After winning dismissal of a class action claim brought by six former Smith Barney brokers last month, Citigroup is vowing to go after the brokers for legal fees.
After winning dismissal of a class action claim brought by six former Smith Barney brokers last month, Citigroup is vowing to go after the brokers for legal fees.
In dismissing the case, Thomas Banus v. Citi, U.S. District Judge Lewis Kaplan described the suit as "baseless" and "an attempt to use the judicial process for the quite improper purpose of simply stalling [Citi's] effort to collect the money it is owed" from balances due on promissory notes.
"Citi intends to enforce its contractual right to recover attorneys' fees and costs from plaintiffs for pursuing this meritless litigation," Citigroup Inc. spokesman Alexander Samuelson said in a statement.
"It is clear from the terms of the promissory notes they signed that these financial advisers are responsible for reimbursing Citi the hundreds of thousands of dollars the company was forced to incur in defending the lawsuit," he said.
Citigroup would have to file a motion with the court for attorneys' fees.
The firm has not yet made such a request. Mr. Samuelson wouldn't comment on when Citi might file.
Getting hit for costs "is a risk — it's always a risk" in pursuing litigation, said Reno, Nev., attorney Mark Thierman, the lead plaintiff's attorney on the Banus class action case.
Mr. Thierman, who made a name for himself among brokers for successfully suing Wall Street firms for overtime pay, said he will appeal Mr. Kaplan's ruling.
Mr. Banus sued Citigroup in New York federal court in August. An amended complaint in October added five other former Citigroup brokers, who the bank said received signing bonuses ranging from Mr. Banus' $45,675 to as much as $801,546. The plaintiffs sought class action status on behalf of at least 500 brokers employed by Citigroup in the previous six years who executed promissory notes.
They asked the court to rule that they don't owe the money. Newly hired brokers are typically given loans, portions of which are forgiven annually for a number of years. If the broker leaves before the loan is completely forgiven, the remaining portion must be paid back with interest.
Banus called that requirement “unconscionable” in his complaint. He said he shouldn't have to pay all at once the $39,000 left on his forgivable signing bonus loan when he quit in 2006.
Bloomberg contributed to this story
