Merrill Lynch Says Late Is Not Better Than Never

June 1, 2011

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in October 2010, Claimant Merrill Lynch alleged breach of contract in its effort to recover damages of approximately $19,000. Respondent Burnham, representing himself pro se, counterclaimed for $7,000 in deferred compensation.

In the Matter of the FINRA Arbitration Between Merrill Lynch, Pierce, Fenner & Smith Incorporated, Claimant, vs. Matthew Burnham, Respondent (FINRA Arbitration 10-04827, May 26, 2011).

The FINRA Arbitrator hearing the matter found that Claimant Merrill Lynch has successfully proven that Respondent had breached a contract between the parties and, as such, the Arbitrator awarded to Claimant damages in the amount of $19,000.

The sole Arbitrator found that Respondent Burnham failed to prove that prior to his departure from Claimant, that there had been a vesting of his sought deferred compensation. To the contrary, the Arbitrator found that Claimant had proven no such vesting had occurred.  As such, the Counterclaim was denied.

SIDE BAR: Alas, as with many FINRA Arbitrations we really don't know as much about the facts as we would like. This referenced "contract" - just exactly what are we talking about? A promissory note loan from the employer to employee? A forgivable loan? I'm guessing it's something like that but it's a bit disappointing that the FINRA Decision doesn't spell that much out, at the very least.

An Arbitrator's Eloquence

Apparently, Respondent's Answer was not timely filed and Claimant moved to bar the late response. In language that I find bordering on the majestic, the Arbitrator stated:

[A]lthough Respondent's Answer was late, the purpose of the FINRA dispute resolution process is to hear claims on their merits. Granting a motion to bar in this matter would deny Respondent his opportunity to present any evidence on his behalf. Denying a party the opportunity to present its case should only be granted when a party has refused to participate or other extreme circumstances. Respondent did not refuse to participate and no such extreme circumstances exist.

Bill Singer's Comment

In FINRA arbitrations and all litigation, there are precise rules as to what must be filed, when, and how.  If you fail to abide by the mechanics of such filing procedures, you could incur financial sanctions or have the filing barred.  Frankly, I have no problem with such policies because the rules of the game are clearly set forth for all to read and comply with. 

Some litigants take it personally when their adversary's lawyer moves an arbitration panel or judge to impose thousands of dollars in sanctions for a late filing or asks that the tardy document be thrown out of the proceeding.  Although such requests may boil your blood, the lawyer would likely be committing malpractice if he or she did not seek to advance their client's interests in the face of an adversary's efforts to untimely file a critical pleading or brief.

As such, if you find yourself embroiled in an arbitration, make sure to comply with the various filing rules.  Those requirements vary with the type of document and for the type of matter (customer complaint versus an intra-industry dispute).  More often than not, if you're late, your outta luck - notwithstanding the ruling in this case.

Similarly, a lesson to be learned from this case is that sometimes it is, indeed, better to be late than to simply walk away.  While your odds of persuading a FINRA Arbitrator to accept  your late filing could be about the same as a crap shoot - at least you have some odds.  Although Burnham was tardy, he still got his day in court and was able to present his side of the case.  Yes, he lost his defense but who knows how many more dollars the Arbitrator would have piled on for attorneys' fee, costs, and expenses but for Burnham's effort to present his side of things.