Ex-Morgan Stanley Brokers Must Arbitrate Class Claim Over Deferred Comp, Judge Rules

by Miriam Rozen

November 22, 2023

Edited with comments from Sonn Law Group

A federal judge has granted Morgan Stanley’s motion to send
to arbitration a putative class action claim that it violates federal law by
withholding deferred compensation from brokers who move to other firms.

Morgan Stanley “demonstrated” that the advisors agreed in
employment and bonus contracts to file such claims in private arbitration, U.S.
District Judge Paul G. Gardephe in Manhattan wrote in a 56-page ruling on
Tuesday. They also did not opt out of the wirehouse’s alternative dispute
resolution program, called Convenient Access to Resolution for Employees
(CARE), according to the ruling.

Sonn Law Group has been retained to handle deferred
compensation claims that are now required to be brought in arbitration before FINRA.
“We look forward to helping former Morgan Stanley advisors,” said Jeffrey Sonn,
Esq.

In his ruling, Gardephe concluded that the ex-advisors had
claims under the Employment Retirement Income Security Act (ERISA) but wrote
that the plaintiffs failed to prove that those were non-arbitrable. The judge
also wrote that, although his ruling prohibits the advisors from seeking to
represent a class, they could still individually seek in arbitration the same
damages or other relief that they had sought in court. 

Ex-Morgan Stanley advisors argue that its compensation plan
violates federal laws governing vesting and anti-forfeiture rules for pension
and retirement packages by withholding deferred pay when brokers move to the
competition.

In September, Morgan Stanley disclosed in a letter to
Gardephe that a rash of other of its ex-advisors are “piggybacking” on the class
case and filing unpaid deferred compensation claims in arbitration.

Court filings details the deferred compensation—including
that it can entail as much as 15% of advisors’ pay and require up to eight
years to vest.

Deferred compensation is one key factor keeping brokers in
their seats, recruiters and Morgan Stanley executives have said.

We appreciate that the court correctly determined these
claims belong at arbitration and are reviewing other aspects of the decision,”
a Morgan Stanley spokesperson said.

“Judge Gardephe found that the Morgan Stanley
deferred-compensation plan is an ERISA pension plan,” Sonn said. “This means
that ex Morgan Stanley advisors can bring claims to recover their deferred
compensation in arbitration as vested and non-forfeitable,” said Sonn. “Our
firm plans to file FINRA arbitration claims to recover the deferred
compensation owed to ex Morgan Stanely financial advisors,” added Sonn.

If you are a former Morgan Stanley financial
advisor that was denied your deferred compensation after you left Morgan
Stanley, you may have a claim for damages. Contact Sonn Law Group PA at
305912000 for free information, or email us at service@sonnlaw.com.

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