Faculty Notes Ronald J. Colombo, Professor of Law

Published on December 8, 2014 | by LawNews

Prof. Ronald Colombo Comments in On Wall Street on Former Morgan Stanley Advisor’s Arbitration Win

Rare Win: How One Advisor Beat Morgan Stanley in Arbitration
By Andrew Welsch
On Wall Street
Dec. 4, 2014

Excerpt:

A FINRA arbitration panel recently ordered Morgan Stanley to pay damages to a former advisor, H. Peter Petrosky, whom the firm had terminated. While the panel said Morgan had the right to discharge him, it also found that the manner in which it was done was a “rush to judgment” that caused unnecessary harm.

Advisors frequently fight back after terminations, often claiming breach of contract, but they usually lose in arbitration. What makes this case different, experts note, was that Petrosky sought damages for slander and disparagement — both of which he won — in addition to breach of contract, which he lost.

“My personal experience, and I’ve been on a few dozen cases, I’ve never seen disparagement [claimed] before,” says Ronald Colombo, a professor of law at Hofstra University. “Factually speaking, this probably doesn’t happen all that much. And to raise it to a claim in arbitration is rarer still.”

CONTRACT LANGUAGE

Legal experts say that another reason his win is a rarity is the language in the contracts advisors sign with their firms.

“Usually, the firms do manage to win because the language in the contracts is so strongly in their favor. But the panels I’ve been on have wrestled with great difficulty over the language in these contracts,” says Colombo.

He notes that advisors often put forth stories that pull at the heart strings of arbitrators, saying that they were given a hard deal. But arbitration panels also have to consider the language of the employment contract, and weigh the evidence carefully.

That process is often more difficult than outsiders realize, Colombo says.

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