By Matias Montillano of Shustak Reynolds & Partners, P.C. posted on Friday, November 9, 2018.

Robert Berry worked as a financial advisor for Wells Fargo Advisors, LLC from 1994 until 2014.  From 2005 to 2014, he participated in the Wells Fargo Advisors Performance Award Contribution and Deferral Plan.  The plan provides retirement benefits to advisors, and some advisors can accrue hundreds of thousands of dollars in deferred compensation.  Advisors can earn deferred compensation based on their performance or certain recruitment incentives. The plan, however, contains a “Forfeiture Clause” under which participants forfeit the unvested portions of their accounts when they leave Wells Fargo.  Certain exceptions to the forfeiture clause apply, such as when the plan participant dies; is laid off; or is at least 50 years old, has worked for Wells Fargo for at least three years, and agrees not to work for a bank, investment advisor, mutual fund, insurance company, or financial planner for three years.  Berry alleges that the forfeiture clause is unenforceable under the Employee Retirement Income Security Act (“ERISA”).  Wells Fargo seeks to classify the plan as a “top hat” plan, available only “for a select group of management and other highly compensated employees.” 

Berry left Wells Fargo after 20 years in 2014, at 62 years old.  He later began working as a financial advisor at another company.  As a result of the forfeiture clause, he forfeited nearly $200,000 of deferred compensation.  Seeking to recover forfeited deferred compensation, Berry brought a claim against Wells Fargo in the South Carolina federal district court on behalf of himself and other similarly situated employees.  He moved for class certification to pursue damages and injunctive relief against Wells Fargo for violations of ERISA.

The district court granted Berry’s class certification motion on October 9.  First, the court held Berry had standing because his injury is redressable through reformation of the plan and payment of benefits under the plan.  Second, the court held the proposed class definition is proper for pursuing the ERISA claim, and the proposed class meets the requirements of Rule 23 (Class Actions) of the Federal Rules of Civil Procedure.  In short, the court granted Berry’s motion to certify class under Rule 23–certifying all participants in the plan since February 1, 2011 who have been denied compensation under the forfeiture clause–and appointed Berry as Class representative. 

Shustak Reynolds & Partners, P.C. focuses its practice on securities and financial services law and complex business disputes. We routinely represent broker-dealers and financial advisors in arbitrations, financial advisor transitions, broker protocol disputes and related matters. Please contact us today for a confidential, complimentary consultation.

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