As most readers are aware, brokerage firms structure their signing bonuses for producing brokers as long term loans which are forgiven over time. When the broker leaves the firm, regardless of the reason, the firm sues to collect the balance on the loans.
Those claims are often met with significant counterclaims by the broker - after all, the broker left the firm for a reason, usually a significant breach by the firm.
While the brokerage firms often win in those cases, since the promissory note is just that, Merrill Lynch has been losing these cases lately, as it appears that Merrill's mistreatment of its brokers over recent years is finally coming home to roost.
Last month, a FINRA Panel refused to enforce a promissory note at Merrill's request. This month, another FINRA arbitration panel denied Merrill Lynch's request to enforce a million dollar note, and ordered Merrill Lynch to pay the broker 1.5 million dollars.
The broker keeps the one million dollars represented by the note, and Merrill pays him an additional 1.5 million dollars.
And, to add insult to injury, the Panel assessed all forum fees against Merrill.
I have represented numerous Bank of America and Merrill Lynch brokers in employment related cases, including the defense of claims on promissory notes. While I do not know anything about this case, in my view of the world, these cases are simply an outgrowth of the poor management of Merrill Lynch which led to its financial demise, and the nearly incompetent management of the brokerage firm by Bank of America. Management of both firms took steps in their own self-interest, regardless of the impact on employees and brokers and destroyed careers in the process.
Sometimes damage to employees in management decisions is unavoidable. A reputable company compensates the employees harmed by those management decisions. Merrill Lynch and Bank of America do not compensate the employees; they sue the employees.
No wonder Bank of America/Merrill lynch finds itself in financial ruin. BofA's stock traded at over $50 a share a few years ago. Today it hovers around $10.
A copy of the award is available here.
