Wells Fargo Wins FINRA Arbitration Against Former Rep With Three On And Off Lawyers

September 21, 2022

In 2019, Wells Fargo discharged Robin Johnson. If you go by Wells Fargo's version of events, Johnson was let go because of concerns about the suitability of her recommendations to certain clients and for failing to complete a trade-approval worksheet. If you go by Johnson's version of events, she was terminated because she filed a claim with human resources alleging sex harassment and discrimination. Two very, very different explanations for why Johnson was terminated. On top of everything, Wells Fargo sued Johnson for her alleged failure to repay two Promissory Notes.

Case in Point

In a FINRA Arbitration Statement of Claim filed in July 2019, FINRA Member Firm Claimant Wells Fargo asserted breach of contract, promissory estoppel, unjust enrichment, tortious interference with contractual and business relations, aiding and abetting, conversion, breach of fiduciary duty, violation of Michigan Uniform Trade Secret Act, and unfair competition. In the Matter of the Arbitration Between Wells Fargo Clearing Services, LLC d/b/a Wells Fargo Advisors, LLC, Claimant, v. Robin K. Johnson, Concorde Investment Services, LLC, RBC Capital Markets LLC, and D.B. French & Co. Investments, LLC, Respondents (FINRA Arbitration Award 19-01933)

https://www.finra.org/sites/default/files/aao_documents/19-01933.pdfAs set forth in part in the FINRA Arbitration Award:

The causes of action related to Claimant's allegation that, after the conclusion of Johnson's employment with Claimant, Johnson breached contractual agreements which included binding confidentiality and non-solicitation covenants. Claimant also sought enforcement and repayment of two Promissory Notes ("Notes") which became due and owing upon the conclusion of Johnson's employment with Claimant.

Claimant Wells Fargo sought an award against Respondent Johnson in the amount of $934,761.37, plus interest, costs, and attorneys' fees; and a permanent injunction:

barring Respondent Johnson from soliciting Claimant's clients and/or diverting business away from Claimant,
barring Johnson from using Claimant's proprietary and confidential information, and
requiring the immediate return of Claimant's proprietary and confidential information.

Claimant further requested that it be granted an award against Johnson, Concorde, RBC, and D.B. French in an amount to be determined at hearing. After filing its Statement of Claim, Claimant updated its damages as against Respondent Johnson to $1,124.830.70 in principal and interest, plus $248,610.52 in attorneys' fees and costs.

Whittling Down the Respondents

Respondent D.B. French & Co. Investments, LLC did not appear; and because the company is not a member or associated person of FINRA and did not voluntarily submit to arbitration, the FINRA Arbitration Panel made no determination with respect to the claims against this Respondent.

Respondents Concorde, RBC and D.B. French did not file an Answer or execute a Submission Agreement.

In August 2019, Claimant voluntarily dismissed without prejudice its claims against Respondent RBC and Respondent Concorde. Accordingly, the FINRA Arbitration Panel made no determination with respect to claims against these two Respondents.

Johnson Counterclaims

Respondent Johnson generally denied the allegations, asserted affirmative defenses, and filed a Counterclaim. As set forth in part in the FINRA Arbitration Award, Respondent Johnson asserted the following causes of action:

violation of the Michigan Elliot Larson Civil Rights Act (ELCRA) MCL 37.2201 et seq. - discrimination based on sex; violation of the Michigan Elliot Larson Civil Rights Act (ELCRA), MCL 37.2201, et seq. - sex harassment; violation of the Michigan Elliot Larson Civil Rights Act (ELCRA), MCL 37.2201, et seq. - discrimination based on retaliation; retaliation in violation of public policy; violation of FINRA standards of commercial honor and just and equitable principles of trade; unfair competition; wrongful discharge; unjust enrichment; and defamation. The causes of action related to Johnson's allegation that she was wrongfully terminated in retaliation for reporting sex harassment and discrimination. In addition, Johnson asserted a claim seeking expungement or modification of the Form U5 filed by Claimant, as part of registration records maintained by the Central Registration Depository ("CRD").

No Response. No Appearance.

In July 2020, Claimant Wells Fargo filed a Motion for Sanctions, including request for dismissal and monetary penalty, pursuant to FINRA Rule 13511: Discovery Sanctions and Rule 13212: Sanctions, to which no response was filed. After Respondent Johnson failed to appear at two pre-hearing conference addressing the Motion, in September 2020, the Panel dismissed Johnson's Counterclaim for her failure to comply with requests to produce documents and information plus for failing to appear at the pre-hearing conferences. Further, the Panel ordered Johnson to pay $1,000.00 in costs and attorneys' fees incurred in the discovery disputes. In December 2021 and July 2022, the Panel scheduled further pre-hearing conferences but, again, Respondent Johnson failed to appear. The FINRA Arbitration Award further asserts that:

The Panel notes that during the pendency of this matter, Johnson, after prior notice, failed to appear at scheduled pre-hearing conferences on December 3, 2019, September 9, 2020, September 16, 2020, January 26, 2021, December 2, 2021, and July 28, 2022. The Panel further notes that Johnson was represented on and off by at least three attorneys.

After consideration of the parties' motions and the multiple failures of Johnson to appear, produce, comply, and otherwise participate in this matter, herein, the Panel grants Claimant's request for a decision on the papers and denies Johnson's request for reinstatement of the Counterclaim.

Award

The FINRA Arbitration Panel found Respondent Johnson liable and ordered her to pay to Claimant Wells Fargo:

$934,761.37 in compensatory damages
$190,069.33 in interest.
$24,404.02 in costs.
$224,206.50 in attorneys' fees pursuant to the terms of the Notes.
$2,000.00 in attorneys' fees and costs as sanctions, as previously ordered.

Pointedly, the Panel dismissed with prejudice Johnson's Counterclaims. and her request for an expungement of the matter.

Finally, the Panel assessed the following fees:

Claimant Wells Fargo: $1,125 in postponement fees; 2,500 Injunctive Relief Surcharge for filing for a temporary injunction in court; $1,825 in hearing session fees,

Respondent Johnson: $300 in pre-hearing cancellation fees; $1,125 in postponement fees; $200 in discovery-related motion fees; $7,175 in hearing session fees

Bill Singer's Comment

According to online FINRA BrokerCheck disclosures as of September 21, 2022, Respondent Johnson was first registered in 1992, and she was registered with Wells Fargo from August 2015 to June 2019. BrokerCheck discloses that Wells Fargo discharged Johnson on May 8, 2019, based upon these allegations:

Discharged following concerns regarding suitability of recommendations to certain clients and instances where FA did not complete a trade approval worksheet.

In response to those allegations, BrokerCheck discloses that Johnson allegedly stated:

filed a claim with human resources for being unfairly targeted. Once I dropped the claim, I was terminated.

BrokerCheck discloses under the heading "Customer Dispute -- Settled" one incident filed on June 2, 2020, in which a customer "alleges that his Financial Advisor made unsuitable recommendations in his accounts," and that on August 31, 2020, the matter was settled for $13,000 without any contribution from Johnson. Under the same Settled heading, Johnson's prior employer from June 2006 to August 2015, Merrill Lynch, Pierce, Fenner & Smith Incorporate, disclosed that a customer complaint was filed May 29, 2020, alleging "unsuitable investment recommendations from 2006 until 2015," and that on August 31, 2020, the matter was settled for $10,000 without any contribution from Johnson.

As we often note in the BrokeAndBroker.com Blog, there is a price-tag that get attached to having your day in court or arbitration. Without question, Johnson got hit with a hefty bill for opting to fight her former employer's demand for repayment of the Notes and in order to pursue her Counterclaims. As discussed recently in part in "Former Ameriprise Rep Files Lawyer Malpractice Complaint After Losing FINRA Promissory Note Arbitration" (BrokeAndBroker.com Blog / August 22, 2022)
https://www.brokeandbroker.com/6624/finra-ameriprise-silverman-eccelston/:

If you are sued for failure to repay a balance on a promissory note, there is almost always a so-called "settlement premium" offer that is made by the creditor. Almost always as in not always -- so, you may be one of the few debtors for whom the full bill is demanded even during settlement discussions. Beyond obtaining some settlement premium, the other advantage of not proceeding to full-fledged litigation replete with opening statements, direct and cross examinations, motions, closing statements, briefs, and expert witness fees, is that you won't incur the charges attached to all those aspects of litigation. Similarly, if you settle before trial, you reduce your own lawyer's billable hours, and, you minimize the billable hours run up by your adversary. Some lawyers can bill 25 or more hours each day. So, factor into your willingness to go to the mat to clear your name or make a point, the ensuing costs and fees associated with pursuing your rights in arbitration and/or court. In Ameriprise v. Silverman, Silverman found out, there was a hefty cost to filing an Answer in the FINRA Arbitration and his Counterclaim; and then fighting the Arbitration Award in federal court; and then in pursuing malpractice claims in state court. If you want to stand on principle -- and many folks do, and that's their right -- don't be shocked if you find that the cost of principle these days may include a bill for your adversary's attorneys' fee, costs, and other fees.

Finally, the FINRA Arbitration Award asserted that Johnson was "represented on and off by at least three attorneys." That's a somewhat pregnant observation. How much of the on-and-off lawyering contributed to the various non-responses and non-appearances cited disapprovingly by the arbitrators? What role did the Covid pandemic play in engendering the on-and-off roles of legal counsel, or, in the alternative, in Johnson's ability to participate in her own defense and prosecution of her Counterclaim?

Securities Industry Commentator:
A legal, regulatory, and compliance feed

curated by veteran Wall Street lawyer Bill Singer https://www.rrbdlaw.com/6669/securities-industry-commentator/

Wells Fargo Wins FINRA Arbitration Against Former Rep With Three On And Off Lawyers (BrokeAndBroker.com Blog)

Manhattan Real Estate Fund Manager Sentenced To Prison For Securities Fraud (DOJ Release)

SEC Charges Cheetah Mobile's CEO and its Former President with Insider Trading / Executives Sold Securities through a Purported 10b5-1 Trading Plan (SEC Release)

SEC Charges Securities Professional and Former Corporate Insider with Insider Trading (SEC Release)

SEC Denies Whistleblower Award to Claimant

Order Determining Whistleblower Award Claims

SEC Buries the Lede About Stunning Misconduct in Its Office of the Ombudsman (BrokeAndBroker.com Blog)

Former U.S. Department of Housing and Urban Development Assistant Inspector General Convicted of Falsifying Financial Disclosure Forms (DOJ Release)

Area man who claimed to be African prince convicted by jury of several fraud crimes (DOJ Release)

SEC Charges Investment Adviser with Violating the Proxy Voting Rule (SEC Release)