Following a six-day arbitration hearing Drew Brehm, together with co-counsel from a New Orleans law firm, secured an arbitration award of more than $500,000 on behalf of one of Schuyler Roche's largest and most prominent clients. The award included $200,000 in attorneys' fees. A three-member arbitration panel constituted under the auspices of the National Association of Securities Dealers (NASD) presided. "Despite the flexibility arbitrators enjoy when making their rulings, which often leads to compromise awards," says Brehm, "the panel's decision was a complete victory for our client, granting all requested relief."

In this case, Schuyler Roche's client had sought payment by a former employee of an "employee forgivable loan" (EFL). Such loans are commonly used in the securities industry as bonus arrangements with stockbrokers and typically provide that a portion of the principal be forgiven at specified intervals as long as the broker remains with the firm. Consequently, when a broker continues employment for the time specified by the EFL documents, he or she is not obligated to repay the loan. Any remaining unforgiven balance, however, becomes due immediately upon termination of the broker's employment.

"Although most EFL cases involve situations in which brokers have resigned voluntarily," explains Brehm, "our case was more challenging because the client had involuntarily terminated the broker's employment for failure to cooperate with an internal investigation the firm had conducted." Accordingly, the broker argued that the allegedly wrongful termination of his employment extinguished his obligation to pay the amount due on the forgivable loan because the employer had prevented him from obtaining forgiveness of the remaining balance.

The broker also charged Schuyler Roche's client with defamation based on written statements the firm had made in Form U-5 (a notice required by industry rules specifying the basis for the termination of a broker's employment) and in oral statements allegedly made by the client's employees. In addition to raising these contentions as defenses to the note, the broker utilized them as the basis for a counterclaim in which he sought to recover more than $1.5 million in damages.

The NASD arbitration panel rejected the broker's claims and awarded Schuyler Roche's client the full principal amount of the EFL note, with interest. In addition, the client won the attorneys' fees it had incurred in pursuing its claim and in defending against the broker's counterclaim. "The panel even required the broker to reimburse the $1,000 filing fee our client had paid," adds Brehm.

Although arbitration panels are not obligated to explain the basis for their awards, and typically do not do so, this panel made specific factual findings nonetheless. It held that, as Brehm and co-counsel had argued, the broker "was less than fully forthcoming in the internal investigation at issue and that he gave inconsistent information to the investigators." In rejecting the broker's defamation claims, the panel determined "these claims to be wholly unsupported by credible evidence and wholly without merit," specifically finding "no defamatory statements attributable to Claimant [Schuyler Roche's client] and no credible evidence whatsoever of damage on account of the circumstances of his [the broker's] termination or the alleged defamation."

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