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Supreme Court to Hear Ex-Ameriprise Advisor's Arb Case Challenge

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What You Need to Know

  • A FINRA arbitration case is heading to the U.S. Supreme Court, with oral arguments scheduled for Nov. 2.
  • Advisor Denise Badgerow had alleged she was fired from Ameriprise affiliate REJ Properties in retaliation for reporting the conduct of REJ's principals.
  • SIFMA has signed an amicus brief in support of the Ameriprise affiliate.

The Securities Industry and Financial Markets Association signed an amicus brief supporting an Ameriprise affiliate in its dispute with a former advisor that is heading to the U.S. Supreme Court, with oral arguments scheduled for Nov. 2, court documents show.

Denise Badgerow became registered with the Financial Industry Regulatory Authority in 2014, when she became a rep and broker for Ameriprise Financial Services, according to her report on FINRA’s BrokerCheck website. She went on to become a registered advisor one year later but left the firm in 2016.

She went on to allege in a FINRA arbitration dispute that she was fired from Ameriprise affiliate REJ Properties in retaliation for reporting to Ameriprise the conduct of Thomas James MeyerRay Anthony Trosclair and Gregory Alan Walters, the principals of REJ, which does business as Walters, Meyer, Trosclair & Associates.

The three respondents “tortiously interfered” with Badgerow’s employment agreement, and the agreement’s noncompete and non-solicitation provisions are invalid, she alleged.

REJ also “tortiously interfered” with her book of business after her “wrongful termination in violation of Louisiana’s Unfair Trade Practices & Consumer Protection Law,” she alleged.

In a second amended and restated statement of claim, Badgerow added Ameriprise as a respondent, alleging that because it was a “joint employer,” it was “jointly and severally liable for the actions” of the other respondents and REJ.

A FINRA arbitration panel, however, dismissed all her claims in 2018.

In 2019, Badgerow sought to vacate the FINRA award via an action in Louisiana state court, alleging the REJ principals engaged in fraud against the FINRA arbitrators. The respondents went on to get the case removed to U.S. District Court for the Eastern District of Louisiana.

Badgerow filed a motion to remand, alleging a lack of federal-subject matter jurisdiction, according to a blog post by The CPR Institute, a nonprofit conflict prevention and resolution organization. The district court ruled there was federal-subject matter jurisdiction and Badgerow appealed the denial of her motion to remand the case to the state court.

The U.S. Court of Appeals for the Fifth Circuit in New Orleans, on Sept. 11, 2020, ruled that the district court “did not err by granting summary judgment on Badgerow’s disparate pay, hostile work environment, or breach of contract claims.” It also held that the district court “did not err in denying REJ’s supplemental motion for attorney’s fees.”

However, the Court of Appeals ruled Badgerow “satisfied her burden under the McDonnell Douglas framework to show that whether her termination was pretext for unlawful retaliation remains a disputed issue of fact that must be determined by the appropriate fact finder.” Therefore, the district court “erred in granting summary judgment on Badgerow’s Title VII retaliation claim,” the Court of Appeals said, remanding that aspect of the case for further proceedings. “In all other aspects, the judgment of the district court is affirmed,” it added.

The U.S. Supreme Court went on to grant certification for the case on May 17. The three REJ principals are the respondents in the case and Ameriprise is not included.

SIFMA’s Position

In a brief filed Sept. 17, SIFMA pointed out that its members are “both arbitral claimants and arbitral respondents, but regardless of their role, they have a strong interest in clear rules about when federal courts have subject matter jurisdiction to hear arbitration-related petitions under the Federal Arbitration Act … and a strong interest in making sure the FAA’s clear federal policy favoring arbitration is honored, including for FINRA arbitration of federal securities law claims.”

In its summary of argument, SIFMA went on to say: “When parties arbitrate a federal securities law dispute before a FINRA panel, a federal court has jurisdiction over subsequent enforcement proceedings. This Court should dispel any confusion over the application of the FAA in federal securities law arbitrations and confirm that the ‘look-through’ approach applies to post-arbitration enforcement petitions.”

If the Supreme Court rules that way, SIFMA argued, it “would not only clarify alleged uncertainties about federal jurisdiction” that the petitioner, Badgerow, “seeks to exploit, but also better ensure uniform application of federal law in securities law arbitrations — thereby mitigating the risk of inconsistent post-arbitration standards in the state courts.”

Pictured: Supreme Court building in Washington. (Photo: Diego M. Radzinschi/ALM)