Judge Denies Ameriprise’s Bid to Escape $675K Arb Award to Broker
Ameriprise Financial has lost its bid to overturn an arbitration award of $675,000 to a broker it fired.
In a decision published Tuesday in a Massachusetts federal court, U.S. District Court Judge Douglas P. Woodlock wrote that Ameriprise’s arguments, including its contention that the award was “illogical” and defied common sense, failed to meet the “extremely narrow” and “exceedingly deferential” standard that courts require to vacate arbitration decisions.
The decision underscores the deference that courts give to the arbitration process. Almost all brokerage firms require employees and customers to bring disputes before arbitrators rather than courts, but the Ameriprise case highlighted a rare case where a Finra member firm sought to undermine the extra-judicial process.
The shoe for brokerage firms is often on the other foot. A former Ameriprise broker in California in July asked a court to vacate an arbitration decision requiring him to repay his promissory note balance of $287,000 because one of the arbitrators was allegedly improperly classified as representing the public. His petition has not yet been decided.
This week’s decision denied Ameriprise’s argument that a three-person Finra arbitration panel’s January award to Cheryle Anne Brady should be tossed because arbitrator David Summer failed to disclose his association with Cutler & Associates, an employment law firm that works primarily with plaintiffs.
Ameriprise also argued that the panel failed to properly consider the reasons that it terminated Brady.
Finra regulators in October 2017 imposed a six-month suspension and $7,500 fine on Brady after finding that her registered sales assistant placed ten trades in nine customer accounts without first obtaining the customers’ approval and that the broker falsely told Ameriprise compliance officials that customers had authorized the trades, according to her BrokerCheck record.
Brady consented to the sanctions.
The Hingham, Mass. broker, who had 22 years of industry experience before losing her job in October 2016, is not currently registered with Finra.
A lawyer for Brady, Peter Bizinkauskas, did not immediately return a request for comment.
Judge Woodlock said it was not proper for the court to speculate on how the arbitrators arrived at their decision, and scored Ameriprise for presenting “no facts” to substantiate its claim that Summer was biased because of his affiliation with the law firm, according to the order.
“The role of the court, on a petition to vacate, is not to conduct a post-mortem of the arbitrators’ cognition processes and how they reached their decision; to do so, would be an inappropriate (and impossible) task,” Woodlock wrote.
Ameriprise did notch a small victory. The judge absolved it of having to pay Brady’s attorney fees of $123,712, as ordered by the arbitrators. The panel “exceeded its authority” because Massachusetts law generally requires that parties agree before hearing sessions begin as to whether they can demand attorneys’ fees, the judge wrote.
A spokeswoman for Ameriprise declined to comment on the decision.
Brady won her award after filing a wrongful termination complaint against Ameriprise in October 2016 that sought more than $2 million to compensate for “lost back pay, front pay and Sunset Plan pay.”
The panel awarded her a total of $879,000 in damages, costs and attorneys’ fees, and required Ameriprise to refile U-5 termination notices with regulators to say that she was fired “without cause” because the firm showed “no credible proof” that she had authorized the alleged trades.
Prior to joining Ameriprise in January 2012, Brady had worked at RBC Capital Markets, UBS PaineWebber, A.G. Edwards and the predecessor firm to LPL Financial, according to her BrokerCheck history.