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Santander Bank, N.A. v. Klein

Superior Court of Massachusetts, Suffolk, Business Litigation Session

June 5, 2019

SANTANDER BANK, N.A.
v.
Michael KLEIN

          File Date: June 6, 2019

          MEMORANDUM OF DECISION AND ORDER ON PLAINTIFF’S APPLICATION TO VACATE OR IN THE ALTERNATIVE MODIFY, ARBITRATION AWARD AND ON DEFENDANT’S CROSS MOTION TO CONFIRM ARBITRATION AWARD

          Douglas H. Wilkins, Justice

         The Complaint in this case seeks to vacate an Arbitration Award of the Financial Industry Regulatory Authority’s ("FINRA") Office of Dispute Resolution dated January 22, 2019 ("FINRA Decision") in Michael Klein v. Santander Bank, N.A., Perry Vachon and Charles Wermuth, Case Number 17-02674 ("Arbitration Proceeding"). The plaintiff here is Santander Bank, N.A. ("Santander"), which was the respondent in the Arbitration Proceeding. The defendant is Michael Klein ("Klein"), who prevailed as the claimant in the Arbitration Proceeding. Before the court is Petitioner’s Application to Vacate, or in the Alternative Modify, Arbitration Award ("Motion"). Klein has filed a "Cross-Motion to Confirm Arbitration Award" ("Cross-Motion"). After hearing, the Motion is DENIED and the Cross Motion is ALLOWED.

         BACKGROUND

         By written Submission Agreement, dated February 16, 2018 ("Agreement"), Mr. Klein and Santander agreed:

The undersigned parties ("parties") hereby submit the present matter in controversy, as set forth in the attached statement of claim, answers, and all related cross claims, counterclaims and/or third-party claims which may be asserted, to arbitration in accordance with the FINRA By-Laws, Rules, and Code of Arbitration Procedure.

         Agreement, ¶11. The parties also agreed that their dispute would be decided pursuant to FINRA procedures and rules:

The parties hereby state that they or their representative(s) have read the procedures and rules of FINRA relating to arbitration, and the parties agree to be bound by these procedures and rules.

Id.

         Klein’s Statement of Claim, dated November 30, 2017 alleged six counts against Santander: (1) violation of the public policy exception to the Employee at will doctrine, (2) breach of the covenant of good faith and fair dealing, (3) promissory estoppel, (4) fraudulent misrepresentation, (5) breach of contract, and (6) retaliation. The allegations of the statement of claim focused upon a former Santander employee, John Bartolo, who reported to Mr. Klein. The statement of Claim alleges that Santander improperly terminated Mr. Klein based on his complaints about Mr. Bartolo on various matters, including personal safety issues and complaints related to Mr. Bartolo’s failure to pass a FINRA securities licensing exam. It does not allege that other supposedly unlicensed employees at Santander sold managed products and did not make broad allegations regarding a series of partnerships where licensed individuals would split commissions with unlicensed individuals. Nor did it allege that Santander circumvented its automated exception monitoring of regulated products.

         A three-member FINRA arbitration panel heard evidence on November 26-29, 2018 in Boston, Massachusetts. The presiding chairperson was Paul Peter Nicolai. During the hearing Mr. Nicolai called for testimony on licensing issues and questioned Mr. Klein regarding his complaints specific to Mr. Bartolo, as well as about broader licensing issues at Santander Securities, LLC ("SSLLC"), which was not a party to the arbitration proceeding. He also issued a warning to SSLLC’s Chief Compliance to review his records on licensing issues and later questioned that witness on licensing issues. The Chairperson disclosed during the hearing that he had reviewed evidence outside of the record relating to licensing and regulatory issues. By Santander’s count, the Chairperson asked about 330 questions during the hearing and occupied close to one hour of testimony.

         The parties submitted post-hearing briefs addressing Mr. Bartolo’s licensing activity, not broader licensing issues concerning other employees.

         The FINRA decision was entitled "Award." It also contained a separate section entitled "AWARD," which read:

After considering the pleadings, the testimony and evidence presented at the hearing, and the post-hearing submissions, the Panel has decided in full and final resolution of the issues submitted for determination as follows:
1. Respondent Santander is liable for and shall pay to Claimant $1, 227, 259.99 in compensatory damages.
2. Respondent Santander is liable for and shall pay to Claimant interest in the amount of $112.40 per day from September 23, 2015 to December 31, 2018.
3. Respondent Santander is liable for and shall pay to Claimant interest in the amount of $435.00 per day from January 1, 2019 until the award is paid in full.
4. Respondent Santander is liable for and shall pay to Claimant the sum of $77, 500.00 in attorneys fees pursuant to Massachusetts General Law Chapter 231, section 6f [sic].
5. Respondent Santander is liable for and shall pay to Claimant $375.00 as reimbursement of the non-refundable ...

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