Reif Law Group, P.C., California’s preeminent boutique trial and litigation law firm for securities and business disputes, filed a motion that a financial advisor’s wrongful termination lawsuit argues that the brokerage firm Oppenheimer & Co. Inc. waived the right to compel FINRA arbitration by violating California law and must pay for the financial advisor’s attorneys’ fees. The motion to waive the arbitration clause, order Oppenheimer to pay attorneys’ fees and issue a contempt citation against the firm for “materially breaching” the arbitration agreement claims to be the first of its kind in the courtroom and leverages new California laws that penalize employers who abuse the arbitration rules that they impose on employees.
Workplace disputes in the securities industry are commonly pursued in FINRA. However, employment discrimination and harassment claims have been long excluded from forced FINRA arbitration under FINRA Rule 13201. Many brokerage firms contract around Rule 13201 by compelling discrimination and harassment claims into alternative arbitration forums. Absent an arbitration clause, workplace claims may be pursued in civil court. Many battles have waged over what constitutes waiver of an arbitration clause. Thanks to new California laws, effective January 2, 2020, the California Legislature has brought an end to the uncertainty of what constitutes waiver of an arbitration clause.
“The new California laws are among the most progressive in the nation and are the ultimate equalizer for forcing brokerage firms to honor their arbitration agreements or risk facing a jury trial and massive sanctions,” said Brandon S. Reif, Managing Partner at Reif Law Group, P.C. and lawyer to Cort J. Barrett, the ex-employee financial advisor in the case against Oppenheimer.
In the case Cort J. Barrett, et al v. Oppenheimer & Co., Inc. and Kevin F. Friedman (Los Angeles Sup. Ct. Case No. 208MCP0019), when Barrett filed a Los Angeles civil action against Oppenheimer and branch manager Kevin F. Friedman, seeking millions in damages for invasion of privacy, discrimination and retaliation claims, Oppenheimer demanded that Barrett take his dispute to FINRA arbitration. Barrett declined and was fired for what he claims were retaliatory reasons. Barrett refiled his case in JAMS arbitration according to the Oppenheimer employment agreement’s arbitration clause.
But Oppenheimer refused to pay the $1,350 JAMS administrative fee and, according to the motion, misrepresented the terms of its arbitration agreement hoping to force Barrett into FINRA arbitration. California’s new laws provide new guidance in Barrett’s favor.
California Code of Civil Procedure Section 1281.97 states that the “drafting party” of an employment (or consumer) arbitration agreement that fails to pay arbitration fees and costs “within 30 days after the due date” has waived the right to compel arbitration in any arbitration forum. The employee has the election to proceed in civil court or to remain in arbitration. The employer must “pay reasonable attorney’s fees and costs related to the arbitration” including the employee’s legal tab fighting over the arbitration forum.
In addition, Section 1281.99(a) states that the court or arbitrator “shall impose a monetary sanction” on the employer including attorneys’ fees and costs incurred by the employee or consumer “as a result of the material breach.” Section 1281.99(b) states that the court or arbitrator may impose additional sanctions such prohibiting the employer from taking discovery (an evidentiary sanction), issuing a contempt citation or terminating the case in the employee’s favor.
In motion papers filed on June 25, 2020, Barrett, through his attorney Brandon S. Reif, argues that Oppenheimer waived the right to compel arbitration by “materially breaching” the arbitration agreement. The motion complains of Oppenheimer’s “intentional falsehoods” and “frivolous motions practice” that interfered with JAMS’ administration of the arbitration. Barrett asks the court to waive the arbitration clause, order Oppenheimer to pay his attorneys’ fees and issue a contempt citation against Oppenheimer for “materially breaching” the arbitration agreement.
Reif reflects upon the case and its significance in the securities industry, saying “Arbitration gamesmanship is no longer an option, and I look forward to the day when Oppenheimer’s sordid tale of what’s wrong with the workplace is unpacked. Brokerage firms, and all employers, with offices in California must pay attention to these new laws. Employers tooling around over the arbitration forum potentially face mandatory arbitration waiver and attorney fee motions for non-compliance.”