An arbitration ruling calls for a former First Republic broker in Miami to repay nearly $12 million in outstanding recruiting loans he was given as part of a bonus agreement when he was hired by the bank, AdvisorHub reports.
A Financial Industry Regulatory Authority panel issued the award in the case of Steven H. Levine, who worked at Morgan Stanley from 1999 to 2004 before joining First Republic in 2018 as a broker and investment advisor. Levine returned to Morgan Stanley in April last year, a month before JP Morgan acquired First Republic in an emergency takeover.
First Republic Securities Company and First Republic Investment Management accused Levine of “breach of contract, unjust enrichment and money had and received” relating to outstanding promissory notes.
The company requested about $12.5 million in compensatory damages, representing the money owed on the notes, as well as more than $425,000 in lawyers’ fees, about $5,625 in costs and expenses, and nearly $16,000 in FINRA fees.
In a counterclaim, Levine accused First Republic of violations including breach of contract, unpaid deferred compensation, and violation of the Racketeer Influenced and Corrupt Organizations Act. He sought unspecified compensatory and punitive damages, nearly $660,000 in lawyers’ fees and costs, and the cancellation of the promissory notes.
The FINRA arbitration panel has now ordered Levine to pay First Republic about $11.5 million in compensatory damages, explaining that the amount represented the full balance of $12.5 million owed on the promissory notes, minus $1 million that First Republic owed to Levine before his departure.
Levine is also liable for interest on the damages, at a rate of 8% annually starting from April of last year, as well as more than $425,000 in lawyers’ fees, about $5,625 in costs, and $2,700 for the non-refundable portion of the arbitration forum filing fee. The three-member arbitration panel denied Levine’s counterclaim arguing the bank was not entitled to recoup funds because it had committed fraud and violated the RICO Act.
Levine’s lawyer, Michael S. Taaffe with Shumaker, Loop & Kendrick in Sarasota, Florida, said they are “disappointed” with the arbitration award and weighing an appeal in court to vacate the award of attorney fees since First Republic had failed to pay his last quarter of commissions.
Levine is one of 16 former First Republic brokers sued by JPMorgan Securities in an effort to have them repay over $92.4 million in outstanding recruiting loans that they received as part of their bonus agreements when they were hired by First Republic, which was acquired and absorbed by J.P. Morgan after going into receivership in May 2023 during the banking crisis.
The lawsuit was filed in May in a petition filed with the U.S. District Court for the Northern District of California in San Francisco. JPMorgan, which bought the advisors’ promissory notes, contended that the bonus agreements require that the loans be repaid in full if the advisors resign.
The attorneys at Lewitas Hyman have handled thousands of promissory note matters for some of the largest financial services firms in the world, as well as on behalf of registered representatives. In this capacity, we have handled claims before FINRA, AAA and JAMS arbitration panels in contested and protracted hearings. If you need guidance on matters related to promissory or forgivable notes, contact us at (888) 655 6002 or through our online contact form for a free consultation.
