Published on:

FINRA Panel Awards Ex-Morgan Stanley Employee $500,000 In Promissory Note Dispute

On May 7, 2015, a Financial Industry Regulatory Authority (“FINRA”) arbitration panel (the “Panel”) awarded (the “Award”) $500,000 to Respondent, John Offenburger (“Offenburger”), against the Claimants Morgan Stanley Smith Barney, LLC and Morgan Stanley Smith Barney FA Notes Holdings, LLC (collectively “Morgan Stanley” and/or “Claimants”), regarding a promissory note dispute.

Morgan Stanley filed a Statement of Claim on or about December 26, 2012, asserting that Offenburger breached the terms of a promissory note when he failed to pay the outstanding balance upon his termination on October 5, 2012.  Morgan Stanley sought to recover $519,131.98 in compensatory damages, as well as unspecified interest, attorneys’ fees, and other costs.  Offenburger filed a Statement of Answer and Counterclaim on or about April 1, 2013, asserting that Morgan Stanley breached their contract with Offenburger and breached the covenant of good faith and fair dealing by making various misrepresentations to induce Offenburger to join Morgan Stanley.  Offenburger sought $1,395,000 in compensatory damages, unspecified punitive damages, attorneys’ fees, other costs and other monetary relief.  Offenburger also alleged that Morgan Stanley committed fraud/fraudulent or negligent misrepresentation, defamation/slander, tortious interference with business relations, violation of Section 4115.15 of the Ohio Revised Code, and was unjustly enriched. Morgan Stanley subsequently filed a Response and Affirmative Defenses to the Counterclaim on or about May 7, 2013.

Upon consideration of all the evidence and pleadings, the Panel decided to deny all of Morgan Stanley’s claims, determining that “the promissory note was unenforceable and no fraud was proven.”  The Panel also awarded Offenburger $500,000 for his claim of lost income, but the panel determined that amount owed to Offenburger was “already […] fully satisfied by Claimant pursuant to the promissory note” and was thus “paid in full.”

Lax & Neville LLP has extensive experience in successfully representing brokers in promissory note disputes. Please contact our team of attorneys for a consultation at (212) 696-1999.