Terra Extraneus

There is an old saw that compares lawsuits to two men armed with knives circling each other in a dark room, not knowing whether they can ever put the knives down. During the raiding wars (a/k/a recruitment wars) of the last twenty-five years, the major wirehouses, broker dealers, and investment banks tried to defend their market share by making it difficult or impossible for stock brokers (a/k/a registered representatives, financial advisors, financial consultants)(“FCs”) to change jobs, even though they are mere at will employees.

One of the most aggressive and effective firms at defending its turf when stock brokers tried to change jobs and take their books of business with them was Merrill Lynch. Other firms were more vicious about it, and turned to forfeiture programs designed to put thousands if not millions of dollars of earned compensation at risk just for changing jobs, so Merrill Lynch was by far not the worst with which to deal.

Finally, however, the Courts began to wise up to the fact that, no matter what high sounding moral or legal issues might be used to justify the raiding wars and the TROs and emergency hearings they spawned, what was really at stake was the book of business, market share and business income. That led Merrill Lynch to develop the Protocol for Recruiting Brokers. About sixty broker dealers have signed up and Bank of America, Merrill’s new owner, just joined in the last couple of weeks.

However, during the recruitment drives of 2008, we are seeing the same contracts containing the same clauses that were used to obtain TROs and put the FCs on the beach since time immemorial. Also, no house will agree to insert any language deferring to the Protocol for Recruiting Brokers.

The houses all say the same thing about their refusal to incorporate the Protocol for Recruiting Brokers. Because any house can resign from the Protocols at any time, no house wants to make its employees third party beneficiaries of an agreement others might not keep. The men in the dark room carrying knives are still circling.

In these turbulent times when recruitment and job flight are at all time highs for FCs, it will be interesting to see if the houses panic over market share and withdraw from the Protocols. It will be interesting to see if courts have the sanity to impose the Protocols as an industry standard with or without signatories. A few courts have done so. See, Merrill Lynch v Brennan (D. Ohio 2007) (hat tip to the Firth Law Firm in Roanoke); Citigroup Global Markets, Inc. v Griffin, slip op. (District Court of Suffolk, No. 08-0022, 2008)(hat tip Social Law Library Research Portal at socialaw.com).

Courts should be reminded that historically courts have historically found these cases interesting for awhile and then later rued the day they let them flourish.

Petitioner’s [Smith Barney] protestations to the contrary notwithstanding, the Court does not foresee any cataclysmic repercussions for Smith Barney that cannot adequately be addressed by monetary damages which are easily calculable from the requisite documentation.

Smith Barney, Inc. v. Anthony Cappiello, Supreme Court, County of New York, No. 603445/98, July 20, 1998, Slip Op. at 3.

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Lawyers are generally technology shy because of the time required to master new software. Thus, when this blogsite was the victim of some sort of mishap, it was clear from researching the plague on the web that though the cause might have been a villan roaming through cyberspace, the opportunity given freely to the villan was the failure to upgrade, for which only I can take responsibility. Thus, about six hours later, this blog site is now on the latest platform available that is out of Beta testing. If it was not for forums, blogs and very generous gurus contributing without hope of just reward in this life, I could not have done it. It was a test of wills, me versus the software, and the software won many but finally had mercy and here we are.

Fortunate are the web villians in cyberspace because that is a forgiving and tolerant community, or else they would be developing tracker software, hunting you down, signing an engagement agreement and giving me your identity. Courts would quickly become familiar with such an intriguing subject and district judges are usually adept at making villany pay up and get out.

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NewsOK.com reported on December 2, 2008 about a Jackson County man ripped off by BlueHippo, a company that sold inexpensive electronics at inflated prices and then never delivered about a third of the sales, continued to dun checking accounts and generally practiced economic vampirism.

This sad story was not just about a victim in Jackson County, but about a sad news heritage gone and lost forever. NewsOK.com did not seem to know the Attorney General of Maryland forced BlueHippo to mend its ways in May 2007, did not know that a class action law suit against BlueHippo also endangered Gateway, a computer manufacturer, and did not know that at least one ABC affiliate in Baltimore had already done an expose on Blue Hippo many months ago.

At least, none of that was in the story by NewsOk.com.

The other sad part of the story is that NewsOk.com could have used the fact that there have been “thousands of complaints nationally against the company” according to the Central Oklahoma Better Business Bureau as a case study of consumer protection. The Oklahoma Attorney General received twelve complaints in 2008, but there was no action taken. Thus, clearly, there is no consumer protection.

Finally, it seems unlikely the victim in Jackson County will be able to engage a tort reformed lawyer to address the fraud. The legal profession does not have the capital any longer to address such small claims which would require multi-state suit and collection efforts.

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