Wachovia / Wells Fargo Loses Stunning Retention-Award Case Against Former Employee

March 9, 2011

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in October 2009, Claimant Wells Fargo sought repayment of $131,690.44 from its former employee Respondent William Coster. Claimant Wells Fargo alleged that Respondent Coster was required to repay the amount in dispute upon his termination, in accordance with the terms of his Retention Program Document (under which he was paid a 2009 Retention Award).  In the Matter Of the Arbitration Between Wells Fargo Advisors, LLC f/k/a Wachovia Securities, LLC,Claimant/Counter, Respondent, versus William Edward Livingston Coster, Respondent/Counter-Claimant (FINRA Arbitration 09-06020, March 7, 2011).

Constructively Discharged

Respondent Coster generally denied the allegations, filed a counter-claim seeking $825,000 in damages, and asserted various defenses. Pointedly, Respondent alleged that the circumstances of his termination fell within the ambit of the "Special Circumstances" provision of the Retention Program Document and, as such, exempted him from repayment. Further, Respondent asserted that he was constructively discharged by Claimant, and that such a situation entitled him to an off-set against the demanded repayment. 

SIDE BAR: An allegation of "constructive discharge" essentially argues that an employee, who may have "resigned," should not be viewed as having voluntarily resigned but, in actuality, was forced to leave employment because of the acts of the employer (or because of the conduct/acts of third parties).  As such, the assertion is that the employee did not so much resigned but was essentially forced out of their job.  The legal impact of such an allegation is to seek treatment as a "fired" employee rather than one who "resigned."

In explaining his theory as to why he was relieved or an obligation to repay the retention award, Respondent Coster alleged that Claimant Wells Fargo's policies relating to the commodities futures business drove several of his large clients away.  Respondent asserted that the net result of these policies would have eliminated approximately 90% of his revenue production. Claimant generally denied these allegations and asserted various defenses, including that Respondent was an at-will employee subjected to termination at the firm's prerogative.

FINRA Arbitration Panel Decides

The FINRA Arbitration Panel denied and dismissed with prejudice all of Claimant Wells Fargo Advisors, LLC f/k/a Wachovia Securities, LLC's claims

But, hold on -- there's more.

The FINRA Panel found Claimant Wells Fargo Advisors, LLC f/k/a Wachovia Securities. LLC, liable for and ordered the firm to pay to Claimant Coster

  • $441,317.38 in compensatory damages on Respondent's Counterclaim;
  • $5,739.59 in costs on Respondent's Counterclaim;
  • $375.00 as reimbursement for the non-refundable portion of Respondent's Filing Fee retained by FINRA;
  • $96,232.50 in attomeys' fees on Respondent's Counterclaim pursuant to Texas law; and
  • $3,650.00 in contingency fees in the event Claimant moves to vacate the Award and loses the motion to vacate.
Bill Singer's Comment: Yet another in a growing number of cases in which you truly have to scratch your head and wonder what the former employer brokerage firm was thinking when it brouught this case. One assumes that before such cases are brought, that there is a rigorous internal vetting as to the prospects for success on the merits of the claims and that all reasonable settlement offers were exhausted. Frankly, I'm getting a sense that in certain General Counsel's offices and at some outside counsel there is a recent tendency to hang tough and send a message. That's all well and fine until you lose a case such as this -- and it becomse transformed into the hot topic at the water coolers around which many disgruntled employees assemble. Clearly, there was a massive miscalculation by Claimant in determining the strength of its case and the weakness of Respondent's.