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Frustrated Former Merrill Lynch Employee Could Not Be Promoted But Maybe Could Have But the Firm Says It Didn't Have To
October 29, 2021
In a recent employment dispute, Merrill Lynch argued that although they had intended to promote an employee, they could not have promoted the employee, but that they had the right to decide not to promote him even if they couldn't; but, regardless of what the firm could not do and also had the right to not do, Merrill had a reasonable basis for not promoting him and made an effort to report on his Form U5 why they didn't promote him. And folks wonder why there's so much litigation on Wall Street.
Case in Point
In a FINRA Arbitration Statement of Claim filed in December 2020, associated person Claimant Williams asserted breach of contract; common law fraud; negligence; and gross negligence. Claimant Williams sought $3,235,000 in compensatory damages, $1 million in punitive damages, interest, costs, and fees. In the Matter of the Arbitration Between Michael T. Williams, Claimant, v. Merrill Lynch Pierce Fenner & Smith, Inc.
Brian M. Shambo
Thomas F. Nelson
Daniel I. Markow
Kyle W. Morgan, Respondents (FINRA Arbitration Award 20-03995)
https://www.finra.org/sites/default/files/aao_documents/20-03995.pdf
As to what prompted Claimant's claims, well that's explained in the FINRA Arbitration Award in a brief and puzzling manner:
The causes of action relate to the financial package offered to Claimant for employment with Respondent.
We're like in the midst of an arbitration with parties suing each other and the best that FINRA can offer is that the dispute has something to do with the "financial package" offered to Claimant?
Counterclaim
Respondents generally denied the allegations, asserted various affirmative defenses, and Respondent Merrill Lynch filed a Counterclaim asserting breach of contract and unjust enrichment. The FINRA Arbitration Award asserts that the causes of action in the Counterclaim:
relate to Claimant's alleged failure to repay sums due to Respondent MLPFS pursuant to a promissory note dated June 13, 2019 ("Promissory Note").
In its Counterclaim, Merrill Lynch sought the balance due on the Promissory Note, $37,878.80 plus interest, fees, and costs. Claimant Williams answered the Counterclaim by stipulating that he "recognizes the debt owed pursuant to the Promissory Note and adopted the affirmative defenses set forth in Respondents' Answer."
SIDE BAR: I'm not quite sure that I understand that last bit about Williams adopting the Respondents' affirmative defenses. I think I know what the Award means to say but it doesn't quite say what it means. There's two ways to read the Award's explanation:
- Williams agrees that there is a balance due on the Note and he agrees with the defenses that the Respondents had raised against his Complaint; or, in the alternative,
- Williams agrees that there is a balance due on the Note and he is adopting the defenses raised against him by the Respondents, and, in the spirit of turnabout is fair play, is using those same defenses against them.
Award
The FINRA Arbitration rendered the following Award:
Bill Singer's Comment1. Claimant's claims are denied in their entirety. Claimant failed to provide a cogent basis for any claim, and in particular as to the individual Respondents. While the evidence showed that Claimant's frustration with the course of events was sincere and reasonable, it also showed that Respondent MLPFS complied with its contract with Claimant and committed no tort.The contract entered stated that Claimant relied on no representations not contained in that agreement. It provided that the employment would be at will. Multiple witnesses, including Claimant, testified that they understood Claimant could terminate the employment at any time, and while Claimant did not state an understanding of the agreement as creating an employment that was terminable at will by Respondent MLPFS, the contract unambiguously provided exactly that.The evidence did not establish, as sometimes asserted by Respondents, that Respondent MLPFS could not have promoted Claimant to Resident Director. It did, however, establish that it had a right to decide not to do so.While not required to dispose of Claimant's claims, the evidence also revealed both a reasonable basis for choosing not to promote Claimant, and efforts by Respondent MLPFS to find a resolution to the reporting on Claimant's U5 that caused Respondent MLPFS to choose not to promote Claimant.Claimant, not Respondents, terminated Claimant's employment as a financial advisor, as he was entitled to do for any reason or no reason. While there was some evidence of some errors in services related to moving Claimant's book of business to Respondent MLPFS and in other services, none of these were material breaches of the contract.Further, there was no evidence from which the Panel would have been able to determine any damages with reasonable certainty, if there had been, in fact, any damages. Respondent MLPFS paid Claimant as agreed. Most of his book of business was, in fact, successfully transferred. He received the funds for which he executed a promissory note and failed to fully repay it as agreed.Notably absent was any substantial evidence to support an inference that any Respondent intentionally misled Claimant. Rather, the evidence all supported the inference that Respondent MLPFS intended to promote Claimant when it hired him as a financial advisor, and later decided not to when additional, relevant facts came to light.It should be noted that this Award in no way represents any finding or conclusion by this Panel that the subject U5 entry was valid or accurate or appropriate. The prior employer was not a party to this proceeding and there was no need for this Panel to reach any conclusion as to the truth or validity or reasonableness of that disclosure.2. With respect to the Counterclaim, Claimant is liable for and shall pay to Respondent MLPFS the sum of $39,054.08 in compensatory damages.3. Claimant is liable for and shall pay to Respondent MLPFS post-judgment interest on the above-stated sum at the Florida statutory interest rate for judgments, to commence fifteen (15) days from the date of service of the final Award through and including date of final payment.4. Claimant is liable for and shall pay to Respondent MLPFS the sum of $19,288.00 in attorneys' fees pursuant to the Promissory Note.5. Claimant is liable for and shall pay to Respondent MLPFS the sum of $2,200.00 in costs pursuant to the Promissory Note.6. Any and all claims for relief not specifically addressed herein, including any requests for punitive damages, are denied.
Okay, so . . . the arbitrators found Claimant Williams to be someone whose "frustration with the course of events was sincere and reasonable . . . [but he] failed to provide a cogent basis for any claim." The Panel sort of sets up Williams with a jab that's actually intended to be more of a feint, and then lands an overhand right punch to the side of his head.
Then there's that oddball discussion about Merrill Lynch's assertion that it "could not have promoted Claimant to Resident Director. It did, however, establish that it had the right to decide not to do so." We could not have done X but we had the right to decide not to do X -- okay, yeah, sure. Next, the Panel offers the somewhat unnecessary aside that "the evidence also revealed both a reasonable basis for choosing not to promote Claimant, and efforts by Respondent MLPFS to find a resolution to the reporting on Claimant's U5 that caused Respondent MLPFS to choose not to promote Claimant." Wanna have some fun? Get a piece of paper and try to write down exactly what that all means. Lemme give it a shot here:
Merrill argued that they could not have promoted Williams but that they did have the right to decide not to promote him even if they couldn't; but, regardless of what the firm could not do and also had the right to not do, Merrill had a reasonable basis for not promoting Williams and made an effort to report on Williams' Form U5 why they didn't promote him.
Now that we've cleared up the not-promotable-but-we-didn't-have-to-promote-him-but-we're-having-difficulty-explaining-why-we-didn't, I want you to digest this tidbit of rationale from the Panel:
Notably absent was any substantial evidence to support an inference that any Respondent intentionally misled Claimant. Rather, the evidence all supported the inference that Respondent MLPFS intended to promote Claimant when it hired him as a financial advisor, and later decided not to when additional, relevant facts came to light.
I mean, which is it? Merrill couldn't promote Williams but "intended to promote" him but then decided not to, which, just to remind you, the firm had the right to not promote him, but, when push came to shove and the firm had to explain on the Form U5 why they didn't do what they couldn't do but had intended to do but had the right not to. Yeah, I can see how Williams might have been a tad frustrated. Finally, put this cherry atop your FINRA arbitration sundae:
It should be noted that this Award in no way represents any finding or conclusion by this Panel that the subject U5 entry was valid or accurate or appropriate. The prior employer was not a party to this proceeding and there was no need for this Panel to reach any conclusion as to the truth or validity or reasonableness of that disclosure.
What the hell are you talking about: What prior employer? What does the prior employer have to do with anything??