In a recent arbitration decision, a panel of FINRA arbitrators awarded $3.25 million in damages, interest, and costs to a broker who had alleged defamation and other claims against his former employer. The decision (known as an "award") concluded the arbitration proceedings in the case of Gorter v. Questar Capital Corp, FINRA Case No. 08-03514 (award signed Jan. 13, 2012).
Gorter v. Questar Capital Corp, FINRA Case No. 08-03514 (award signed Jan. 13, 2012): Thomas Gorter had alleged claims of tortious interference, breach of contract, negligence, and defamation. Mr. Gorter, the registered representative, had alleged that his employer had made defamatory remarks to customers and false reports concerning the broker's employment to regulators.
Questar, an affiliate of Allianz SE and Allianz Life Insurance Co., denied the allegations, and asserted a counterclaim contending that the broker had breached his agreements with Questar, and was obligated to indemnify the firm. Mr. Gorter had sought $3.82 million in compensatory damages at the close of hearing, together with punitive damages and other relief, including expungement of the Form U-5 that Questar had filed concerning Mr. Gorter. Questar initially sought over $10 million on its counterclaim, but apparently withdrew its request for damages by the end of the hearing.
Each of the parties also argued during the case that the other should be responsible for paying sanctions, arguments that the Panel rejected. The fact that both sides had made motions for sanctions indicates that the case was hard-fought.
Arbitrators generally are not required to explain their decisions in detail, and the arbitrators in this case decline to explain which of the claims the panel felt was deserving of the large damages award. The arbitrators rejected the broker's claim for punitive damages, also without explanation.
Part of what makes this outcome interesting is that the securities firm/broker-dealer was held liable for millions of dollars yet the FINRA Panel had denied punitive damages and declined to recommend expungement of the broker's Form U-5. This decision reflects how a financial services firm may risk tremendous liability when an employee alleges defamatory or disparaging remarks -- whether or not those remarks are deemed to constitute defamation by a broker-dealer on a broker's Form U-5 form and whether or not the arbitrators choose to award punitive damages.