The Clients’ Waiver of Their Rights Under Regulation BI of the Securities and Exchange Commission

TAMAR FRANKEL

BU Law emerita professor Tamar Frankel discusses the Securities and Exchange Commission (SEC)’s Regulation Best Interest (BI), which imposes on broker-dealers a commitment to act in the best interests of their clients. Specifically, Frankel addresses the SEC’s treatment of client waivers of the Regulation BI, which goes even further than general fiduciary law to prohibit any waiver of the broker-dealer’s conflicting interests.

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Stelter v. Wisconsin Physicians Service Insurance Corp.

Docket: 18-3689

Opinion Date: February 20, 2020

Judge: William Joseph Bauer

Areas of Law: Labor & Employment Law

WPS employed Stelter as an assistant in 2002 and promoted her to sales representative in 2007. In 2010, Harings, an agency manager, expressed concern in Stelter’s performance review regarding personal appointments made during work hours. In 2013, Harings again noted appointments during work hours and Stelter’s need for better familiarity with large group insurance products. In February 2014, Stelter injured her back at work. WPS approved her request for time off. On April 17, Stelter’s doctor cleared her to return with no restrictions. In June, Harings conducted Stelter’s performance review, giving an overall rating of improvement required. To get Stelter better acquainted with selling large group insurance, Harings had Stelter visit another WPS office, about a two-hour drive from the location where Stelter worked. In September, Harings met with Stelter weekly. Harings’s notes expressed her frustration that Stelter failed to request additional training and continued leaving work for appointments without giving adequate notice. Harings recommended termination. In December, WPS terminated Stelter. Stelter sued, claiming discrimination and retaliation in violation of the Americans with Disabilities Act. She alleged she was disabled with back pain that was aggravated by a work injury, The Seventh Circuit affirmed summary judgment in favor of WPS. Stelter was terminated for a pattern of job absenteeism and deficiency.

Michael Needle, P.C. v. Cozen O'Connor

Docket: 19-2241

Opinion Date: February 20, 2020

Judge: St. Eve

Areas of Law: Legal Ethics, Professional Malpractice & Ethics

In a 2007 RICO action, Needle (a Pennsylvania sole practitioner) and Illinois attorneys represented the plaintiffs under a contingent fee agreement. The Illinois attorneys withdrew; Needle recruited Illinois attorney Royce as local counsel. They eventually settled the case for $4.2 million. The settlement agreement did not address attorney’s fees, costs, or expenses. Needle wanted $2.5 million, leaving the plaintiffs with $1.7 million. The attorneys also disagreed over the division of the fee between themselves. Royce filed an interpleader action. Needle “routinely and unapologetically tested the district court’s patience, disregarded court orders, and caused unnecessary delays.” The court repeatedly sanctioned Needle, ultimately following the written fee agreement. The Seventh Circuit affirmed an award of attorneys’ fees of one-third of the settlement, with Needle 60 receiving percent and Royce 40 percent of the aggregate. During the dispute, Needle was without counsel and was on the verge of a default judgment, when three partners from the O’Connor law firm stepped in to represent Needle P.C. Less than three months after appearing as counsel, O’Connor “understandably” withdrew due to irreconcilable differences and a total breakdown of the attorney-client relationship. O’Connor sought compensation under a quantum meruit theory and perfected an attorney’s lien. The district court granted O’Connor’s petition to adjudicate and enforce the lien. The Seventh Circuit affirmed. O’Connor is entitled to recover in quantum meruit and the district court properly concluded that the petitioned fees were reasonable.

Royce v. Needle

Dockets: 19-1054, 18-2850, 18-2851, 18-3725

Opinion Date: February 20, 2020

Judge: St. Eve

Areas of Law: Legal Ethics, Professional Malpractice & Ethics

In the underlying 2007 civil RICO action, Needle (a Pennsylvania sole practitioner) and two Illinois attorneys represented the plaintiffs. The attorneys executed a contingent fee agreement with their clients. The Illinois attorneys later withdrew from the representation, so Needle recruited Illinois attorney Royce as local counsel. Needle and Royce agreed to split half of any fee equally and the other half proportional to the time each spent on the matter. Needle and Royce litigated the suit for several years before successfully settling the case for $4.2 million. The settlement agreement did not address attorney’s fees, costs, or expenses. All payments were made to Royce as escrow agent. Needle wanted $2.5 million, leaving the plaintiffs with $1.7 million. Needle and Royce also disagreed over the division of the attorney’s fee between themselves. Royce filed an interpleader action. The Seventh Circuit described what followed as “a long, tortured history” based on an “objectively frivolous" position; Needle “routinely and unapologetically tested the court’s patience, disregarded court orders, and caused unnecessary delays.” The court repeatedly sanctioned Needle for “obstructionist and vexatious” tactics. The district court followed the written fee agreement and awarded attorneys’ fees of one-third of the settlement, then awarded Needle 60 percent and Royce 40 percent of the aggregate. The Seventh Circuit affirmed: The district court’s rulings were correct, the sanctions were appropriate, and Needle’s other arguments are baseless.