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Former Raymond James Rep Wins One and Loses One in Employment Disputes
May 6, 2021
Some eight years ago, two Raymond James reps decided to work together. Apparently, a goal of the work relationship was to facilitate the contemplated retirement of one of the reps. Then someone may (or may not have) jumped offsides, and the ball was fumbled during the lateral, and then an offensive player picked up the fumbled ball and ran it in for a score -- looking at the field of play, however, we got one ref walking off five yards for an offsides penalty but we got another ref with raised arms calling a touchdown. Same play. Same game. Two different calls.
2013: A Business Relationship Begins
In 2013, Diana Petersen and Ronald Bardine entered into a business relationship while both were employed at Raymond James Financial Services, Inc. Petersen and Bardine entered into an Independent Contractor Agreement whereby Bardine would supervise Petersen -- and this agreement was for a term of six months subject to renegotiation/renewal thereafter. Also, Petersen and Bardine entered into a Purchase Agreement whereby (in contemplation of her retirement) she would transfer her securities practice to him by January 1, 2018. Finally, in a Financial Advisor Agreement between Petersen and Raymond James, it was set forth that she was retained by Bardine as a Raymond James registered representative notwithstanding that she was not that firm's "employee." Ronald J. Bardine, Respondent, v. Diana M. Petersen, et al., Appellants (Opinion, State of Minnesota Court of Appeals, A20-0940, File No. 71-CV-16-1378 / May 3, 2021) http://brokeandbroker.com/PDF/BardineMNCtApp210503.pdf
2015: A Matter of Concern
For about two years, Petersen and Bardine worked together; however, in the fall of 2015:
[B]ardine became concerned that Petersen was not complying with Raymond James policies. He knew that she had given clients blank forms to sign and had shown clients unverified investing reports. And in late October 2015, a coworker reported Petersen to the compliance department for signing her husband's name on a check. The Raymond James compliance department subsequently sent a team of compliance officers to investigate the allegations. During the investigation, the officers interviewed Petersen, Bardine, and others, and reviewed documents and emails relating to Petersen's work. The officers discovered that, in addition to the issues Bardine identified, Petersen had been saving client passwords and corresponding with clients via an email address not affiliated with Raymond James. Based on the results of the investigation, Bardine and Raymond James terminated their agreements with Petersen.When Bardine received a bill from Raymond James for the investigation, he asked Petersen for reimbursement. She refused. Bardine sued, alleging claims of breach of contract, negligence, breach of the covenant of good faith and fair dealing, and unjust enrichment. Petersen countersued for breach of contract, conversion, civil theft, breach of fiduciary duty, and unjust enrichment. She based these claims on assertions that Bardine failed to pay Petersen an agreed-upon commission, wrongfully accused Petersen of violating Raymond James company policies, and failed to pay Petersen for her client list.4 Petersen also moved for the determination of attorney fees pursuant to the purchase agreement by the jury in a separate proceeding, which the district court granted.= = = = =Footnote 4: Additionally, Petersen filed a Financial Industry Regulatory Authority (FINRA) arbitration action against Raymond James for defamation, tortious interference with contract, tortious interference with prospective economic advantage, aiding and abetting, and intentional and negligent infliction of emotional distress. The arbitration panel awarded Petersen $360,000.
at Pages 5 of the Court of Appeals Opinion
2019: Petersen v. Raymond James (FINRA Arbitration)
https://www.finra.org/sites/default/files/aao_documents/17-02974.pdf As characterized in the FINRA Arbitration Decision, Claimant Petersen alleged that Respondent Raymond James Financial had:
wrongfully terminated Claimant and defamed her by knowingly making false statements in the Form U5 filed by Respondent as part of her registration records maintained by the Central Registration Depository ("CRD").
At the close of the FINRA Arbitration hearing, Claimant sought $3,437,387 in compensatory damages, interest, $2,500,000 in punitive damages, attorneys' fees, and costs. Additionally, Claimant sought the expungement of the allegedly defamatory comments from her industry record. Respondent Raymond James generally denied the allegations and asserted various affirmative defenses.
Motion for Sanctions
On July 1, 2019, Claimant Petersen filed a Motion for Sanctions, on which the Panel heard oral argument but deferred making a ruling on until the evidentiary hearing. Around July 28, 2019, Claimant filed a Request to Renew the Motion for Sanctions, which the Panel granted at the evidentiary hearing. At the hearing, the Claimant moved to dismiss her aiding and abetting claim, which the Panel granted without opposition from Respondent.
SIDE BAR: FINRA Code of Arbitration Procedure for Customer Disputes:FINRA Rule 12212: Sanctions(a) The panel may sanction a party for failure to comply with any provision in the Code, or any order of the panel or single arbitrator authorized to act on behalf of the panel.Unless prohibited by applicable law, sanctions may include, but are not limited to:
- Assessing monetary penalties payable to one or more parties;
- Precluding a party from presenting evidence;
- Making an adverse inference against a party;
- Assessing postponement and/or forum fees; and
- Assessing attorneys' fees, costs and expenses.
(b) The panel may initiate a disciplinary referral at the conclusion of an arbitration.(c) The panel may dismiss a claim, defense or arbitration with prejudice as a sanction for material and intentional failure to comply with an order of the panel if prior warnings or sanctions have proven ineffective.
Award
The FINRA Arbitration Panel found Respondent Raymond James Financial liable and ordered it to pay to Claimant Petersen:
In recommending the expungement of the "Termination Explanation" and "Termination Allegations" on Claimant Petersen's Form U5, the Panel proposed the following revision:
The FINRA Arbitration Panel found Respondent Raymond James Financial liable and ordered it to pay to Claimant Petersen:
- $360,000 in compensatory damages with interest;
- $500 in costs;
- $100,000 in sanctions for failure to comply with the Panel's Orders pursuant to FINRA Rule 12212(a); and
- $600 in reimbursed filing fees.
Expungement
Diana Marie Petersen was given a five day notice of termination of the Financial Advisor contract with her supervisor and Raymond James Financial Services, Inc. on October 27, 2015, effective November 1, 2015. No reason for termination was provided at that time and the termination was not for cause. Diana Marie Petersen had engaged in a number of minor violations of Raymond James Financial Services, Inc. policy and was in conflict with her supervisor. None of this behavior was determined by Raymond James Financial Services, Inc. to justify termination for cause. After serving the notice of termination, not for cause, it was discovered that Diana Marie Petersen had signed her husband's name out of convenience to a letter the husband had authorized in connection with the husband's duties as a Trustee. The letter did not involve an investment, but because the trust was a client of Raymond James Financial Services, Inc., signing her husband's name was an additional violation of Respondent policies. Subsequently, Raymond James Financial Services, Inc. terminated Diana Marie Petersen's registration with Raymond James Financial Services, Inc. under the for cause clause on November 10, 2015.The Reason for Termination shall remain the same.The Panel recommends the expungement based on the defamatory nature of the information. The language in Claimant's Form U5 filed suggests conduct that portrays Claimant in an extremely negative light making it quite difficult if not impossible for her to obtain new employment in the financial services industry. These words were chosen by Respondent's law department to protect the supervisor and Respondent and do not accurately reflect the reasons why Claimant was terminated. The Panel is not making a finding that all the elements of common law defamation have been established, but the words are generally defamatory, damaging to Claimant's reputation, and could mislead the public. The incidents do not involve customer dispute information.
Yes, but . . .
Notwithstanding that the FINRA Arbitration Panel found that Petersen's "termination was not for cause," the arbitrators still found that Claimant Petersen "had engaged in a number of minor violations of Raymond James Financial Services, Inc. policy and was in conflict with her supervisor." Against that amalgamation of policy infractions and inter-personal conflict, Raymond James discharged Claimant. As Raymond James' saw things, the firm's compliance policies were violated when Petersen signed her husband's name in connection with his duty as a Trustee because said Trust was a client of Raymond James. Notwithstanding, the FINRA Panel of Arbitrators characterized Raymond James' regulatory disclosures as designed to "protect the supervisor and Respondent and do not accurately reflect the reasons why Claimant was terminated."
Some Mitigation of Discovery Sanctions
In addition to the Panel's displeasure with Raymond James' disclosures relating to Petersen's termination, the arbitrators were angered by the firm's conduct during Discovery. In awarding Claimant Petersen $100,000 in Discovery-related sanctions, the Panel provided this barbed rationale:
Prior to the hearing and renewed at the hearing, Claimant moved for sanctions against Respondent for violating multiple Panel Orders to produce documents. The Panel decided to award monetary sanctions to Claimant in the amount of $100,000.00.
According to the FINRA Office of Dispute Resolution Arbitrator's Guide, "Failure to comply with the discovery rules hinders the efficient and cost-effective resolution of disputes and undermines the integrity and fairness of FINRA's forum." The litany of excuses that Respondent did not know that Claimant was requesting, and the Panel was repeatedly ordering, production of all documents responsive to the discovery requests, that Respondent disagreed with the Panel's multiple orders to produce, that Respondent spent a lot of money in the discovery process, or that Claimant was also guilty of discovery abuse does not come close to justifying Respondent's repeated refusal to comply with the rules in the Code of Arbitration Procedure (the "Code") and the Panel's orders. Respondent did finally produce numerous additional documents a few days before the final hearing. However, these documents should have been produced months prior to the final hearing to allow Claimant an opportunity to plan and present its case and to allow this Panel to hear the case in an orderly manner.The Panel's Order dated May 22, 2019 (drafted by the previous Chairperson, on behalf of the unanimous Panel), reaffirmed previous orders and required production of the relevant discovery documents by June 15, 2019 at 5:00 P.M. The Order provided that "failure, for any reason, to comply with the deadline of June 15, 2019 may result in the panel's negative or adverse inference(s) and will trigger sanctions in the amount of ten thousand dollar [sic] ($10,000) per day". Respondent, again, chose not to comply. See the Panel's Order of July 21, 2019 (drafted by the current Chairperson, on behalf of the unanimous Panel). The Panel is tempted to impose the nearly half-million dollar sanction Respondent has earned because of its deliberate disregard of Panel Orders. In light of the scope of this case, however, we believe some mitigation of that sanction is appropriate and will still serve the purpose of upholding the integrity of the FINRA arbitration process and send the appropriate message to Respondent.
I do not believe that the Panel's "mitigation" of the contemplated $500,000 Discovery sanction was appropriate. Such misguided mercy will not "send the appropriate message to Respondent." If anything, the appropriate message would have been better sent and received if it came with a $500,000 price-tag. If the Panel truly wanted to uphold the integrity of mandatory intra-industry arbitration, and truly wanted to send a meaningful message to the firm, I would suggest that the arbitrators should have availed themselves of the remedy prescribed in FINRA Rule 12212(b):
FINRA Rule 12212: Sanctions. . .(b) The panel may initiate a disciplinary referral at the conclusion of an arbitration.
Not Adding Up?
Claimant Petersen sought Claimant sought $3,437,387 in compensatory damages, interest, $2,500,000 in punitive damages, attorneys' fees, and costs; however, the FINRA Arbitration Panel awarded her $360,000 in compensatory damages with interest; $500 in costs; $100,000 in sanctions; and $600 in reimbursed filing fees. Although roughly $461,000 in total awards ain't chicken feed, that sum is far short of the nearly $6 million in damages sought. No -- I'm not suggesting that the Panel came up with the wrong amount but I am complaining that the arbitrators offered no rationale or explanation for their calculation.
Bardine v. Petersen (Minnesota District Court)
So, we got a ref signaling touchdown for Petersen. She gets the points for her win in FINRA arbitration against Raymond James. But wait . . . there's that other ref calling an offsides penalty against her.
For reasons that sort of escape me, Raymond James billed Bardine for the firm's costs derived from investigating Petersen's conduct. I'm not saying such a bill is wrong but, you know, it sort of seems a tad petty given the circumstances. Moreover, if the firm wanted to bill someone, why not send the invoice to Petersen? Be that as it may, Petersen declined to reimburse Bardine for the charges, and he sued her in the Sherburne County District Court,/Minnesota State Court. In his state court Complaint, Bardine alleged breach of contract, negligence, breach of the covenant of good faith and fair dealing, and unjust enrichment. In response, Petersen countersued Bardine for breach of contract, conversion, civil theft, breach of fiduciary duty, and unjust enrichment.
Following a jury trial, Petersen was found to have breached the independent contractor agreement and the financial advisor agreement, as well as the covenant of good faith and fair dealing under the purchase agreement. The jury awarded Bardine $175,000 in damages and $64,757.17 in attorney fees. The District Court denied Petersen's motion for a new trial.
Petersen v. Bardin (Minnesota Court of Appeals)
On appeal to the Minnesota Court of Appeals, Ronald J. Bardine, Respondent, v. Diana M. Petersen, et al., Appellants (Opinion, State of Minnesota Court of Appeals, A20-0940, File No. 71-CV-16-1378 / May 3, 2021) http://brokeandbroker.com/PDF/BardineMNCtApp210503.pdf, Petersen argues, in part, that the District Court:
erred by denying her motions for judgment as a matter of law and abused its discretion by denying her motion for a new trial. She also contends that the district court abused its discretion by admitting "expert" testimony from Bardine's fact witnesses, erred by submitting the question of attorney fees to the jury, and provided improper instructions to the jury. . . .
As the Court of Appeals framed the issues before it:
at Page 8 of the Court of Appeals OpinionPetersen assigns error to the district court's denial of her motions for judgment as a matter of law and her motion for a new trial. The crux of her argument is that the independent contractor agreement and the financial advisor agreement are invalid as a matter of law. As such, Petersen asserts that there was insufficient evidence to support the jury's verdict. . . .. . .[A]ccording to Petersen, because the independent contractor agreement expired in April 2014, any alleged breach in the fall of 2015 was a legal impossibility. Petersen also claims that because the financial advisor agreement was between herself and Raymond James-and Raymond James did not sign the contract- Bardine cannot enforce the agreement. As a result, she asserts, the district court erred by denying her motion for judgment.
Independent Contractor Agreement
As to whether the Independent Contractor Agreement retained vitality and had not terminated after six months, the Court of Appeals found in part that:
[B]ardine and Petersen performed under the terms of the original contract for the six-month period as planned. But when the agreement expired in 11 April 2014, the two continued to perform under the terms of the agreement. Petersen offers no support for her claim that the parties' conduct changed after April 2014.6 And our review of the record does not reveal any other evidence to suggest that the parties stopped working under the terms of the original agreement. In short, although the original agreement was only intended to be in place for six months, we conclude that Bardine's and Petersen's continued performance under the terms of the agreement extended the contract until October 2015.Because the parties continued to perform under the independent contractor agreement until Bardine terminated the agreement in October 2015, Bardine's breach-of-contract claim is not invalid as a matter of law. As such, there was sufficient evidence for a jury to conclude that Bardine had proven his breach-of-contract claim with regard to the independent contractor agreement. The district court did not err by denying Petersen's motion for judgment as a matter of law. . .
at Pages 10 - 11 of the Court of Appeals Opinion
Financial Advisor Agreement
In addition to arguing that the Independent Contractor Agreement had expired, Petersen further contended that Financial Advisor Agreement was invalid and unenforceable because it was not signed by a Raymond James representative. The Court of Appeals found in pertinent part that although the agreement was unsigned:
[H]ere, it is undisputed that Petersen and Raymond James adhered to the terms of the contract from the time of its execution to Petersen's termination. Petersen worked as an independent contractor of Raymond James and the company provided Petersen with the necessary tools and assistance to buy and sell securities. Despite Petersen's claims otherwise, we conclude that the financial advisor agreement was validly formed.
at Page 13 of the Court of Appeals Opinion
Although Bardine was not a party to the Financial Advisor Agreement, the Court deemed him to have third-party rights of enforcement:
Here, the financial advisor agreement states that it is "by and between" Raymond James and Petersen. But Bardine is named as the "associate" who had retained Petersen's services, and his signature is on the final page of the agreement. At trial Bardine testified that in signing the agreement, he understood that a "burden" was placed upon him to adhere to the terms of the contract. And Bardine did in fact perform under the terms of the agreement until it was terminated in fall 2015. In spite of the fact that Bardine was not identified as a party in the beginning of the agreement, because he agreed to and performed in accordance with the agreement, we conclude that he can enforce the contract.
at Page 14 of the Court of Appeals Opinion
Motion for New Trial
Having found the contracts at issue to be valid and the jury verdict supported by the evidence, the Court of Appeals did not find that the District Court had abused its discretion when denying Peterson's Motion for a New Trial. As to the lower court's admission of testimony from Raymond James' compliance officers, the Court of Appeals found that:
when the officers testified to Raymond James policies or federal financial regulations, they did so within the scope of the investigation into Petersen's conduct. The purpose of those statements was not to provide expert opinion on those policies and regulations, but to explain why Petersen was being investigated and why she had been discharged. As such, the district court did not abuse its discretion by admitting the compliance officers' testimony at trial.
at Pages 17 - 18 of the Court of Appeals Opinion
After resolving additional arguments pertaining to attorney fees and jury instruction, the Court of Appeals affirmed the District Court and granted in part Petersen's Motion to Strike portions of Bardine's Addendum and Appellate Brief.