Hale v. Morgan Stanley
| Decision Date | 15 November 2021 |
| Docket Number | Case No. 3:19-cv-229 |
| Parties | Richard "Rip" HALE, Plaintiff, v. MORGAN STANLEY, Defendant. |
| Court | U.S. District Court — Southern District of Ohio |
Peter Kevin Newman, Dayton, OH, for Plaintiff.
Rachael Leigh Rodman, Ulmer & Berne LLP, Columbus, OH, Beth A. Black, Pro Hac Vice, Tracy L. Gerber, Pro Hac Vice, Greenberg Traurig, P.A., West Palm Beach, FL, for Defendant.
ORDER: (1) DENYING PLAINTIFF'S MOTION TO VACATE THE ARBITRATION AWARD BELOW WITH PREJUDICE; (2) DENYING PLAINTIFF'S MOTION FOR AN EXTENSION OF TIME TO COMPLETE DISCOVERY AND/OR UNDERTAKE POST-HEARING DISCOVERY; (3) DENYING PLAINTIFF'S MOTION FOR LEAVE TO AMEND; (4) CONFIRMING THE ARBITRATION AWARD AT ISSUE AND DENYING AS MOOT DEFENDANT'S MOTION TO CONFIRM THE ARBITRATION AWARD; (5) DENYING AS MOOT PLAINTIFF'S MOTION TO DISMISS; (6) DENYING AS MOOT PLAINTIFF'S MOTION FOR AMENDMENT OF THE CALENDAR; (7) ENTERING JUDGMENT IN DEFENDANT'S FAVOR; AND (8) TERMINATING THIS CASE ON THE DOCKET
This matter is before the Court on several motions that the Court explains in further detail below. Because each motion is contingent on Plaintiff's original motion to vacate the arbitration award at the heart of this case (Doc. No. 1), the Court finds this matter ripe for review.
According to Defendant Morgan Stanley Smith and Barney LLC ("Morgan Stanley"), "[a]t Morgan Stanley, the rules apply to everyone." Doc. No. 1 at PageID 16. Not so, contended Plaintiff Richard Hale ("Hale"). After receiving reprimands from his supervisors for violating company policies related to financial disclosures and revealing company information, as well as losing company privileges bestowed to top employees, Hale challenged Morgan Stanley in arbitration. Doc. No. 1 at PageID 4. He lost. Doc. No. 12.
The arbitration proceedings lasted four days, eleven witnesses testified, and both parties briefed the issues for the Honorable David Coar ("Judge Coar")1 , the arbitrator, to review. Doc. No. 31 at PageID 277. The following background facts were contested during the underlying dispute, but given the narrow standard of review this Court must presently apply, resolving the parties’ factual disputes are not necessary to decide the main issue -- did Judge Coar issue a legitimate award? See Barrick Enters., Inc. v. Crescent Petroleum, Inc. , 496 F. App'x 614, 616 (6th Cir. 2012) ; Questar Cap. Grp. v. Gorter , 909 F. Supp. 2d 789, 797 (W.D. Ky. 2012). But for clarity and to give a complete account of the arbitration proceedings, the Court will set the facts forth below.
Hale worked for Morgan Stanley as a financial advisor for thirty-four years in their Beavercreek, Ohio office. Doc No. 32-3 at PageID 413; Doc. No. 32-12 at PageID 611. He was a top producer at Morgan Stanley, receiving multiple awards for his work. Doc. No. 32-1 at PageID 361; Doc. No. 32-12 at PageID 611. But then came the complaints. Morgan Stanley issued several letters reprimanding Hale over a span of four years. Doc. No. 31-2 at PageID 298. The first letter arrived in March 2013, when Morgan Stanley chastised Hale for giving a quote in a newspaper article about tax investment strategies -- without permission, in violation of Morgan Stanley's policies. Id. at PageID 302. The second letter, in October 2014, came after Hale violated Morgan Stanley's policies and procedures pertaining to an initial public offering. Id. Finally, the third letter followed in response to Hale's alleged reinvestment of clients’ dividend income into their IRA accounts without their prior approval. Doc. No. 1 at PageID 8.
Morgan Stanley mobilized its internal investigation unit -- the Special Investigations Unit ("SIU") -- to investigate these alleged violations. Id. When Hale allegedly violated Morgan Stanley's policy by failing to disclose his position in his family limited partnership -- a fourth infraction -- SIU initiated a call with Hale on April 28, 2016. Id. Hale alleged that this call was an ambush, rife with verbal abuse towards him. Id. Morgan Stanley alleged that Hale was the "combative" one and would not take responsibility for his actions. Id. ; Doc. No. 31-2 at PageID 305. Later, on August 23, 2016, Hale met with SIU members again to make amends; both parties left with differing views of what was said, with each side alleging that the other party was combative and abusive. Doc. No. 1 at PageID 9–10; Doc. No. 31-2 at PageID 11–12. Hale subsequently complained to Human Resources on September 19, 2016. Doc. No. 1 at PageID 9. Morgan Stanley's Guardianship Committee, an internal governance board, reviewed Hale's disciplinary record thereafter and concluded that Morgan Stanley should disqualify Hale from the Chairman's Club -- a firm designation given to top performers. Doc. No. 32-1 at PageID 369–70.
After this series of events, Hale elected for arbitration against Morgan Stanley. Doc. No. 31 at PageID 277. Morgan Stanley resolves claims against it through Judicial Arbitration and Mediation Services ("JAMS"), a well-known alternative dispute resolution service provider. Doc. 32-1 at PageID 384–86. All employees at Morgan Stanley who wish to assert claims against Morgan Stanley related to their employment must assert these claims through JAMS. Id. The parties select an arbitrator, who has the power to issue an award for relief over the claims. Doc. No. 31-4 at PageID 341. JAMS rules require an arbitrator to issue "a concise written statement of the reasons for the [a]ward, stating the essential findings and conclusions on which the [a]ward is based." Id. at PageID 350.
In March 2018, Hale filed a "restatement of claims" amending his claims against Morgan Stanley, specifically alleging that Morgan Stanley was negligent and intentionally inflicted emotional distress upon him through its investigation; defamed him in SIU's statements and reports regarding its investigation into his alleged misconduct; and breached its fiduciary duty of care by allegedly failing to meet with him once he complained. Doc. No. 31-1 at PageID 282; Doc. No. 32 at PageID 409.
Because one of the arguments in the present case deals with Judge Coar's decision to designate certain documents as privileged, it is important to summarize how those events transpired during arbitration. Morgan Stanley argued that certain portions of the SIU's investigation file were privileged when Judge Coar inquired about SIU's role at Morgan Stanley. Doc. No. 32-19 at PageID 656; Doc. No. 33 at PageID 686. Hale opposed, but Judge Coar, after reviewing (1) all the privileged documents; (2) Morgan Stanley's privilege log; (3) the parties’ letters explaining their positions; and (4) Morgan Stanley's submission explaining the nature of SIU, ruled that the attorney-client privilege shielded the documents from production and/or consideration during the arbitration proceedings. Doc. No. 32-20; Doc. No. 32-21; Doc. No. 33 at PageID 688.
In addition to his arguments regarding privilege and discovery, on April 19, 2018, Hale moved for leave to add an age discrimination claim to the claims before the arbitrator, alleging that Morgan Stanley treated him less favorably (by not giving him the Chairman's Club benefits) than a younger financial advisor with a sordid criminal history. Doc. No. 32-4. After extensive briefing, Judge Coar denied Hale's motion for leave to amend. Doc. No. 32-5 at PageID 454; Doc. No. 32-7; Doc. No. 32-8; Doc. No. 32-9; Doc. No. 33 at PageID 676, 678.
During the arbitration hearing, Hale, through counsel, attempted to resurrect an abandoned retaliation claim that he omitted from his restatement of claims in March 2018. Doc. No. 32-13 at PageID 623. When Morgan Stanley protested, Judge Coar noted that Hale had withdrawn this claim and denied him leave to reassert it. Id. at PageID 623, 625. Judge Coar clarified that any reference to a retaliation claim was limited to Hale's possible use of the burden-shifting standard for Title VII cases; regardless, Judge Coar specified that retaliation was "out as a substantive claim." Id. at PageID 625.
The arbitration proceeded. Hale's attorney gave his opening statement, arguing (1) defamation, (2) intentional infliction of emotional distress, (3) negligence, and (4) breach of fiduciary duty. Doc. No. 32-17 at PageID 643–47. Each claim was thoroughly briefed and presented for Judge Coar's review after the hearing. See Doc. No. 32-11.
Following four days of testimony, Judge Coar, in a written opinion dated May 2, 2019 (Doc No. 32-12 at PageID 610), ruled in favor of Morgan Stanley. After acknowledging that no party disputed that their claims were within the scope of arbitration, Judge Coar found that the facts favored Morgan Stanley. Id. at PageID 617–18. More importantly, Judge Coar found Morgan Stanley's investigators credible. Id. He insisted that their testimony demonstrated "[t]he simple truth ... that Hale committed the acts and omissions for which he received discipline." Id. at PageID 617. Judge Coar found the following: (1) "Hale was not defamed ...."; (2) "he [was not] the victim of intentional infliction of emotional distress"; (3) "[t]he investigation of [SIU investigators’] conduct was reasonable and not negligent or flawed"; and (4) "[t]he assertion that [Morgan Stanley] breached its duty of care to Hale by not limiting the number of times that he could speak to upper management is frivolous." Id. at PageID 618.
This case has taken several turns since arbitration concluded. It first appeared before the Court on August 2, 2019, when Hale filed a motion to vacate Judge Coar's award under Sections 10(a)(3) and (4) of the Federal Arbitration Act ("FAA"). Doc. No. 1. Morgan Stanley moved to dismiss for lack of subject matter jurisdiction on October 1, 2019. Doc. No. 9. Judge Rice (to whom this case was previously assigned) agreed and dismissed Hale's complaint, but the Sixth Circuit reversed that ruling and...
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Hale v. Morgan Stanley Smith Barney LLC
...Barney LLC, 982 F.3d 996, 997-99 (6th Cir. 2020). On remand, the district court denied Hale's motion to vacate on the merits. See Hale, 571 F.Supp.3d at 879-87. Hale now appeals a second II On appeal, we must apply two different standards of review-one for the district court's decision and ......