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Financial Arbitration: Merrill Lynch Denied Overturn of Ruling

Wednesday, September, 19, 2012


Merrill Lynch recently tried to overturn a financial arbitration against it--a decision to the tune of $10 million. The award was decided on by a FINRA panel.

The organization is often accused of favoring investment firms instead of investors. What was Merrill's complaint against the arbitration panel, and why did the judge disagree?

Contract Arbitration: Brokers vs. Brokerage

The story begins with the awards given by the panel to former brokers Meri Ramazio and Tamara Smolchek. These each of these women felt they were treated unfairly after they exited the firm in 2008 when it was acquired by Bank of America Corp.

Merrill was ordered to pay nearly $1 million to Ramazio and a whopping $4.3 million to Smolchek for unpaid deferred compensation, lost wages, lost book, value of business & reputation, and unpaid wages.

In addition, the arbitration panel found that the brokerage firm owed $5 million in punitive damages for intentional misconduct: $1.5 million t Ramazio and $3.5 to Smolchek.

Merrill Lynch Appeals the Employment Arbitration Ruling

It is extraordinarily difficult to get a judge to overturn any type of binding arbitration decision. How, then, did Merrill think they could get the decision overturned?

They claimed that the chair of the council had not let them know that her husband, who is a securities lawyer, represented clients adverse to the brokerage firm.

One piece of evidence the firm used was the fact that the chair's husband made comments about a winning over Merrill in court in a 2005 newspaper article.

The Federal Judge's Legal Arbitration Decision

Federal Judge Kenneth A. Marra of Florida claims that at least one of Merrill's claims is not entirely true. His decision stated that, "it [Merrill] knew at least some of the information Mrs. Pearce is alleged to have withheld."

For proof, he cited the fact that the brokerage had on file eight pages from the chair's website printed out, each one of them which was published before the arbitration.

The FINRA hearing took five days, Judge Marra said, and Merrill Lynch only tried to raise the chair's partiality as an issue after the decision was made.

Had the firm been genuinely concerned, the judge seems to imply, it would have raised objections before the financial arbitration even began.

A spokesperson for the brokerage said that Merrill Lynch is currently reviewing the judge's decision.