On April 23, 2020, a New York appellate court unanimously affirmed confirmation of a FINRA arbitration award against Credit Suisse for approximately $1 million in unlawfully withheld deferred compensation.
Credit Suisse had petitioned the New York Supreme Court (Commercial Division) to vacate the Award, arguing that, as a matter of law, (1) it did not terminate its investment advisers when it announced it was closing its US wealth management division and (2) its advisers were made whole by transition packages from their new employers. The Supreme Court rejected both arguments and denied Credit Suisse’s petition from the bench. Credit Suisse appealed on both grounds. Affirming, a five justice panel of the Appellate Division (First Department) cited with approval numerous cases holding that an employee who departs in the face of inevitable termination is constructively terminated. As for Credit Suisse’s defense that its liability can be offset or mitigated by the advisors’ transition package with a new employer, the Appellate Division found that Credit Suisse “offers no authority for the proposition that mitigation or offset is a defense to payment of vested compensation.”
Credit Suisse’s arguments on appeal are also its sole defenses to the dozens of claims brought by former advisers seeking more than $200 million in earned, vested deferred compensation it has refused to pay them in breach of the employment agreements and deferred compensation plans its own lawyers drafted. Seven FINRA arbitration panels have heard these defenses and rejected them, uniformly awarding deferred compensation to the advisers. The New York Supreme Court has heard these defenses and rejected them. Now, the New York Appellate Division has heard these defenses and unanimously rejected them on the law. By contract, New York law governs the deferred compensation arbitrations against Credit Suisse regardless of where a former adviser worked or files his or her claim. With a clear, unequivocal decision by a New York appeals court, Credit Suisse can no longer claim to rely upon its frivolous defenses in good faith.