Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—E.D. Wis.: Former financial services franchisee’s breach of contract counterclaim against franchisor properly dismissed in arbitration, (Mar 7, 2014)

By Linda O’Brien, J.D., LL.M.

A former financial services franchisee in litigation against his franchisor failed to show that an arbitration award—which dismissed his counterclaim for breach of contract in violation of the Wisconsin Fair Dealership Law—should be vacated, the federal district court in Milwaukee has ruled. Thus, the arbitration award in favor of the franchisor was confirmed (Renard v. Ameriprise Financial Services, Inc., March 6, 2014, Stadmueller, J.).

In 2009, Ameriprise Financial Services, Inc., a financial brokerage firm, entered into a franchise agreement with Paul Renard as an affiliated independent financial advisor. Between 2009 and 2011, Ameriprise and Renard executed four promissory notes. In May 2011, Ameriprise sent Renard a Notice of Special Regulatory Supervision, stating that a complaint was received alleging that a client was solicited to purchase Electronic Transfer Funds (ETFs) that were unsuitable and resulted in a financial loss. Ameriprise initiated an investigation and placed Renard under special supervision during its review. Subsequently, Ameriprise issued a Notice of Immediate Termination for Cause, stating that the investigation found a breach of the franchise agreement due to several violations, including the solicitation of purchases in leveraged and inverse ETFs and the submission of client orders marked as unsolicited when the orders were in fact solicited.

As a result of the termination, the unpaid balances of the promissory notes became immediately due to Ameriprise. When Renard failed to satisfy the notes, Ameriprise filed an arbitration claim with the Financial Industry Regulatory Authority (FINRA) Dispute Resolution. Renard filed counterclaims, asserting a violation of the Wisconsin Fair Dealership Law (WFDL), among other claims. An arbitration panel found Renard liable for damages and dismissed his counterclaims. Renard filed suit against Ameriprise, seeking to vacate the arbitration award.

In confirming the arbitration award, the court found that the arbitrators did not exceed the scope of their power in denying Renard’s claim under the WFDL. Ameriprise conceded that it did not comply with the notice requirements of the WFDL. However, Ameriprise contended that it could immediately terminate Renard based on federal securities laws violations because Ameriprise’s responsibilities under the Securities Exchange Act preempted any notice requirements under the WFDL. The arbitration panel’s interpretation of the law and award were adequately supported by evidence and Renard failed to show that the arbitrators’ decision was based on something other than the evidence in the record, the court noted.

Additionally, the award was not procured by fraud. To prevail, Renard had to establish the alleged fraud by clear and convincing evidence. Renard argued that Ameriprise’s counsel reference to him as a criminal even though Renard was not charged or convicted of violating federal securities law was a misstatement of fact and law. Since Renard testified at the arbitration that he knowingly mismarked transaction tickets and this conduct violated federal securities laws, it was permissible for Ameriprise’s counsel to comment on the evidence in the record. Moreover, Renard had the opportunity to provide a rebuttal with his perspective. Thus, the court could not find that the counsel’s statements tainted the arbitration as to constitute fraud.

Finally, Renard was not prejudiced when the arbitration panel refused to keep the record open to allow him to offer post-hearing briefs. Renard was not denied the opportunity to present evidence; rather he requested a postponement to review and brief the law. Also, Renard provided no authority to support his argument that a failure to permit post-hearing briefing warranted vacating the award, the court concluded.

The case is No. 13-CV-555-JPS.

Attorneys: Terry J. Gerbers (Gerbers Law Offices SC) for Paul J. Renard. Ryan S. Stippich (Reinhart Boerner Van Deuren SC) for Ameriprise Financial Services Inc.

Companies: Ameriprise Financial Services, Inc.

Cases: FranchisingDistribution WisconsinNews