A federal court has denied a motion by J.P. Morgan Securities to reverse a $1.4 million arbitration award that an advisor won against the company for alleged defamation.
In a ruling handed down on Friday, District Judge Rebecca Grady Jennings for the Western District of Kentucky in Louisville, said “JPMS has failed to establish any grounds on which to vacate the award.”
J.P. Morgan did not respond to an inquiry for comment.
In February, a three-member Financial Industry Regulatory Authority arbitration panel sided with Dustin B. Luckett of Louisville, who alleged that the Form U5 that J.P. Morgan filed after he was fired was defamatory.
The panel awarded Luckett $1.4 million and granted his request that his record be expunged of the allegation that he violated the company’s notary policies by asking a co-worker to notarize a document without the customer being present, and then retaliated against the co-worker who reported the breach. He argued that he was never trained by J.P. Morgan or anyone else on notary rules. Luckett had sought about $5.6 million in the case.
J.P. Morgan argued that the award should be vacated because the arbitration panel issued it “in manifest disregard” of the law. The bank cited four reasons it believed the award should be vacated. It said Luckett failed to prove the elements of a tortious interference claim, that New York law should have been applied to Luckett’s claims because it provides absolute privilege for statements on a Form U5, that Luckett failed to prove that JPMS published a false statement, and that “false light” is not a recognized claim under New York law.
But in citing one of several legal sources used in its ruling, the court said, “To constitute a manifest disregard for the law, ‘[a] mere error in interpretation or application of the law is insufficient. Rather, the decision must fly in the face of clearly established legal precedent.’” It further noted that, “When faced with questions of law, an arbitration panel does not act in manifest disregard of the law unless (1) the applicable legal principle is clearly defined and not subject to reasonable debate; and (2) the arbitrators refused to heed that legal principle.”
The court also noted that the Finra arbitrators did not explain the basis of their award, which they are not required to do. But the court also noted that under Finra rules, both parties had the option to request an explanation of the decision, but neither exercised that right.
“When an award is unexplained, a party seeking to have the award set aside faces a tremendous obstacle. If a court can find any line of argument that is legally plausible and supports the award, then it must be confirmed. Only where no judge or group of judges could conceivably come to the same determination as the arbitrator must the award be set aside,” the court said.
With respect to Luckett’s alleged tortious interference claims, the court found that there was “plausible basis” for the panel to have agreed with three out of the four claims. The fourth, in which Luckett claimed injury to his business relationship, was “sufficient grounds on which the panel could have found the final element of the tortious interference claim satisfied,” the court said, noting that both Merrill Lynch and Raymond James testified that they extended offers to Luckett but backed off because of the publication of his Form U5.
The court also pointed out that Luckett testified that he and his family faced hardship due to J.P. Morgan’s action, including being forced to sell their home and cars. He also testified that he took a job that paid substantially less than what he was making.
The court said all it needed was to identify one legally plausible basis for the arbitration award, and “the tortious interference claim resolves this case because it could have properly formed the basis for the Panel’s decision.”
In an email to Financial Advisor, Luckett’s attorney, Michael A. Valenti of Valenti Hanley PLLC in Louisville, said, “We and our client Mr. Luckett are delighted with the court’s well-reasoned ruling. That said, the actions which precipitated this case have taken a toll on our client’s personal and financial life so he is hopeful that this matter will soon be over once and for all and he can move on with his life.”
Luckett began his career with Merrill Lynch in 2006, according to BrokerCheck. He had short stints at three other firms, including Chase Investment Services, before moving to J.P. Morgan in 2012. After being fired from J.P. Morgan in June 2017, he joined J.J.B. Hilliard, W.L. Lyons in July 2017. He left the firm in June 2018.
According to his Facebook profile, he works for Yellow Cardinal Advisory Group, the wealth management division of First Financial Bank in Louisville. He joined the bank in 2018.