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Ameriprise Financial Services, Inc. v. Brady

United States District Court, D. Massachusetts

September 11, 2018




         Petitioner, Ameriprise Financial Services, Inc., (“Ameriprise”), has timely filed this action seeking to vacate an arbitration award in favor of Respondent, Cheryle Anne Brady. For the reasons stated below, I grant the petition only in part, vacating so much of the award as purports to assess attorney fees against Ameriprise, but otherwise confirming the award.

         I. BACKGROUND

         A. The Parties

         Ameriprise is a national broker-dealer providing wealth management, securities trading, and investment banking services. It is a member of the Financial Industry Regulatory Authority (“FINRA”).

         Brady has been a Registered Associate with FINRA or its predecessors at several broker-dealers since 1993. She worked for Ameriprise from January 2012 until her September 2016 termination as a result of unauthorized trades in June 2016.

         B. Unauthorized Trading Incident

         As Brady tells it, on June 20, 2016 her sales assistant, Brian Noyes, went rogue and engaged in several securities trades for clients without consulting those clients, as their account terms required. Brady contends she learned of the trades shortly after they were entered, questioned Noyes about the trades, and instructed him to “fix this”. For its part, Ameriprise concluded after an internal investigation, and continues to maintain, that Brady directed Noyes to engage in the unauthorized trades.

         In October 2017, at the close of FINRA's investigation, Brady signed a FINRA Letter of Acceptance, Waiver, and Consent (AWC) conceding that she lied to Ameriprise's Compliance Department (“Compliance”) during its investigation of the trades. In response to a June 23, 2016 email inquiry from Compliance about the trades, Brady stated that she had talked to the clients on the day of each trade and told Noyes to make the trades. While she maintained this story on a second call with Compliance, she later told her assistant manager that in fact Noyes had entered the trades without her foreknowledge. Misrepresentations are understood to constitute a violation of FINRA Rule 2010, which provides that “[a] member, in the conduct of its business, shall observe high standards of commercial honor and just and equitable principles of trade.” In Brady's AWC, she conceded she violated FINRA Rule 2010 by making the misrepresentations to Compliance.

         On or about September 7, 2016, Ameriprise terminated Brady's employment and later filed a U5 termination form with FINRA stating the reason for Brady's termination was: “The advisor was terminated on September 7, 2016 for policy violations including unauthorized trading and use of discretion in non-discretionary accounts.”

         C. The Arbitration

         1. Agreement to Arbitrate

         At the commencement of her employment with Ameriprise, Brady signed a Financial Advisor Agreement. In Part 12 of that agreement, she agreed, in relevant part, to “arbitrate any dispute, claim, or controversy that [might] arise between [her] and the Company or a customer or any other person [“Claims”], unless otherwise agreed to in writing by the parties.” That agreement also stated that Brady “and [Ameriprise] shall each be responsible for their own costs of legal representation, if any except where such costs of legal representation may be awarded as a statutory remedy by the arbitrator.”

         Additionally, Brady took out loans from Ameriprise. The following clause is included in the notes for each loan:

The undersigned Employee hereby . . . agrees to pay all costs in collection, whether or not suit of action is filed hereon, in the event that payment is not made in accordance with the provisions of this Promissory Note. The costs of collection shall include but are not limited to reasonable attorney's fees for collection efforts which before commencing any legal proceeding, in arbitration, at trial, and on appeal.

         On or about October 26, 2016, Brady filed a statement of claim in FINRA Dispute Resolution (“FINA DR”) for defamation, wrongful termination, breach of contract, tortious interference, and failure to supervise against Ameriprise and Noyes in connection with her termination. On or about November 17, 2016, Ameriprise filed a statement of claim in FINRA DR for breach of the promissory note agreement related to loans Brady had taken out from the company.

         In late 2016, after filing their respective statements of claim, the Parties signed the FINRA Arbitration Submission Agreements for each claim. The Submission Agreement for Ameriprise's claim stated, in part: “The party further agrees to abide by and perform any award(s) rendered pursuant to this Submission Agreement. The party further agrees that a judgment and any interest due thereon, may be entered upon such award(s) and, for these purposes, the party hereby voluntarily consents to submit to the jurisdiction of any court of competent jurisdiction which may properly enter such judgment.” The Submission Agreement for Brady's claim against Ameriprise and Noyes was the same, but addressed to “parties, ” rather than “party.”

         2. Selection of Arbitration Panel

         The Parties received Arbitrator Disclosure Reports from FINRA regarding possible arbitrators to fill the Arbitration Panel (“Panel) of three that would preside over their dispute. FINRA sent three lists of ten potential arbitrators. The Parties could peremptorily strike up to four arbitrators from each list of ten FINRA offered, permanently removing those arbitrators from consideration.

         Just one disclosure report is relevant to the instant action: that of David Summer, who served on the Panel. Under “Skills in Controversy, ” Summer listed “Account Related - Breach of Contract, Account Related - Dividends, Executions - Limit/Stop/Market Order, Employment - Breach of Contract, Employment - Discrim. Age, Employment - Employment Discrimination, Employment - Retaliation, Employment - Sexual Harassment.” As to Arbitrator Background, Summer stated:

From March 2004 to present I have represented clients in various courts and before the IRS in audits and other tax forums. From January 2001 to March 2004, I worked for PricewaterhouseCoopers in their International Tax Department. From September 1997 to January 2001, I worked as a litigator for two Boston law firms.

         Summer listed two law firms, Bologna & Harris and Baker & Associates, at which he was previously employed.

         Though the association was not listed on his disclosure form, Summer was also associated with Cutler & Associates, a firm that advertises its plaintiff-side employment work. In addition, Summer has a litigation practice in employment law.

         3. The Arbitration Award

         On or about December 26, 2016, Brady filed a Motion to Consolidate her claim, which had been assigned Case Number 16-03134, and Ameriprise's claim, which had been assigned Case Number 16-03368. In March 2017, the Panel granted the Motion to Consolidate over Ameriprise's opposition.

         The Panel issued an award in the consolidated matter bearing a January 23, 2018 date of service. It awarded compensatory damages to Brady in the sum of $675, 000.93, costs of $80, ...

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