Judge Upholds Award of Attorneys’ Fees to Brokers Who Left CS for UBS
Credit Suisse has lost another attempt to overturn an arbitration decision awarding millions of dollars in deferred compensation and fees to brokers who defied its plan to have them join Wells Fargo Advisors after the Swiss bank’s 2015 decision to close its U.S. brokerage business.
This time it was the brokers’ lawyers who were the winners.
Credit Suisse has already paid the deferred compensation damages to brokers Jonathan Galli, Paul Connolly, Alexander Martinelli and Christopher Herlihy, according to Brian Neville, one of their lawyers at the New York City firm of Lax and Neville. But it withheld the lawyers’ fees, asking the Massachusetts court to modify all or part of the three arbitrators’ decision on the grounds that they exceeded their authority in countering the general rule that each party pay its own attorneys’ fees.
In her order affirming the underlying arbitration award, Judge Sanders said Credit Suisse essentially hoisted itself in its own petard by asking the arbitrators in its counterclaim to have the brokers pay its fees, even if not specifically mentioning attorneys’ fees.
“Credit Suisse placed the issue of fees before the panel, and cannot now be heard to complain that the arbitrators exceeded their powers,” Sanders wrote, noting as well that courts are required to give strong deference to arbitration decisions.
In their award document last February, the arbitrators noted that they were “authorized to award attorneys’ fees because both parties requested attorneys’ fees in closing arguments.”
The “theory should have come as no surprise to Credit Suisse, which had already been required to pay the attorney’s [sic] fees of the prevailing party in another arbitration,” Judge Sanders wrote in a footnote to her decision. She was referring to an $863,000 arbitration award to Brian Chilton, another former Credit Suisse broker in Massachusetts who joined Morgan Stanley.
Credit Suisse, which has been ordered to pay deferred comp claims to former brokers in at least eight cases, has moved to vacate at least four of the decisions in court, and is preparing for arbitration hearings in several other cases.
It is appealing a New York court’s decision affirming a $6.1 million award to New York brokers Joseph Lerner and Anna Winderbaum, who are now with Morgan Stanley. Credit Suisse lost its motion to vacate a $976,000 award to Nicholas Finn—another broker with UBS in Boston, and is preparing for a court hearing to vacate a $1.6 million award to Richard DellaRusso and Mark Sullivan, UBS brokers in New York.
“Credit Suisse continues to throw good money after bad, moving to vacate completely rational and correct arbitration awards,” said Neville.
Credit Suisse spokesman Jonathan Schwarzberg said the company has paid significantly less in deferred compensation awards than brokers sought, and last year won a $9 million “raiding” claim against UBS, which hired almost one-third of Credit Suisse’s U.S. force of brokers after it announced it was closing its U.S. offices. Credit Suisse had reached an agreement with Wells Fargo Advisors giving it preferential treatment in recruiting its U.S. brokers
“The only FINRA panel to have broadly considered the circumstances under which over 100 RMs [relationship managers] left Credit Suisse in the fall of 2015 correctly found that those RMs were induced to resign as part of an unlawful raid orchestrated by UBS,” Schwarzberg wrote in an e-mail. “The UBS decision was completely in Credit Suisse’s favor.”
Credit Suisse focused on vacating only attorneys’ fees in the Boston case because the $1.6 million of deferred comp awarded to the brokers represented “only about 1/9th” of what they sought, he wrote.
“Nevertheless,” he said, “CS respectfully disagrees with the decision.”