New York Securities Lawyer Blog
Earlier today, the United States District Court for the Southern District of Florida (“District Court”) denied Bank of America Merrill Lynch’s (“Merrill Lynch”) petition to vacate a Financial Industry Regulatory Authority, Inc. (“FINRA”) arbitration panel award. See Order Denying Petition to Vacate Arbitration Award, Merrill Lynch, Pierce, Fenner & Smith, Inc., vs. Smolchek, et. al., No. 12 Civ. 80355 (S.D.Fla. Sept. 17, 2012). Merrill Lynch had publicly stated it was confident that this arbitration award would be vacated. This is a significant decision and could affect thousands of Merrill Lynch advisors who either left Merrill Lynch recently or who are thinking about leaving in the future. As a result of the District Court’s decision, Merrill Lynch will be required to pay $10.2 million to two former financial advisors, both of whom were denied deferred compensation. Similar to many other brokers who left Merrill Lynch after its merger agreement with Bank of America in September 2008, Meri Ramazio and Tamara Smolchek (“Claimants”) brought an arbitration claim against Merrill Lynch seeking disbursement of their duly owed deferred compensation. Claimants’ request for damages was based on the theory that the acquisition of Merrill Lynch constituted a “good reason” for collecting their deferred pay. The $10.2 million FINRA arbitration award rendered by the panel in April 2012 included a commensurate total of $5,150,000 in compensatory damages for a breach of contract related to the brokers’ deferred compensation awards and unpaid wage, as well as a sum total of $5,000,000 in punitive damages on the basis that Merrill Lynch has “intentionally, willfully and deliberately engaged in a systematic and systemic fraudulent scheme to deprive Claimants of their rights and benefits under [Merrill Lynch’s] Deferred Compensation Programs.” See Tamara Smolchek and Meri Ramazio v. Merrill Lynch, Pierce, Fenner & Smith, Inc., FINRA Case No. 10-04432. After the award was rendered in April, both parties filed competing petitions seeking to confirm and vacate the arbitration award. Merrill Lynch asserted that: (1) the chairwomen’s failure to disclose certain facts suggested the possibility of a bias and created an evident partiality; (2) the panel’s decision to limit Merrill Lynch’s presentation of its case and to impose certain sanctions against it is demonstrative of the panel’s misconduct; and (3) the panel exceeded its powers. In its order denying Merrill Lynch’s petition to vacate the arbitration award, the District Court concluded that Merrill Lynch “has not sufficiently demonstrated evident partiality on the part of the panel or that the panel engaged in misconduct or exceeded its powers.” In addition to the class action brought by nearly 1,400 aggrieved brokers, which was recently purported to settle for $40 million and is currently awaiting approval from a federal court judge in Manhattan, Merrill Lynch also faces more than 1,000 similar claims in the FINRA arbitration forum. See Scott Chambers et al v. Merrill Lynch & Co., Inc., et al, No. 10 Civ. 7109 (S.D.N.Y). If you are a financial advisor who has any issues related to your employment at Merrill Lynch, or if you are thinking of changing your employment, please contact Lax & Neville LLP at (212) 696-1999 to discuss your potential matter. At Lax & Neville LLP, we represent securities industry employees nationwide seeking representation in employment matters.