Judge Upholds $6.1 Million Comp Award to Former Credit Suisse Brokers

(Story was updated July 22 in sixth paragraph with comment from brokers’ lawyer.)

A New York judge turned down Credit Suisse Securities’ attempt to vacate a hefty arbitration award to two brokers who joined Morgan Stanley in 2015 after the Swiss bank said it was  shutting its U.S. operations.

Finra arbitrators in May 2019 ordered the Swiss bank to pay Joseph T. Lerner and Anna Sarai Winderbaum $6.07 million to compensate them for deferred compensation that the Swiss bank refused to pay because they allegedly received transition payments from Morgan Stanley to compensate for money left behind.

The award included $1.39 million of deferred comp owed to Lerner, $1.40 million to Winderbaum, penalty damages (“liquidated damages” under New York law) in the same amount and $250,000 in attorneys’ and other fees. It also ordered their U-5 regulatory filings to read that they were “terminated without cause.”

In confirming the award last Friday, Justice Andrea Masley of the New York State Supreme Court cited the strong deference courts are required to give to arbitration decisions and Credit Suisse’s failure to provide convincing arguments to show that arbitrators manifestly disregarded state employment law and industry standards.

“We believe the decision is wrong,” a Credit Suisse spokesman said. “It ignores settled principles of law and the facts in this case.”

Lax and Neville, the New York law firm that represented Lerner and Winderbaum, considers the judge’s upholding of the liquidated-damages award that doubled the value of the deferred stock particularly significant, said Brian Neville. “It requires an affirmative finding that the firm lacked good faith,” he said.

The case was at least the second vacature loss for Credit Suisse in New York courts, and comes as the bank continues to battle dozens of remaining claims for deferred compensation that have not yet been heard by arbitrators.

“It’s another huge loss for Credit Suisse, and it makes the continued defense that they don’t owe FAs deferred comp because of their deals with new employers frivolous,” said Rogge Dunn, a Dallas-based lawyer who has seven claims pending in Finra arbitration on behalf of brokers. “Credit Suisse continues to pursue a defense that has been declared irrelevant and inapplicable.”

The bank has lost about seven underlying arbitration claims for deferred comp, and has sought to vacate several other awards in addition to those won by Linder and Winderbaum.

Credit Suisse has paid deferred comp to most brokers who followed its guidance to join Wells Fargo Advisors, from which it received referral payments. It has prevailed in at least two arbitration claims from brokers who were seeking withheld bonuses but who failed to repay balances on compensation-related promissory notes when they left Credit Suisse.