Arbitrators Reverse Dismissal of Ex-Merrill Employee’s Stock Decline Case
In an unusual twist, a three-person arbitration panel has reversed its decision issued last week to dismiss a retired Merrill Lynch employee’s claim for losses tied to the decline of his company stock during the financial crisis.
The arbitrators said evidentiary hearing dates would be reset.
“The panel did the right thing,” said Florida-based lawyer Michael Taaffe of Shumaker Loop & Kendrick, who represents the plaintiff, John Gelbach. “They misunderstood that it needed to be a unanimous decision, and when Finra realized it was not unanimous and took it back to the panel, the panel withdrew the award.”
Arbitration decisions are typically final and require a broker to go to court to seek a motion to vacate, but Finra rules provide an exception in limited cases when there is a clear procedural error, Taaffe said.
Herbert Brantisky, the chair of the panel and the dissenting arbitrator in the initial dismissal, said he was not authorized to discuss the case. A Merrill spokesman declined to comment.
The other two panelists, who could not immediately be reached for comment, had dismissed Gelbach’s claim on the grounds that he had waited too long to bring his case. Finra rules require complaints to be brought with six years of an event or events precipitating a claim.
Gelbach, who sought $8 million in damages in his February 2018 claim, had argued that it was within the limit. Merrill’s alleged fraud that destroyed the value of some of his stock and options holdings was not known until 2014, triggering the start of the six-year period, he alleged.
Gelbach worked at Merrill for more than 35 years, beginning as a retail broker in Cleveland in 1970 and retiring in 2007 after spending most of his career in institutional sales, according to Taafe. The retiree claimed that Merrill’s wrongdoing shaved about $8 million from his stock and option holdings, but argued that he did not recognize the fraudulent behavior until Bank of America in 2014 announced an almost $17 billion settlement with the federal government.
The case is one of 77 stock-decline claims against Merrill that have been brought in arbitration. Six of those have been dismissed so far, according to Taafffe. At least one, a $100 million claim from former Merrill western region director James Billington, has been refiled after it was dismissed in March, according to Paul W. Thomas, a California-based lawyer who also represents some of the plaintiffs.