Appeals court backs stockbrokers in pay suit against Brill Securities

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Three stockbrokers for Brill Securities in New York have won an appeal, freeing them from being forced to arbitrate a suit over overtime pay.

Joseph, Herzfeld, Hester & Kirschenbaum, the law firm representing the stockbrokers, said in a statement that the ruling from the New York State Appellate Division, First Department, was an “enormous victory” for the stockbrokers, who are seeking lost wages and damages from the suit.

Matthew Kadushin, a lawyer representing the stockbrokers, said the ruling “slams the door on broker-dealers, who are now without defense.”

The court ruled the stockbrokers, part of a class action, could not be compelled to arbitrate the claims over what they say is unpaid overtime. The ruling upholds a lower court ruling, issued in June 2011 by New York Supreme Court Justice Barbara Kapnick, in Manhattan, N.Y., which denied Brill Securities attempt to seek dismissal of the complaint or force the stockbrokers to arbitrate their claims.

Brill Securities had argued that by signing FINRA’s U4 forms, the stockbrokers were forced submit to arbitration in the case.

“The agreement between the parties makes it exceedingly clear that arbitration shall be governed by the rules promulgated by FINRA,” the court ruled. “FINRA Rule 13204(d) prohibits arbitration of class action claims and specifically, prohibits enforcement of ‘any arbitration agreement against a member of a . . . putative class action with respect to any claim that is the subject of the . . . class action’ until certain conditions, inapplicable here, are met.”

The class action alleges that during their employment at Brill Securities, stockbrokers were compensated solely by commissions yet consistently worked in excess of 40 hours a week and never received the legally mandated time-and-a-half overtime pay, a violation for federal Fair Labors Standards Act.

The class action was filed on behalf of about 50 stockbrokers at Brill Securities between 2007 and 2010.

The company, according to the law firm, sought to defeat the class action by arguing that an arbitration agreement in stockbrokers’ U4 forms forced them to arbitrate the claim.

“We are pleased by the court’s decision which enforced the parties’ agreement to arbitrate only those claims permitted by the FINRA rules,” said Attorney Michael Palmer, who argued the case on behalf of the stockbrokers, in a statement. “FINRA has consistently recognized that broker-dealers cannot compel stockbrokers to arbitrate claims which were filed as a class action. The court recognized that a defendant cannot breach their own arbitration agreement to avoid class litigation.”

The suit names as defendants Brill Securities, along with Robert Brown, its CEO and an owner; Nicholas Brown, its chief financial officer and an owner; Jonathan Kurtin, president and an owner; and David Nutkis, vice president and chief operating officer of Brill.

 

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