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by Bill Singer

Former Dresdner Kleinwort Employees Win Massive Arbitration Award

February 3, 2011

Let me start off by warning you that I'm not totally confident that I understand all the facts or procedural aspects of this story.  To some degree, the obfuscation is caused by parallel proceedings in the New York State Supreme Court and in Financial Industry Regulatory Authority ("FINRA") arbitrations. Moreover, given the cold trail in the court case and the confidentiality in the FINRA arbitrations, I'm forced to try and fill in the blanks.

What seems to be somewhat clear is that there was a dispute - a heated one at that - between Commerzbank AG, Dresdner Kleinwort Securities LLC, and Dresdner Kleinwort Services LLC and those firms' former employees.  And it's a major disagreement involving tens of millions of dollars in 2008 bonuses.  In the United Kingdom, Germany and Italy, those disputes have resulted in numerous lawsuits that have either settled, been dismissed, or are ongoing.  As of the date of this blog, I am unaware that any former employee has won a verdict against the firms concerning the bonus issue.  Across the pond, the employers seem to be winning.

In the United States, the bonus disputes are being fought out on the dual fronts of court and arbitration. See, Commerzbank AG, Dresdner Kleinwort Securities LLC, and Dresdner Kleinwort Services LLC  v. John Bilello et al. (NYS Sup. Ct., February 22, 2010).   

In  2009, the three entities named as Plaintiffs had merged with the result that the Dresdner Kleinwort component is now referenced as an investment banking brand of Commerzbank AG.  The Plaintiffs wanted a declaration from the New York court that the disputed 2008 bonuses were discretionary and could be paid subject to the prerogatives of the Plaintiffs. The Plaintiffs argued that the financial crises of 2008 and 2009 compelled them to severely curtail the amounts to be paid, and that since the bonuses were only discretionary to begin with, that management had the right to reduce the pay-outs as it deemed appropriate.  In Paragraph 26 of the court Complaint, the specifics are set out [underlining appears in the Complaint]:

The Bonus Memoranda

26. Each of the defendants received a memorandum dated December 19, 2008, addressed to them individually which stated in pertinent part as follows:

Your discretionary bonus for 2008 as determined in Dresdner Kleinwort's sole discretion and the arrangements given below has been provisionaly awarded at

EUR [defendant's award amount].

Your providisional bonus award continues to be discretionary and contingent on, among other things, Dresdner Kleinwort performance.  Thus, the provisional bonus award stated above will be paid in accordance with, and is subject to, all applicable Dresdner Kleinwort policies pertaining to the determination and payment of such bonuses and the condition that no additional material deviations in Dresdner Kleinwort's revenue and earnings, as against the forecast for the months of November and December 2008, are identified during preparation of the annual financial statements for 2008 i.e., that Dresdner Kleinwort's earnings position does not deteriorate materially in this period. This will be reviewed in January 2009 by Stefan Jentzsch.  In the event tht such additional material deviations are identified, the Company reserves the right to review the provisional award and, if necessary, as determined in its sole discretion, to reduce or eliminate entirely the provisional award.

Apparently, Defendants interpreted the above language as confirming that an award of the bonus had, in fact, been made subject to terms and facts that did not materially change after December 19, 2008. For them, promises had been made, they made employment choices in reliance of those assurances,  and money was owed to them. The Defendants viewed the Plaintiffs' so-called exercise of discretion as a breach of the bonus / employment agreements or evidence of fraud.

It is unclear as to the status of the New York State court case but we do know that most of the Defendants in that case are also Claimants in two FINRA arbitrations; and that, similarly, the Plaintiffs in the court case are Respondents in the arbitrations.

All of which brings us to a sort of starting point for this article, which begins with the odd situation of a consolidated FINRA arbitration. 

In June 2009, former Dresdner Kleinwort Securities, LLC ("Respondent DKS") employees Christian Paul Miller and Brian Alan Langille filed separate FINRA arbitrations against Respondent DKS, a FINRA member firm. In March 2010, those two Claimants sought to add five additional Claimants, three of whom had been named the month earlier in the New York State court case in which DKS was a Plaintiff.   Thereafter, the FINRA Arbitration Panel permitted the consolidation of the two cases and allowed the addition of the new Claimants.

In the Matter of the Arbitration Between Christian Paul Miller, Brian Alan Langille, Amy E. Dunn, Vincent J. Faust, Vincent J.Bilello, Tanya A. Lincevski, Ricardo Zulliger, Claimants vs. Dresdner Kleinwort Securities LLC, Respondent (FINRA Arbitration 09-03493, January 25, 2011)

consolidated with

Brian A. Langille, Claimant vs. Dresdner Kleinwort Securities LLC, Respondent. (FINRA Arbitration 09-03740, January 25, 2011).

Claimant Langille alleged that he had been intimidated and retaliated against by Respondent DKS in connection with his employment;  and Claimants Miller, Langille, Dunn, Faust, Bilello, Lincevski, and Zulliger asserted breach of contract, intentional infliction of emotional distress, fraudulent inducement, and tortious interference in connection with their employment at Respondent. The Claimants alleged that they had been fraudulently induced by Respondent  DKS to remain at the firm through the offer of a bonus that was never paid.

Accordingly,

  • Langille ultimately sought $1,190,700.00 in damages and $396,900.00 in legal fees and treble damages.
  • Respondent Miller sought $661,500.00 in damages and $220,500.00 in legal fees and treble damages.
  • Dunn sought an unpaid bonus in the amount of $23,814.00, legal fees in the amount of $7,938.00, and treble damages in the amount of $63,504.00.
  • Faust sought an unpaid bonus in the amount of $793,800.00, legal fees in the amount of $264,600.00, and treble damages in the amount of $2,116,800.00.
  • Bilello requested sought an unpaid bonus in the amount of $185,220.00, legal fees in the amount of $61,740.00, and treble damages in the amount of $493,920.00.
  • Lincevski requested sought an unpaid bonus in the amount of $26,460.00, legal fees in the amount of $8,820.00, and treble damages in the amount of $70,560.00.
  • Zulliger sought an unpaid bonus in the amount of $992,250.00, legal fees in the amount of $330,750.00, and treble damages in the amount of $2,646,000.00.

In his separate case, Claimant Langille asserted that Respondent's conduct was in retaliation against him for his seeking legal advice regarding the payment of a bonus for 2008, and that such conduct constituted an act of intimidation. Claimant Langille sought reinstatement as a Managing Director of Respondent, damages in the amount of $79,170.00 plus interest and five (5) months COBRA premiums and outplacement services.

Following hearings, the FINRA Arbitration found Respondent DKS liable and ordered it to pay to Claimant:

  • Miller compensatory damages in the amount of $661,500.00 plus interest at a rate of 2% per annum from February 1, 2009 until payment of the award.
  • Langille compensatory damages in the amount of $1,190,700.00 plus interest at a rate of 2% per annum from February 1, 2009 until payment of the award.
  • Bilello compensatory damages in the amount of $185,220.00 plus interest at a rate of 2% per annum from February 1, 2009 until payment of the award.
  • Faust compensatory damages in the amount of $793,800.00 plus interest at a rate of 2% per annum from February 1, 2009 until payment of the award.
  • Zulliger compensatory damages in the amount of $992,250.00 plus interest at a rate of 2% per annum from February 1, 2009 until payment of the award.

Clamant Dunn's and Claimant Lincevski's claims were denied in their entirety.

In a FINRA Statement of Claim filed in August 2009, former DKS employees Cronin, Hand, and Nogulovic alleged breach of contract, intentional infliction of emotional distress, fraudulent inducement, and tortious interference. In the Matter of the Arbitration Between Anthony E. Cronin, Matthew J. Hand, and Dusan Nogulovic, Claimants  vs. Dresdner Kleinwort Securities LLC, Respondent (FINRA Arbitration 09-04668, November 3, 2010)

 

Cronin requested compensatory damages in the amount of $119,070.00, treble damages in the amount of $238,140.00, and attorney's fees in the amount of $449,820.00.

Hand requested compensatory damages in the amount of $330,750.00 and treble damages in the amount of $661,500.00. However, in November 2009, he withdrew with prejudice his claims.

 

In February 2010, Claimant Cronin moved to add Nogulovic as a Claimant, which was granted. Nogulovic requested compensatory damages in the amount of $231,525.00, treble damages in the amount of $463,050.00, and attorney's fees in the amount of $231,525.00.

 

Respondent DKS generally denied those allegations and asserted various affirmative defenses.

 

Following deliberation, the FINRA Arbitration Panel denied the Claimants' claims.

 

As things now stand, of the nine former DKS employees who went to verdict as Claimants in FINRA arbitrations against DKS, five won and four lost. 

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