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Morgan Stanley & Co., Inc. v. Solomon

February 19, 2009


The opinion of the court was delivered by: Kenneth A. Marra United States District Judge


This cause is before the Court upon Plaintiff Morgan Stanley & Co., Inc.'s Motion for Preliminary Injunctive Relief (DE 9). The motion is fully briefed and the Court held a hearing on January 22 and January 30, 2009. The Court has carefully considered the briefs, the evidence and the argument of counsel and is otherwise fully advised in the premises.

The Court makes the following findings of fact and conclusions of law in connection with the denial of the preliminary injunction and entry of final judgment in favor of Defendants Neil B. Solomon and Neil B. Solomon, P.A..

I. Findings of Fact

Defendant Neil B. Solomon ("Solomon") is an attorney whose law practice currently consists of representing plaintiffs in securities arbitrations. Mr. Solomon, through his law firm Defendant Neil B. Solomon, P.A., currently represents three customers in arbitrations before the Financial Industry Regulatory Authority against Plaintiff Morgan Stanley Co., Inc. ("Morgan Stanley"). Morgan Stanley seeks preliminary and permanent injunctive relief enjoining Mr. Solomon and his firm from this representation as well as any future representation adverse to the interests of Morgan Stanley. In addition, Morgan Stanley seeks an order staying the arbitrations until a ruling on disqualification occurs.

From approximately November 2001 through June 2006, Mr. Solomon was employed as an associate at the law firm of Greenberg Traurig. During that time period, Greenberg Traurig represented Morgan Stanley with respect to securities litigation, which included handling arbitration claims and class action claims involving securities. The vast majority of the cases were arbitrations arising out of suits brought against Morgan Stanley by individuals who lost money in investments. Mr. Solomon worked on Morgan Stanley matters while an associate at Greenberg Traurig from approximately November 2001 through November 2003 and worked on other securities matters until June 2006. In the two-year period during which Mr. Solomon was engaged in the representation of Morgan Stanley, he billed about 1,500 hours of time.

Mr. Solomon's job responsibilities with respect to Morgan Stanley included responding to discovery, ranking arbitrators, research and writing, attending meetings and preparing pre-hearing memoranda for in-house attorneys. As part of his responsibilities, he would confer with Morgan Stanley brokers, branch office managers, branch administrative managers and in-house attorneys.*fn1 He tried two arbitrations and participated in one mediation and therefore needed to talk to branch members with respect to these matters. In talking to brokers, Mr. Solomon never discussed their training or saw documents relating to their compensation.

With respect to choosing arbitrators, Mr. Solomon would consult Greenberg Traurig's database on arbitrators. That database ranked arbitrators based on their backgrounds, history of prior awards and their preliminary rulings on matters such as discovery. The database included information garnered from clients.*fn2 Mr. Solomon's work on arbitrator selection for Morgan Stanley cases took place in 2001 and 2002 and only involved ranking arbitrators in three or four Morgan Stanley cases. In total, Mr. Solomon testified that he spent about four or five hours on arbitrator rankings. He would look at arbitrator awards, the background and age of the arbitrators, find out other Greenberg Traurig's attorneys experience with a particular arbitrator, and put this information on a spreadsheet. He would also recommend which arbitrators should be stricken. Many of the arbitrators ranked by Greenberg Traurig during the time Mr. Solomon worked there are still arbitrators today, however, when asked about arbitrators assigned to Morgan Stanley cases from his time at Greenberg Traurig, Mr. Solomon testified that he could only remember one of the arbitrators. At some point, Greenberg Traurig assigned another individual the responsibility of maintaining the arbitrator database, at which point Mr. Solomon was no longer involved in the ranking of arbitrators. In fact, Mr. Solomon never saw the Greenberg Traurig arbitrator database after that.

In an arbitration, both sides are permitted to strike various arbitrators. Once stricken, those arbitrators do not remain on the panel. Each side also ranks their preference for arbitrators. During the time Mr. Solomon worked at Greenberg Traurig, parties had unlimited strikes of arbitrators. This is no longer the case. Instead, the current system provides attorneys with a choice of 24 arbitrators in three different categories. Within each category, attorneys may strike four. Thus, as explained by Mr. Solomon, the current system works in such a way that if Morgan Stanley wants to strike an arbitrator, there is nothing that Mr. Solomon can do to prevent that arbitrator from being stricken.

In picking arbitrators today, Mr. Solomon examines prior awards and tries to discern whether an arbitrator is more claimant or respondent-friendly. In addition, he looks at their backgrounds and contacts colleagues who might have knowledge about the arbitrators. Mr. Solomon is also a member of a claimants bar for securities arbitrations, which also provides information on arbitrators.

In dealing with discovery in securities arbitrations, there are standard discovery guides with which the parties are expected to comply. Attorneys for either party, however, may request discovery materials in addition to that required by the standard discovery guides. During his time at Greenberg Traurig, Mr. Solomon gained familiarity with Morgan Stanley's system for handling discovery matters in arbitrations. With respect to discovery, Morgan Stanley would produce all documents indicated on the discovery guide. In-house counsel would, however, share with Mr. Solomon documents that were not responsive to standard discovery requests. Regarding the arbitrations in question, Mr. Solomon has requested branch managers' compensation information, which is information not included in the discovery guide.

Furthermore, at Greenberg Traurig, Mr. Solomon handled settlement of cases which exposed him to Morgan Stanley's settlement evaluations. He became familiar with the compensation structure at Morgan Stanley and the personalities of the in-house legal department. He also learned what factors in-house attorneys felt was significant in terms of case settlement. Mr. Solomon worked on legal arguments that supported Morgan Stanley's position in the arbitrations. He is now taking opposing legal positions in his representation of clients suing Morgan Stanley. Finally, Ms. Alison Patton, in-house counsel who worked with Mr. Solomon, stated that she would be unlikely to share as much information about Morgan Stanley with future counsel should Mr. Solomon be allowed to bring claims against Morgan Stanley. Mr. Solomon stated that he only had one work-related conversation with Ms. Patton while employed by Greenberg Traurig.

II. Conclusions of Law

In moving for a preliminary injunction, Morgan Stanley argues that the legal representation being provided by Mr. Solomon violates Rule 4.1-9 of the Florida Rules ...

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