Financial Advisor IQ ( July 24, 2019) - A retired Merrill Lynch managing partner, George Lawlor, has filed a lawsuit against his ex-employer, alleging the wirehouse attempted to make an end run in federal court around his Finra-filed complaint. Lawlor says the self-regulator’s rules erroneously allowed Merrill Lynch to succeed in avoiding arbitration.
Lawlor worked for Merrill Lynch for 22 years and supervised 15 traders generating $25 to $30 million in annual revenues before retiring in 2006, according to his lawsuit. He filed a complaint with Finra in October 2017 against the wirehouse after losing $4 million from his retirement savings around 2009 — retirement assets managed by his former employee, the lawsuit alleges.
In 2014 Merrill Lynch’s parent company Bank of America and the U.S. Department of Justice reached a settlement which led to the company conceding wrongdoing with securitized securities prior to Lawlor filing his Finra complaint. Lawlor had based his Finra complaint in part on those admissions and documents that the DOJ released as part of the pact, which identified “many illegal securitizations of financial instruments.” The firm's earlier wrongdoing — to which the wirehouse didn’t concede until 2014 — triggered his retirement saving losses in 2009, Lawlor alleged.
But Merrill Lynch responded to Lawlor’s Finra complaint by filing a federal lawsuit against him in November 2017, even though he had signed multiple agreements with his employer to arbitrate all disputes, Lawlor alleges in his new lawsuit.
In 2018, a federal court dismissed that Merrill Lynch-filed lawsuit against Lawlor based on the arbitration agreements.
Lawlor then returned to Finra, where he sought to pursue the stock fraud claims as well as attorney fees and expenses for the legal defense he had to mount against Merrill Lynch’s thwarted federal lawsuit. In March of this year a Finra panel ruled that too many years — more than six — had elapsed between his allegations against Merrill Lynch and Lawlor’s complaint.
A Merrill Lynch spokesperson declined to comment on the matter.
Michael Taaffe of Sarasota, Fla.’s Shumaker, Loop & Kendrick, who represents Lawlor, did not respond to a request for comment.
Another plaintiff lawyer with no stake in this lawsuit spots a pattern.
“Merrill Lynch loves to have its cake and eat it too,” says Andrew Stoltmann, a Chicago-based plaintiff lawyer and a director and past president of the Public Investors Arbitration Bar Association. “It will frequently try to avoid Finra jurisdiction when it feels it is more beneficial to do so — and they like their legal arguments as opposed to equitable arguments. It’s abusive when Merrill Lynch tries to do this,” he adds.
In his lawsuit, Lawlor alleges: “Merrill Lynch intentionally breached the arbitration agreement by suing Mr. Lawlor in federal court to attempt to wrongfully enjoin Mr. Lawlor’s pending arbitration claim.”
Lawlor initially filed the lawsuit in a New York state court, but Merrill Lynch had it transferred this month.
“Merrill Lynch also sued 22 other customers with claims essentially identical to Mr. Lawlor’s in 11 federal courts across the nation to deliberately evade Finra’s jurisdiction,” the lawsuit alleges.
“In a hearing before the United States District Court for the Southern District of New York, Merrill Lynch’s counsel admitted that he had been aware of the binding arbitration agreement between Merrill Lynch and Mr. Lawlor at the time Merrill Lynch filed the federal court action seeking to enjoin Mr. Lawlor’s Finra arbitration,” the lawsuit states.
According to the lawsuit, a Merrill Lynch lawyer told the federal court that when the wirehouse had its case pending against Lawlor, “I will concede we are aware of that language” in the arbitration agreement that compelled Lawlor and his former employer to adjudicate claims before Finra. The court then “rebuked Merrill Lynch’s counsel for this improper tactic” and stated that it was “‘very concerned that Merrill Lynch did not satisfy its duty of candor to the Court in bringing this motion,’”according to Lawlor’s lawsuit.
“[I]t was only after Merrill Lynch lost every court decision that Merrill Lynch finally agreed in writing on April 27, 2018 that Mr. Lawlor had the right to pursue in Finra arbitration all costs and fees incurred in connection with Merrill Lynch’s federal litigation as well as sanctions and punitive damages,” the lawsuit states.
But when Lawlor filed amended claims at Finra, including a request for attorney’s fees he incurred as a result of “Merrill Lynch’s frivolous lawsuit,” the wirehouse responded a few months later filing its motion to dismiss based on the argument that the underlying events happened before January 2009 — more than six years prior to Lawlor’s amendments.
With Finra granting Merrill Lynch’s dismissal motion, Lawlor now seeks to have the public court modify the Finra panel’s award, specifically as it pertains to his request for attorney fees and expenses incurred fighting his former employer’s federal lawsuit.
Finra rules did not permit him to submit or have one of its panels issue a ruling about his attorney's fees and expenses claims while Merrill Lynch’s lawsuit against him was pending, Lawlor’s lawsuit states.