A federal appeals court yesterday ruled that Wells Fargo Advisors is liable for $1.1 million in attorneys' fees owed to four former brokers at the firm.
The ruling stems from a raiding case brought by Wachovia Securities LLC against
Stifel Nicolaus & Co. Inc. and brokers Frank Brand, Marvin Slaughter, Stephen Jones and George Stukes, who joined
Stifel in January 2008 from A.G. Edwards & Sons Inc. in South Carolina.
Wachovia bought A.G. Edwards Inc. in 2007, and has since been renamed Wells Fargo Advisors LLC.
In December 2009, a Finra arbitration panel rejected the raiding claim and ordered Wachovia to pay the brokers' legal costs under South Carolina's Frivolous Civil Proceedings Act.
Wachovia appealed to a federal court in South Carolina, arguing that the three-person Financial Industry Regulatory Authority Inc. panel did not follow procedural rights under the Frivolous Civil Proceedings Act. The law gives an accused party 30 days to respond to a request for sanctions and a separate hearing on the matter.
The district court rejected the appeal, and the firm, now renamed Wells Fargo Advisors, appealed to the 4th U.S. Circuit Court of Appeals in Richmond, Va.
Yesterday, a three-judge panel ruled that the arbitration panel did not have to follow the law's procedural mandates.
Wells Fargo spokesman Tony Mattera declined to comment.
The brokers' attorney, Joseph Dougherty, a shareholder at Buchanan Ingersoll & Rooney PC, was not immediately available.
Wells Fargo would have to continue the fight by appealing to the Supreme Court — an unlikely outcome — or possibly get the decision reviewed by the full bench of the circuit court.
Mr. Jones, one of the brokers, said he expected to be paid shortly.
The South Carolina case was one of several raiding cases that arose when former A.G. Edwards brokers left Wachovia.
The case got particularly nasty when Wachovia hired a private investigator to videotape several of the brokers taking boxes from the Wachovia office in Florence, S.C., where they were based. The firm got a temporary restraining order against the representatives, and told a federal judge who issued the order that the video showed the brokers taking the boxes to their new
Stifel office.
But the arbitrators said the videotape only showed the brokers removing documents.
The reps were the largest producers in the Wachovia office, generating approximately $2.9 million on $471 million in assets, according to Wachovia's complaint against them.
