In another case against Edward Jones, a panel of judges for the Missouri Court of Appeals heard oral arguments Jan. 7 on whether to vacate a $750,000 arbitration award won by former Jones broker Channing Schwartz in 1995.
Edward Jones alleges misconduct on the part of one of the arbitrators in the original case. Arbitration awards are not appealable, except on charges such as arbitrator misconduct, including manifest disregard for the law.
In this case, Schwartz' attorney, Mark Stites of Overland Park, Kan., says Edward Jones claims one of the arbitrators failed to disclose the fact that his wife is a stockbroker for Smith Barney, a competitor firm. Stites says Edward Jones knew this at the time of the hearing and made no objection. Furthermore, Stites says, one of the arbitrators himself was a stockbroker and Edward Jones made no objection. Stites claims the firm simply does not want to pay such a large award.
"The arbitrator mentioned that his wife worked for Smith Barney," Stites says. "It's on the record, and they never objected. Instead they waited for the award to come down and ... invented this argument."
Schwartz was employed with Edward Jones for 11 years in Alliance, Neb., resigning in 1994 to take a position with Linsco/Private Ledger. Three days after leaving, Schwartz was hit with a temporary restraining order Edward Jones obtained from a state judge. Schwartz was barred from contacting clients for more than three weeks, during which time he says he lost nearly 60% of his clients.
Schwartz took Jones to NASD arbitration where in November '95, the three-member panel awarded him $750,000 in damages for defamation, tortious interference and malicious prosecution.
Jones appealed the arbitration decision and in March '97, the Circuit Court of Jackson County, in Kansas City, Mo., rejected the firm's motion.
Jones then appealed to the court of appeals. The appeals court's ruling is expected by mid-March.
Stites asked the appellate judges to impose a higher interest penalty on the $750,000 award since the firm, according to published reports, earns at least a 20% return on equity and the statutory interest rate on arbitration awards is only 9%. "They're making money on this," Stites says.
Edward Jones did not respond to requests for comment before press time in early January.