Ex-Solly Brokers Have a Bad Day in Court
Former Salomon Smith Barney brokers suing the firm about its controversial Capital Accumulation Plan (CAP) received a setback in Massachusetts federal court earlier this week when a judge denied a motion that would have let nine states claims be tried as one.
"It was not a good day for brokers," says Tom Towe, one of several attorneys representing reps who, he said, walked away from this week’s court session "frustrated and snakebitten. They didn’t win everything, but they came close."
Brokers are seeking damages of more than $150 million they say they are owed for CAP. The CAP controversy started in 1996. Several SSB brokers say more than $100 million of the firm's stock is forfeited every year by reps and other employees who leave and don't fight to get these shares or their money back. As a result, "the firm would rather settle the cases on an individual basis than change the plan, "a broker says. "It costs less money."
Towe and co-council Richard Coffman, who represent brokers from Kentucky, Indiana, Michigan, Mississippi, Missouri, Ohio, Texas, North Carolina and Virginia, asked Judge Robert Keeton for a "renewed motion of certification in those nine states where the wage statues are virtually identical." The request was denied. The attorneys say they will appeal.
Towe and Coffman claim that since the states have wage laws nearly identical to Delaware law they should be lumped together as one rather than nine separate claims. When brokers signed Citigroup contracts, the parties agreed that any dispute should be settled under Delaware law, according to Towe. Yet the judge disagreed, saying Mississippi law should apply because that’s where the original case was filed.
"We think the judge is dead wrong on that," Towe says.
Brokers in Massachusetts, Connecticut and New York, whose laws are not similar to Delaware’s, had their cases moved forward to a Nov. 8 hearing.
Attorney Bruce Nagel, representing brokers from Louisiana, argued that all states should be considered one entity in a class action suit involving the interest on the money the reps weren’t paid.
Smith Barney, meanwhile, requested that the case be dismissed for lack of numbers, since only 14 Louisiana brokers are involved. The judge granted Nagel additional time to check the accuracy of the numbers. The case will also be heard Nov. 8.
Nagel claims Citigroup deducted money from brokers’ commissions each month, and that the firm held the funds for six months before acquiring stock, and he says the brokers are entitled to the money the firm received from the interest.
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