses, that request is denied. "

Are we done with this multi-year, multi-jurisdictional saga? Of course not -- like you thought otherwise? 

2019: 5Cir Opinion

Unhappy with NDTX's Order denying his petition to vacate and granting Ameriprise's motion to confirm the 2018 FINRA Arbitration 17-01226, Walker appeals to the United States Court of Appeals for the Fifth Circuit ("5Cir").  Jeremy J. Walker, Plaintiff/Appellant, v. Ameriprise Financial Services, Inc., Defendant/Appellee (Opinion, 5Cir, 18-11641 / October 9, 2019) 
http://brokeandbroker.com/PDF/WalkerOrderNDTX181129.pdf  On appeal to the federal circuit court, Walker argues that the FINRA arbitrators 1. improperly failed to allow him to present evidence/testimony, and, 2. improperly dismissed his Walker v. Ameriprise FINRA Arbitration #17-01226 claims based upon an erroneous determination that they had been fully adjudicated in 2015 pursuant to Miller/Ameriprise v. Walker FINRA Arbitration #15-01325. 

As to Walker's first appellate argument pertaining to the presentation of his evidence/testimony, 5Cir found in part that:

[A]fter Ameriprise filed for dismissal, Walker filed both a preliminary and a supplemental response. Ameriprise's motion was heard via telephone conference attended by the full arbitration panel and all parties and counsel, who presented evidence for approximately one hour. We see no indication that the panel refused to hear material evidence, engaged in any other misconduct, or otherwise deprived Walker of a fair hearing. . . .

at Page 5 of the 5Cir Opinion

As to Walker's second appellate argument pertaining to arbitrators' determination that his 2017 claims had previously been adjudicated in 2015, the 5Cir finds that he failed to set out facts and circumstances that the "panel violated any express provisions of the arbitration agreement." At best, the Court, suggests, Walker may have raised an issue that the arbitrators had incorrectly applied the factors used in determining whether his latter claims were previously brought regarding the same dispute against the same party and was fully and finally adjudicated on the merits." As such, 5Cir allows, albeit in hypothetical fashion, that even if Walker could have demonstrated that the arbitrators "erroneously" applied the standards permitting consideration of Ameriprise's Motion to Dismiss, that such a mere error would not necessarily rise to the level of proof of reversible misconduct. Accordingly, as to the second argument, 5Cir found that Walker "fails to meet his burden for vacatur . . ." 

Walker has taken his horse to the Old Court Road and he can't ride no more . . .