Ex-MS Broker Seeks to Vacate $2 Mln Arb Award, Citing Evidence Destruction
A former Morgan Stanley broker who was ordered in November to pay the firm almost $2 million to cover promissory-note balances and arbitration costs has filed a rare motion to vacate the award.
Stephen Todd Walker said that the three Financial Industry Regulatory Authority arbitrators who issued the order failed to give adequate consideration to his contention that his Morgan Stanley Smith Barney manager orchestrated a Saturday “shredding party” in 2011 to destroy some 250 boxes of records that could have been used in his defense and to support his counter-claims against the firm.
“There aren’t many motions to vacate, and they must meet a very high standard,” said Sidney Liebesman, Walker’s Philadelphia-based lawyer. “But you also don’t have the type of conduct at a financial institution like Morgan Stanley that we had here.”
In papers filed Tuesday in U.S. District Court in the Eastern District of Pennsylvania, Walker accused the arbitrators of routinely ignoring his arguments about the devastating effects of the “spoliation” of evidence throughout the almost seven years of the arbitration dispute.
“They permitted MSSB to deliberately destroy relevant and material documents, but still unfairly reap the litigation benefit from the absence of such documents,” Walker wrote in filings supporting his motion to vacate.
Among the key documents that were allegedly destroyed by the manager, Daniel Thompson, and two assistants, was a list of clients that Walker brought with him from Deutsche Bank Alex. Brown in 2001 and that was appended to his employment contract, according to the papers he filed. The documents would have helped substantiate his claims of “tortious interference” with his business after he left Morgan Stanley in May 2010.
Although the arbitrators offset some of the award to Morgan Stanley with a $525,000 finding in Walker’s favor (he had asked for over $52 million in his counterclaim), the broker hopes to refile his arbitration claim if Judge J. Curtis Joyner upholds his vacate request, according to Liebesman.
Walker, who now works at RBC Capital Markets in Philadelphia, said in his filing that Morgan Stanley and his team worked on a separate floor of one of its Philadelphia branches in order to help them keep their client records that in more than 300 banker’s boxes and 120 filing cabinets.
The request to vacate alleges that Thompson destroyed much of the potential evidence in defiance of orders from Morgan Stanley lawyers to preserve them as part of a litigation hold once it initiated the promissory note complaint. It cites an email from Thompson claiming that the volume of destruction was so great “that a ‘shred truck’ was required to ‘come and pick up the papers.’”
A spokeswoman for Morgan Stanley, which has asked a judge to compel Walker to pay the arbitration award, said she could not immediately comment. Walker filed the vacate papers as part of the ongoing litigation.
Thompson, the former branch manager who now works at U.S. Trust in Wilmington, Del., could not be reached for comment.
Guillermo L. Bosch, a lawyer in New Oxford, Pa. who chaired the arbitration panel, did not return a call for comment.