FINRA Arbitrators Checkmate SunTrust With Punitive Damages for Misuse of Rep's Name and Picture

The infamous "Touch Move" rule of chess prompts many arguments about whether you touched a piece or took your finger off that piece. In a recent FINRA arbitration, after SunTrust filed a Statement of Claim against a former employee, the employer metaphorically took its finger off the chess piece. In retrospect, SunTrust probably should not have touched the piece. That opening move paved the way for a disastrous endgame when arbitrators awarded the former employee over $207,500 in compensatory and punitive damages.

Case in Point

In a FINRA Arbitration Statement of Claim filed in December 2020, FINRA member firm Claimant SunTrust asserted breach of promissory note. Claimant sought $94,725 in pro rata loan repayment, interest, fees, and costs. In the Matter of the Arbitration Between SunTrust Investment Services, Inc. n/k/a Truist Investment Services, Inc., Claimant, v. Michael Nathan Hudgins, Respondent (FINRA Arbitration Award 20-04075)
https://www.finra.org/sites/default/files/aao_documents/20-04075.pdf

Associated person Respondent Hudgins generally denied the allegations, asserted affirmative defenses, and filed a Counterclaim asserting breaches of contract and duty of good faith, and the unauthorized use of name and picture. Respondent sought at least $10,000 for each breach and at least $350,000 in punitive damages.

On March 29, 20023, the FINRA Arbitration Panel issued a post-hearing Order directing the parties to provide supplemental memoranda addressing the following:

1) Does the “entire agreement” or integration clause in the Retiring Agent’s Agreement result in that agreement superseding the terms and conditions of the Offer Agreement; and 2) Does Va. Code § 8.01-40 apply to post-resignation emails containing Respondent’s likeness, and if so, how should damages, if any, be determined? On April 6, 2023, the parties filed their respective post-hearing briefs on these issues

SIDE BAR: Code of Virginia

Title 8.01. Civil Remedies and Procedure
Chapter 3. Actions
Article 3. Injury to Person or Property
§ 8.01-40. Unauthorized use of name or picture of any person; punitive damages; statute of limitations.
A. Any person whose name, portrait, or picture is used without having first obtained the written consent of such person, or if dead, of the surviving consort and if none, of the next of kin, or if a minor, the written consent of his or her parent or guardian, for advertising purposes or for the purposes of trade, such persons may maintain a suit in equity against the person, firm, or corporation so using such person's name, portrait, or picture to prevent and restrain the use thereof; and may also sue and recover damages for any injuries sustained by reason of such use. And if the defendant shall have knowingly used such person's name, portrait or picture in such manner as is forbidden or declared to be unlawful by this chapter, the jury, in its discretion, may award punitive damages.

B. No action shall be commenced under this section more than 20 years after the death of such person.

Award

The FINRA Arbitration Panel found:

• Respondent Hudgins liable and ordered him to pay to Claimant Truist $94,725 in compensatory damages plus interest and $9,497.50 in attorneys' fees; and
  
  
• Claimant Truist liable and ordered the firm to pay to Respondent Hudgins $7,500 in compensatory damages plus $200,000 in punitive damages.

The Panel's rationale for the award of damages against Truist and in favor of Hudgins is set out as follows:

Compensatory Damages:

Claimant's use of Respondent’s "name, portrait or picture" in Market Watch emails after his resignation from Claimant on October 8, 2019, was without the written consent of Respondent. His previous consent given as part of his employment relationship was immediately terminated when he resigned. The Panel's award of damages is based on evidence and information presented at the hearing. The Panel gave no weight to any declarations admitted into evidence.

Punitive Damages:

This Award is based on the Panel’s determination that Claimant knowingly used Respondent’s name and picture in Market Watch emails sent out seventy-eight (78) times between the date of his resignation in October of 2019 and February of 2021, during which period Respondent was no longer employed or associated with Claimant. During such period, on several occasions Respondent advised Claimant that these emails were confusing to customers since he was no longer employed by Claimant and that they should stop. He communicated this request to continuing employees of Claimant with whom he had regularly worked. The responsibility for making a correction was entirely within the control of Claimant. Its failure to remove Respondent's name and picture after notice constitutes unauthorized knowing use within the meaning of Va. Code § 8.01-40.

Bill Singer's Comment

SunTrust went after Hudgins for loan repayment. The Panel awarded SunTrust just about $95,000 in compensatory damages, and tacked on interest and just under $10,000 in attorneys' fees. All of which reminds me of the "Touch Move" rule of chess:

• If you touch a piece you have to move it if you can.
• If you touch an opponent's piece you have to take it if you can.
• If you let your hand off a piece the move is over.

After SunTrust filed its Complaint against Hudgins and metaphorically took its finger off the chess piece, that opening move paved the way for a disastrous endgame when the arbitrators awarded Hudgins $207,500 in comps and punies. SunTrust won its side of the lawsuit; however, in hindsight, maybe the firm should not have started this game of legal chess? All of which makes you wonder if SunTrust pondered the various openings that it could have used to start the game; or, whether any in-house or outside lawyer pointed out that Hudgins' likely counter-attack could be devastating.

As SunTrust sat down and looked over the chessboard, it should have seen that on its side of the table, Hudgins owed repayment of a loan. On the other side of the table, however, the former employer had sent out 78 sets of emails using the former employee's name and picture over the course of about 1 1/2 years after he had resigned. Making matters worse, Suntrust persisted in this conduct even after Hudgins admonished the firm that the emails were confusing customers. 

If it's not a winnable game, why start it?

If the plan was to play for a "draw," what was the potential of an errant move costing you the game?

Compliments to Hudgins' lawyers Henry I. Willett, III , Esq. https://www.cblaw.com/henry-i-willett-iii and Robert Michaux, Esq., of Christian & Barton, LLP for their innovative defense.

• SunTrust
• Hudgins
• FINRA
• Arbitration
• Loan
• Punitive Damages
• Name and Picture
• Touch Move
• Chess
• BrokeAndBroker
• Bill Singer