Recently, on February 21, 2013, a Financial Industry Regulatory Authority, Inc. (“FINRA”) arbitration panel issued a consolidated award which denied Morgan Stanley Smith Barney, LLC and Morgan Stanley Smith Barney FA Notes Holdings, LLC (collectively referred to as “Morgan Stanley”) the relief they sought for the alleged unpaid balances of promissory notes, and instead awarded two former Morgan Stanley brokers approximately $1.5 million in compensatory damages, finding that Morgan Stanley cost the brokers significant commissions by changing their work environment. See Morgan Stanley Smith Barney, LLC and Morgan Stanley Smith Barney FA Notes Holdings, LLC vs. Jorge Carreras, FINRA No. 11-03407, consolidated with Morgan Stanley Smith Barney, LLC and Morgan Stanley Smith Barney FA Notes Holdings, LLC vs. Carlos Javier Molina, FINRA No. 11-03408. Morgan Stanley filed a Statement of Claim against Jorge Carreras and a separate Statement of Claim against Carlos Molina, both on September 1, 2011, alleging breach of promissory notes. Mr. Carreras and Mr. Molina in turn filed separate Statements of Answers which contained counterclaims against Morgan Stanley. The counterclaims included the following: breach of contract (commission agreements), negligent misrepresentation, constructive discharge, and breach of contract (bonus agreements). Mr. Carreras and Mr. Molina filed a motion to consolidate the cases, which despite Morgan Stanley’s opposition, was granted by FINRA. The FINRA arbitration panel denied Morgan Stanley’s claims against Mr. Carreras and Mr. Molina and granted Mr. Carrera and Mr. Molina’s counterclaims, ordering Morgan Stanley to remit compensatory damages, totaling nearly $1.5 million to the brokers. The arbitration award states, “[t]he Panel found that [Morgan Stanley] changed the work environment involving the Swiss platform, causing significant commissions lost to [Mr. Carreras and Mr. Molina].” This arbitration award is an exception to the industry norm as it is unusual for a broker to win cases where their former broker-dealer files an arbitration to collect the outstanding balance of a promissory note or debt, even when the broker asserts viable counter claims. Experienced counsel can help brokers like Mr. Carreras and Mr. Molina identify which fact patterns fit the exception and make a case worth fighting. The lawyers at Lax & Neville LLP have that experience.
Lax & Neville LLP has represented individuals, securities industry employees, financial services professionals and securities industry companies nationwide in employment matters and securities-related and commercial litigation, including loan default cases and Form U-5 expungement matters. Please contact our team of attorneys for a consultation at (212) 696-1999.