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After 3-year battle with Credit Suisse, advisors may finally receive $6.7M award

A sign hangs above the entrance to a Credit Suisse Group AG bank branch in Bern, Switzerland, on Thursday, June 18, 2020. The Swiss economy is expected to suffer its biggest contraction since the mid-1970s this year, with financial stability risks increasing globally due spiraling corporate and state debt. Photographer: Stefan Wermuth/Bloomberg
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After waiting three-and-a-half years, two advisors are closer to finally getting their last paycheck now that a New York judge sided with them in their ongoing legal battle with their former employer, Credit Suisse.

Joseph Lerner and Anna Winderbaum’s latest legal victory may also help a few dozen other former Credit Suisse advisors in their efforts to claim what they say is millions in compensation the Swiss bank owes them. In Lerner and Winderbaum’s case, Credit Suisse owes them $6.7 million, plus interest, according to their 2019 FINRA arbitration award, which the judge confirmed. In her ruling, the judge also cited a recent Credit Suisse case involving the same issues as precedent.

Lerner and Winderbaum’s attorney, Barry Lax, says his clients have been waiting patiently for this win. “At the end of day they knew they were right and they were entitled to this compensation,” says Lax who is founding partner of the law firm Lax & Neville.

His law firm represents more than two dozen former Credit Suisse advisors seeking deferred compensation from their former employer.

The legal win comes after advisors have engaged lengthy litigation against Credit Suisse, involving a number of FINRA arbitration cases and state courts. At the heart of the issue is whether Credit Suisse effectively terminated its advisors when it decided to shutter its U.S. wealth management business four years ago. Under Credit Suisse employment contracts, advisors lose their deferred compensation if they quit. The firm has argued that they did.

Arbitration panels and state courts have sided with the advisors. Bill Singer, an attorney who doesn’t represent the advisors, says this latest court decision got it right.

“Credit Suisse has every right to expand its business or to close its business. It can do what it wants. But it’s common sense that if you announce the closing of the division, then of course you have constructively discharged everyone,” Singer says.

Singer, who says the court’s decision helps set a precedent for other cases, adds: “These people didn’t quit. The firm effectively locked the doors and turned off the lights. And it said ‘We didn’t fire you.’”

When an unusual recruiting deal between Credit Suisse and Wells Fargo went awry, years of broker frustration, severe attrition and litigation followed. Also at stake: Up to $245 million in back pay.

Lerner and Winderbaum started their careers at Donaldson, Lufkin & Jenrette in the 1990s and stayed with the firm following its acquisition by Credit Suisse. When Credit Suisse parted ways with the duo, they oversaw about $1 billion in client assets. They found new employment with Morgan Stanley in December 2015.

Last year, after 37 hearing sessions, an arbitration panel ordered Credit Suisse to pay Lerner and Winderbaum $6.7 million in deferred comp, damages and fees. The arbitrators also granted the advisors 9% interest on the award from the date it was issued (May 1, 2019) until it is paid.

In state court, Credit Suisse asked the judge to vacate the award grounds that the arbitrators had exceeded their authority and disregarded the law.

The bar for vacating an arbitration award is high. Judge Andrea Massley rejected all of Credit Suisse’s arguments, saying the court would not second-guess the arbitrators’ decision.

"The parties selected arbitration and agreed to be bound by FINRA's findings. This court will not revisit FINRA's contract interpretation in the absence of misconduct, misconstruction and misapplication,” Massey wrote in her decision issued July 16.

Credit Suisse said it believes her decision was wrong.

“It ignores settled principles of law and the facts in this cas,” the firm said in a statement, adding that the arbitration award conflicts with others.

The firm also pointed to its $9 million arbitration win against UBS for alleged raiding. Its Swiss rival hired about 100 of its former advisors following Credit Suisse’s announcement that it would close the unit and permit advisors to move to Wells Fargo under an exclusive recruiting arrangement.

The firm says it is considering its options.

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