Deferred Compensation

Published on: November 8, 2024

Court Reaffirms Ruling That Morgan Stanley’s Deferred Compensation Plans are ERISA Plans, Denies Morgan Stanley’s Motion to Reconsider

On November 5, 2024, Judge Paul G. Gardephe of the United States District Court for the Southern District of New York denied Morgan Stanley’s motion to reconsider and, in a detailed opinion, reaffirmed his November 21, 2023 ruling that Morgan Stanley’s deferred compensation plans are ERISA plans.

Last year, Judge Gardephe held that Morgan Stanley’s Compensation Incentive Plan and Equity Incentive Plan are “individual account plans” for the purposes of the Employee Retirement Income Security Act of 1974 (ERISA), a ruling that would require the Plans to comply with ERISA’s statutory protections for employee plan participants. On December 5, 2023, Morgan Stanley moved for “reconsideration and/or clarification” of the Court’s ruling, arguing that (i) the Court overstepped its authority and (ii) factual issues precluded the Court’s determination that Morgan Stanley’s Plans are governed by ERISA. On May 24, 2024 Morgan Stanley took the unusual step of seeking a writ of mandamus from the Second Circuit Court of Appeals, which the Second Circuit denied on August 27, 2024.

In his November 5, 2024 Order, Judge Gardephe examined Morgan Stanley’s arguments at length and rejected them, finding that Morgan Stanley’s contention that this Court committed “clear error” in deciding the ERISA coverage question is “disingenuous and incorrect” and that “[t]he issue of ERISA’s applicability to [Morgan Stanley’s] deferred compensation programs has been front and center since this lawsuit was filed in 2020.” Considering whether testimony proffered by Morgan Stanley in a separate arbitration precluded the Court’s determination that the Plans are governed by ERISA, Judge Gardephe found the testimony “irrelevant” because the question of whether a plan is governed by ERISA is determined from the plan documents. Judge Gardephe again rejected Morgan Stanley’s argument that the deferred compensation plans fall within the U.S. Department of Labor’s bonus regulation and reaffirmed his prior ruling that “Morgan Stanley’s deferred compensation programs are ERISA plans.”

Published on: August 8, 2024

Protecting Your Interests: Barry R. Lax on Deferred Compensation Legal Battles (Podcast)

By Lax & Neville LLP

Click here to listen.

Recently, financial advisory firms have been getting slammed by lawsuits over deferred compensation and ERISA violations, with cases involving major players like Morgan Stanley, Merrill Lynch, and U.S. Bancorp. To help you navigate these turbulent waters, we sat down with Barry R. Lax, a founding partner of Lax & Neville LLP, who provided an in-depth analysis of these landmark cases. Barry’s expertise sheds light on the complexities and potential pitfalls of deferred compensation plans, offering crucial insights for financial advisors who might have deferred compensation coming their way.

In this episode, Barry explains the recent victories and defeats of these firms in arbitration and court battles, providing a detailed look at the legal strategies and outcomes. He discusses the implications of these cases for advisors, especially those dealing with deferred compensation and retirement plans protected by ERISA. Barry also shares practical advice on how advisors can protect their interests and navigate the legal landscape.

Published on: May 21, 2024

Lax & Neville LLP Pursuing Unpaid Deferred Compensation Claims Against Merrill Lynch

By Lax & Neville LLP

On April 30, 2024, a class action was filed against Merrill Lynch in the Western District Court of North Carolina to recover the deferred compensation that Merrill Lynch cancelled upon Plaintiffs’ voluntary resignation. While we believe there are strong claims against Merrill Lynch for violation of ERISA, we believe that they must be arbitrated at FINRA. See Regulatory Notice 16-25 here. Lax & Neville is pursuing arbitration claims on behalf of former Merrill Lynch advisors for their cancelled deferred compensation comprised of both Long-Term Incentive (LTI) Cash Plans/WealthChoice and Restricted Stock Units (RSUs).

In a similarly situated class action, Shafer, et. al. v. Morgan Stanley, et. al., the Plaintiffs, former Morgan Stanley financial advisors, sued Morgan Stanley in December 2020 to recover their deferred compensation, which was cancelled by Morgan Stanley when those advisors voluntarily resigned. Morgan Stanley moved to compel those advisors’ claims to FINRA arbitration. On November 21, 2023, almost three years after the filing of the Complaint, the Federal Court granted Morgan Stanley’s motion requiring any Morgan Stanley advisor who wants to recover their deferred compensation to file FINRA arbitration claims against Morgan Stanley. See the Court’s Order and Opinion here. For more information on the Morgan Stanley decision, see here.

Our firm has extensive experience successfully pursuing deferred compensation claims in FINRA arbitration. Most recently, we have won more than $35 million in unpaid deferred compensation, interest, costs, and attorneys’ fees for more than two dozen former Credit Suisse investment advisers, and we represent dozens of Morgan Stanley financial advisors seeking to recover their deferred compensation.

Published on: December 7, 2023

New York Southern District Court Confirms Award Against Credit Suisse for Unpaid Deferred Compensation

By Lax & Neville LLP

On November 16, 2023, the United States District Court for the Southern District of New York entered judgment on a FINRA Arbitration Award against Credit Suisse Securities (USA) LLC, ordering it to pay more than $1.3 million to an investment advisor formerly employed by its now-closed US private bank. See Opinion and Order here.

The claimant and nearly fifteen hundred other employees were terminated when Credit Suisse announced it was closing its US private bank in October 2015. Credit Suisse unlawfully refused to pay $245 million in deferred compensation it owed to the advisors and claimant, like dozens of his colleagues, brought claims for breach of contract, breach of the implied covenant of good faith and fair dealing, fraud, and unjust enrichment. On February 02, 2023, a three-member FINRA Arbitration Panel found for the adviser and ordered Credit Suisse to pay claimant the full amount of his deferred compensation and prejudgment interest.

Credit Suisse moved to vacate in the Southern District. The Court denied the motion, confirmed the award and entered judgment.

Published on: November 22, 2023

Court Compels Morgan Stanley Advisors to Arbitrate for Their Deferred Compensation at FINRA

By Lax & Neville LLP

Today, the Southern District of New York granted Morgan Stanley’s motion to compel arbitration in the class action Shafer, et. al. v. Morgan Stanley, et. al. (Case 1:20-cv-11047-PGG).

Plaintiffs, former Morgan Stanley financial advisors, sued Morgan Stanley asserting that Morgan Stanley violated the Employee Retirement Income Security Act of 1974 (“ERISA”) by not paying Plaintiffs all of their deferred compensation when they resigned from Morgan Stanley, and Morgan Stanley moved to compel arbitration on June 29, 2022. The Court’s decision forces Plaintiffs and any similarly situated former Morgan Stanley financial advisor to file their claims for unpaid deferred compensation in FINRA Arbitration.

In its opinion, the Court held that Morgan Stanley’s Compensation Incentive Plan and Equity Incentive Plan are ERISA plans and “‘individual account plans,’” which under ERISA “means a pension plan which provides for an individual account for each participant and for benefits based solely upon the amount contributed to the participant’s account….” (Order, p. 44). The Court’s holding may significantly strengthen FINRA arbitration claims against Morgan Stanley, which primarily depend on the applicability, and Morgan Stanley’s violation, of ERISA.

Published on: April 24, 2023

Four More Former Credit Suisse Advisers Represented by Lax & Neville LLP Win FINRA Arbitration Award Against Credit Suisse Securities (USA) LLC in the Deferred Compensation Arbitrations

By Lax & Neville LLP

On April 18, 2023, four more former Credit Suisse investment advisers represented by Lax & Neville LLP won a FINRA arbitration award against Credit Suisse Securities (USA) LLC for unpaid deferred compensation. See Simon Clarke, Mitchell Riesenberger, Jose Rodriguez-Villalobos, Jeremy Seidman v. Credit Suisse Securities (USA) LLC, FINRA No. 20-02093. Lax & Neville has tried nine arbitrations resulting in awards of more than $35 million to 30 former Credit Suisse advisers.

The Claimants, Simon Clarke, Mitchell Riesenberger, Jose Rodriguez-Villalobos, and Jeremy Seidman, are now among the numerous former Credit Suisse advisors who have successfully brought claims for their portion of the over $200 million of deferred compensation that Credit Suisse refused to pay its advisors when it closed its US private bank in 2015, violating the advisers’ employment agreements and the firm’s own deferred compensation plans. Credit Suisse took the position, as it has with hundreds of other former investment advisers, that the Claimants voluntarily resigned and forfeited their deferred compensation. A three-arbitrator panel awarded Claimants compensatory damages, including prejudgment interest, in the amount of $2,862,019.32. The FINRA Panel recommended expungement of Claimants’ Forms U-5, the termination notice a broker-dealer is required to file with FINRA. As with hundreds of their colleagues, Credit Suisse falsely reported that Claimants’ “Reason for Termination” was “Voluntary.” The FINRA Panel recommended that the “Reason for Termination” be changed to “Termination without cause.”

Lax & Neville LLP has won more than $35 million in compensatory damages, interest, costs, and attorneys’ fees on behalf of former Credit Suisse investment advisers. To discuss these FINRA arbitration Awards, please contact Barry R. Lax, Brian J. Neville, Sandra P. Lahens or Robert R. Miller at (212) 696-1999.

Published on: February 9, 2023

Another Former Credit Suisse Adviser Represented by Lax & Neville LLP Wins a FINRA Arbitration Award Against Credit Suisse Securities (USA) LLC in the Deferred Compensation Arbitrations

By Lax & Neville LLP

On February 2, 2023, another former Credit Suisse investment adviser represented by Lax & Neville LLP won a FINRA arbitration award against Credit Suisse Securities (USA) LLC for unpaid deferred compensation. See James D. Garrity v. Credit Suisse Securities (USA) LLC, FINRA No. 20-03957. Lax & Neville has tried eight arbitrations resulting in awards of more than $32 million to 26 former Credit Suisse advisers.

The claimant, James Garrity, is now among the numerous former Credit Suisse advisors who have successfully brought claims for their portion of the over $200 million of deferred compensation that Credit Suisse refused to pay its advisors when it closed its US private bank in 2015, violating the advisers’ employment agreements and the firm’s own deferred compensation plans. Credit Suisse took the position, as it has with hundreds of other former investment advisers, that Mr. Garrity voluntarily resigned and forfeited his deferred compensation. A three-arbitrator panel awarded Mr. Garrity compensatory damages in the amount of $1,018,624.89 and prejudgment interest in the amount of $363,244.20. The Panel also ordered Credit Suisse to pay $51,000 in FINRA forum fees.

Lax & Neville LLP has won more than $32 million in compensatory damages, interest, costs, and attorneys’ fees on behalf of former Credit Suisse investment advisers. To discuss these FINRA arbitration Awards, please contact Barry R. Lax, Brian J. Neville, Sandra P. Lahens or Robert R. Miller at (212) 696-1999.

Published on: December 7, 2021

Former Credit Suisse Advisers Win $9.5 Million and $9 Million Awards For Unpaid Deferred Compensation in FINRA Arbitrations

By Lax & Neville LLP

On December 23, 2021, a team of seven former Credit Suisse investment advisers represented by Lax & Neville LLP won a $9.5 million FINRA arbitration award against Credit Suisse Securities (USA) LLC for unpaid deferred compensation. See Prezzano et al. vs. Credit Suisse Securities (USA) LLC, FINRA No. 19-02974. This comes just weeks after another FINRA Panel awarded $9 million to a team of eight former Credit Suisse investment advisers represented by Lax & Neville. See Hutchinson et al. vs. Credit Suisse Securities (USA) LLC, FINRA No. 16-02825.

These teams are now among the numerous former Credit Suisse advisors who have successfully brought claims for their portion of the over $200 million of deferred compensation that Credit Suisse refused to pay its advisors when it closed its US private bank in 2015, violating the advisers’ employment agreements and the firm’s own deferred compensation plans. The advisors were terminated without cause when the firm closed its US private bank. As it did with respect to almost every one of more than 300 advisers, and in each and every one of the deferred compensation cases filed against it, Credit Suisse took the position that the advisors voluntarily resigned and forfeited their earned deferred compensation when Credit Suisse closed their branches and eliminated their positions. The FINRA Panels unanimously found that Credit Suisse terminated each of the advisors without cause, breached their employment agreements, and violated their respective states’ labor laws.

Nine arbitrations have gone to award thus far, including seven brought by Lax & Neville LLP. See Prezzano et al. vs. Credit Suisse Securities (USA) LLC, FINRA No. 19-02974, Hutchinson et al. vs. Credit Suisse Securities (USA) LLC, FINRA No. 16-02825, Galli, et al. v. Credit Suisse Securities (USA) LLC, FINRA No. 17-01489; DellaRusso and Sullivan v. Credit Suisse Securities (USA) LLC, FINRA No. 17-01406; Lerner and Winderbaum v. Credit Suisse Securities (USA) LLC, FINRA No. 17-00057; Finn v. Credit Suisse Securities (USA) LLC, FINRA No. 17-01277; and Chilton v. Credit Suisse Securities (USA) LLC, FINRA No. 16-03065. All nine FINRA arbitration panels, three New York Supreme Court Commercial Division Judges (Credit Suisse Securities (USA) LLC v. Finn, Index No. 655870/2018 (N.Y. Sup. Ct. 2019); Lerner and Winderbaum v. Credit Suisse Securities (USA) LLC, Index No. 652771/2019 (N.Y. Sup. Ct.), Credit Suisse Securities (USA) LLC v. DellaRusso and Sullivan, Index No. 657268/2019 (N.Y. Sup. Ct.)), and a unanimous panel of the New York Appellate Division have found for the advisers and ordered Credit Suisse to pay the deferred compensation it owes them.

Published on: October 1, 2020

MASSACHUSETTS SUPERIOR COURT CONFIRMS ADVISORS’ $2.094 MILLION ARBITRATION AWARD AGAINST CREDIT SUISSE, INCLUDING INTEREST AND ATTORNEYS’ FEES, FOR ITS UNLAWFUL WITHHOLDING OF DEFERRED COMPENSATION

By Lax & Neville LLP

On August 31, 2020, the Massachusetts Superior Court confirmed a Financial Industry Regulatory Authority (“FINRA”) Arbitration Award against Credit Suisse for more than $2 million owed to four former Credit Suisse advisors represented by Lax & Neville LLP, including approximately $1.6 million in unlawfully withheld deferred compensation, more than $83,000 in costs and more than $411,000 in attorneys’ fees.

The former Credit Suisse advisors sued Credit Suisse for, among other things, violations of the Massachusetts Wage Act, breach of contract, breach of the implied covenant of good faith and fair dealing and unjust enrichment after it closed its U.S. wealth management business on October 20, 2015 and unlawfully cancelled their earned deferred compensation. On February 14, 2020, a three-member FINRA Arbitration Panel found for the advisers and ordered Credit Suisse to pay compensatory damages totaling $1,602,609.95 plus costs, interest and attorneys’ fees.

Credit Suisse petitioned the Court to vacate in part or modify the Award, challenging the Panel’s authority to award attorneys’ fees on the basis that the advisors had no contractual right to attorneys’ fees and that Credit Suisse did not agree to submit the issue of attorneys’ fees to the Panel. In rejecting Credit Suisse’s petition and refusing to modify or vacate the Award, the Court held that Credit Suisse itself had originally submitted a request for attorneys’ fees against its four former advisers, giving the Panel the authority it needed to award attorneys’ fees. Under New York law, which governed the parties’ agreements, a mutual request for attorneys’ fees forms a binding contract between the parties and authorizes a Panel to award attorneys’ fees. The Court further noted that given Credit Suisse’s many losses in the Credit Suisse Deferred Compensation Arbitrations, its surprise at, and defense to, the Panel’s award of attorneys’ fees when both parties had requested them was unreasonable, stating that the “theory should have come as no surprise to Credit Suisse, which had already been required to pay the attorney’s [sic] fee of the prevailing party in another arbitration,” referencing the $585,307 in compensatory damages, $131,694 in interest and $146,326 in attorneys’ fees awarded to Brian Chilton, another former Credit Suisse financial advisor represented by Lax & Neville LLP. Another $1.34 million in attorneys’ fees were also awarded to former Credit Suisse advisors Joseph Lerner and Anna Winderbaum and Richard DellaRusso and Mark Sullivan, all of whom were represented by Lax & Neville LLP, as well as Christian Cram, Andrew Firstman and Mark Horncastle.