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FINRA Arbitration Panel In Manhattan, NY Awards $715,000 Unpaid Bonus To Former Barclays Investment Banker

  • By: David Rich
  • Published: January 25, 2011

In October 2010, an arbitration panel of the FinancialIndustry Regulatory Authority, Inc. (“FINRA”) in Manhattan, NY awarded compensatory damages of $715,000, plus interest and costs, to an investment banker, formerly employed by respondent Barclays Capital Inc. (“Barclays”), for breach of an implied contract to pay the investment banker a bonus for 2008. Whalen v. Barclays Capital Inc., Case No. 09-03587 (Oct. 8, 2010).

Three months later, in January 2011, Barclays fired about 600 employees, including many in Manhattan, NY. Barclays is refusing to pay, to the investment bankers it fired this month, bonuses for the work they performed in 2010. The Whalen arbitration award is a good development for, among others, investment bankers whom Barclays or other securities firms fired in late 2010 or early 2011 without paying the bankers any bonuses for 2010.

In Whalen, the claimant, Thomas D. Whalen, successfully maintained that Barclays, through its words and its course of conduct, implicitly agreed to pay to the claimant a bonus for 2008. In early 2009, Barclays, in breach of this agreement, advised the claimant that it would pay him no bonus. This bonus dispute arose as follows.

The claimant in Whalen was an investment banker with 20 years of experience whom Lehman Brothers (“Lehman”) recruited in 2006 to build and head its healthcare investment banking group. Under the claimant’s leadership, Lehman’s healthcare investment banking group reportedly surpassed its revenue target for 2007, and was retained for several major underwriting transactions scheduled for 2008 and 2009.

In 2008, Lehman filed for bankruptcy and Barclays acquired certain of Lehman’s assets. Upon Barclays’ acquisition of Lehman, the Whalen claimant, like thousands of other Lehman employees, accepted Barclay’s offer to work for Lehman. The claimant brought his entire book of business from Lehman to Barclays, and worked for Barclays throughout 2008 and into 2009.

The Whalen claimant, in successfully maintaining that Barclays’ statements and the parties’ course of dealing created an implied contract to pay him a bonus for 2008, pointed to, among other evidence. In that asset purchase agreement, Barclays agreed to pay, to Lehman employees who joined Barclays, bonuses for services performed in 2008. The asset purchase agreement stated, among other things, that:

On or after the Closing, [Barclays] shall, or shall cause its Subsidiaries to, pay each [employee who transferred from Lehman to Barclays] an annual bonus (“08 Annual Bonuses”), in respect of the 2008 Fiscal Year that, in the aggregate, are equal in amount to 100 percent of the bonus pool amounts accrued in respect of amounts payable for incentive compensation (but not base salary) and reflected on the financial schedule delivered to [Barclays] on September 16, 2008 and initialed by an officer of each of Holdings and [Barclays] (the “accrued 08 FY Liability”). Such 08 Annual Bonuses shall be awarded on or before March 15, 2009 in such forms and proportions as are consistent with [Barclays’] customary practices, so that the aggregate amount awarded shall equal the Accrued 08 FY Liability.

In the Whalen arbitration, Barclays unsuccessfully argued that the terms of employment-related documents rendered wholly discretionary any payment by Barclays to the claimant of a bonus for 2008. The Whalen panel flatly rejected Barclays’ position, and awarded, to the claimant, compensatory damages of $715,000, plus interest and costs.

The Whalen arbitration award is grounded on at least two well-established principles which I have explained in two recent articles, linked here and here. First, New York state courts, and federal courts applying NY Law, have determined, in many lawsuits by professionals in the financial industry or in other fields, that the course of dealing between the parties evinces an implied promise that annual or semi-annual bonus payments are a part of the plaintiff’s compensation. Second, FINRA, NASD, and NYSE panels predominantly have found that terminated employees are entitled to full or proportionate bonuses for a prior year or years’ employment, despite employers’ arguments that the terms of employment-related documents render such bonuses entirely discretionary.

If you are a professional who suspects that your former employer is unlawfully failing to pay you a bonus or incentive compensation owed to you and you reside in the Manhattan, NY area, call Attorney David S. Rich at (347) 970-5550.

David Rich, Esq.

David Rich David S. Rich is the founding member of the Law Offices of David S. Rich, LLC,
a Manhattan Employment and Business Litigation Law Firm, in New
York City and in Englewood Cliffs, New Jersey...View Profile