FINRA Employment Arbitration: Never Mind

April 13, 2010

In the Matter of the Arbitration Between Steven Esposito, Claimant, versus Citigroup Global Markets, Inc., Respondent. (FINRA 08-03070, March 31, 2010), Claimant Esposito alleged Breach of Contract; Violation of Right to Privacy; Intentional Interference with Existing and Perspective [Ed: I believe that should be "Prospective"] Business Relationships; and Conversion (at the hearing, Claimant was granted permission to add a claim for Fraud).  Claimant sought $600,000 in compensatory damages and $375,000 in punitive (at the close of the hearing, Claimant amended those claims by seeking compensatory damages of over $906,500 and $38,000 in attorneys' fees).


Promises, Promises, Promises


Claimant alleged that he and Respondent Citigroup Global Markets, Inc. (CGMI) entered into an employment agreement, whereby CGMI provided him with a seven-year forgivable loan in the form of a promissory note (with an addendum that included newer notes); would commit to open a North Shore "satellite" office; and would provide him with

  • sales assistance;
  • the firm's maximum pay-out;
  • syndicate allocation; and
  • an advertising budget

Claimant alleged that CGMI failed to meet the terms of the agreement by

  • Failing to provide syndicate allocation
  • Failing to provide a proportional share of accounts from terminated/retired broker;
  • Never attempting to open a North Shore "satellite office."

Also, Claimant alleged that he was forced to move his book of business from CGMI, and that CGMI interfered with his ability to transfer his customers and failed to transfer a trust account that Claimant maintained with Respondent.


No Way


Respondent CGMI generally denied the allegations and asserted affirmative defenses including: 

  • Claimant failed to state a claim upon which relief can be granted;
  • The Statement of claim is barred by the doctrines of waiver, laches, ratification, and estoppels;
  • Lack of standing;
  • CGMI fully performed;
  • Doctrine of unclean hands;
  • Claimant was an "at-will" employee not bound to a specific term of employment. 

CGMI asserted a Counterclaim citing Breach of Contract based upon Claimant's failure to pay back two promissory notes upon termination. At the close of hearing, Respondent requested $572, 924.21 in compensatory damages plus interest of $108,649.47, and attorneys' fees of $85,938.16.




I'm not sure that I understand the Panel's Award - and I certainly don't understand the rationale for the decision - but the Panel dismissed with prejudice the claims of both Claimant and the Counterclaim of Respondent.  No winners.  No losers. Everyone picks up their chips and leaves the table.


Bill Singer's Comment:  As a veteran industry lawyer, I frequently get calls from would-be clients asking if they can sue for this or sue for that.  Esposito's claims typifies the wide range of allegations that FINRA arbitration Complaints can cover -- particularly in cases where there are defenses raised about repaying a portion of an Employee Forgivable Loan.  Among the more common complaints that I hear are those that involve disputes about the promised services of a sales assistant (typically, you thought that the SA was supposed be yours alone, and fully paid for by your employer). Then there are the issues pertaining to the promised corner office, or the promised branch relocation, or the promised opportunity to manage the office. Other common flashpoints involve D&B Leads or how a given office was supposed to divvy up accounts from terminated/retired brokers.  Talk to enough industry lawyers and we will likely nod knowingly when you tell us about how everything was going along fine until the Branch Manager hired his nephew, or until there was some perceived sexual hanky-panky going on between the manager and a new broker.  


The frustrating aspect of Esposito, is that the FINRA Arbitration Panel takes us from Point A (the allegations) to Point C (the decision) but fails to provide us with the connecting Point B (the rationale).  Given the recurrent nature of the claims and defenses raised in Esposito, you would likely expect that one of the parties would emerge as a clear-cut winner.  Although I can imagine many scenaria under which you could have two winners or two losers, I can hardly imagine drafting a decision that would fail to explain the rationale for dismissing six-figure claims and counterclaims based largely upon the same set of facts.