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Brokerage Firm Demands $2.6 Million Damages From Former Employees
July 28, 2016
In the song "The End of The Innocence" the lyrics lament that:
When happily ever after failsAnd we've been poisoned by these fairy talesThe lawyers dwell on small details
Case In Point
SIDE BAR: Oddly, the Decision does not state the date on which the initial Statement of Claim was filed but only references a "Second Amended Statement of Claim filed on or about: May 26, 2015."
The FINRA Arbitration Decision asserts that the claims were related to the Respondents planning to leave Claimant's employ and, thereafter, creating a new brokerage firm. Said planning purportedly occurred at a time when three of the four individual Respondents were still employed at the firm; and included the alleged involvement of both current and former Noyes' employees.
Going On the Counter-Attack
Respondents Monere, Bouckaert, Vick, Falco, and Bono generally denied the allegations and asserted various affirmative defenses.
Vick and Falco filed a Counterclaim alleging that they were forced to leave Noyes's employ for reasons including:
Claimant's long-term plan to convert their customers to fee-based assets, Claimant's compliance philosophy and compliance issues, a fear that that their customers' accounts would be frozen by FINRA or the SEC, and Claimant's alleged inept management.
Vick and Falco's Counterclaim sought $1,389,000.00 compensatory damages plus attorneys' fees and costs.
Bono filed a Counterclaim alleging retaliation disparagement, and tortious interference with customer relationships. Bono alleged that:
[H]e was stripped of his title and duties in retaliation for his complaints about Claimant's regulatory non-compliance and the perception of possible whistle-blowing. In addition, Bono alleged that after his resignation, Claimant's employees made untrue statements to customers that Bono had overcharged them on commissions.
Bono's Counterclaim sought $954,000.00 compensatory damages.
Expungement Request
Respondents Monere and Bouckaert requested that the Panel recommend the
expungement of this arbitration case from Bouckaert's registration records maintained
by the Central Registration Depository ("CRD").
Spousal Emails
On May 17, 2016, the Panel granted Claimant's Motion to Compel Non-Privileged Emails and required Respondent Bono to produce the requested emails showing his wife as recipient by May 19, 2016. Following Bono's motion for reconsideration, the Panel ruled that he had to produce to one of the arbitrators certain emails listed on the privilege log for an in camera inspection to determine if they were privileged.
Following the arbitrator's review of the submitted emails, the Panel ruled that the emails to Bono's wife would be treated as attorney-client privileged or as attorney work product, but certain attachments and forwarded emails were not protected and had to be produced to Claimant by May 24, 2016
Award
The FINRA Arbitration Panel found Respondents Monere Investments, Bouckaert, Falco, Vick, and Bono jointly and severally liable to and ordered them to pay Claimant David A. Noyes & Company $640,000.00 in compensatory damages and $40,000 in monetary sanctions for discovery abuse.
Separately, the Panel found individual liability for Respondents Vick and Bono and ordered them to pay to Claimant Noyes the following compensatory damages:
- Vick: $44,200.00; and
- Bono: $70,500.00
Bill Singer's Comment
Online FINRA BrokerCheck records as of July 28, 2016 disclose Respondents had the following employment histories at Claimant David A Noyes:
- Bono: from 1977 until May 2015;
- Bouckaert: from 1979 until December 2011;
- Vick: from 1997 until April 2015; and
- Falco from 1997 until April 2015
Also, BrokerCheck discloses the following concerning FINRA member firm Monere Investments Inc.:
- 75% or more of the member firm is owned by Monere Holdings, Inc. since August 2014;
- Thomas Bono is the Chairman
- Peter Vick is Vice Chairman
- John Bouckaert is the President
- Anthony Falco is a Director
Once we step back and flesh out some of the prior relationships, we see that we had a number of long-term Noyes employees who left and wound up at Monere Investments -- and to merely characterize a former President and a former Vice-CEO as mere "employees" doesn't do justice to their former roles. What likely happened among the Claimant and Respondents was not merely a parting of the ways but what must have been the shifting of tectonic plates. The allegations and recriminations on both sides of this arbitration spell out how intense the dispute was. Clearly, we are entitled to infer from the facts and awards that "betrayal" was the emotion at the heart of the claims and cross-claims.
How, then, do we determine who actually won this case? Judging from Claimant's demands for damages, which amounted to something around $2.6 million, the net awards of just under $800,000 came to about one-third of what was sought. As to which side of the lawsuit came away truly victorious would depend, in part, on where settlement negotiations (if they occurred) concluded: the over/under is $800,000. Beyond that cost-benefits analysis, it seems clear that the arbitrators were none too happy with Respondents' conduct prior to and following their departure from Claimant; and the $40,000 discovery sanction further reflects that the arbitrators weren't enamored with Respondents' conduct during the litigation.
The takeaway from this dispute is that it's not exactly a free country, as lawyers often hear their defendant/respondent clients argue. You have the right to tell a boss to drop dead and shove the job. You may -- and this is an important qualification for those with non-compete agreements -- have the right to set up a competing business. You may -- and this is another important qualification for those with non-solicit agreements -- have the right to recruit your former colleagues and/or clients. The thing with injecting "may" into the equation of leaving and starting your own business is that some of the issues aren't amenable to commonsense but fall under the ambit of quirky common laws and arcane statutes.
In many instances, it pays to retain a lawyer to review your existing affiliation agreements and to work with you on preparing a checklist of Do's and Don'ts for how best to leave an employer and how best to start your new business. Are you going to get hosed by such a lawyer with thousands of dollars in legal fees? Perhaps. Is that cost worth it? Well, in this case, you would have had some $800,000 to work with before the answer would have been "no."