Securities Industry Commentator by Bill Singer Esq

Plaintiff Erin Daly brings this action against her former employers, Defendants Citigroup, Inc., Citigroup Global Markets Inc., and Citibank, N.A. ("Defendants" or "Citi"), alleging that Defendants discriminated against her on the basis of her gender and retaliated against her after she complained about that discrimination and unrelated securites-law violations perpetrated by Defendants. Now before the Court are Defendants' motions to (1) compel arbitration and (2) dismiss Plaintiff's Sarbanes-Oxley whistleblower claim for lack of jurisdiction and/or failure to state a claim pursuant to Federal Rule of Civil Procedure 12 (Doc. No. 20.) For the reasons set forth below, the Court grants Defendants/ motions in their entirety.

[P]laintiff was fired in December 2014, but did not file her complaint for retaliation for two years, well after the 180-day filing window that followed the alleged retaliation.

Plaintiff responds that because she continues to experience harm as a result of Defendants' filing of a negative U5 - which is accessible to potential employers via the FINRA database - she is suffering from a continuing violation for which the 180-day limit has not yet run. But while the continuing violation doctrine may function in narrow circumstances to allow courts to consider a mix of timely and time-barred conduct as part of one violative pattern of activity, see Gonzalez v. Hasty, 802 F.3d 212, 220 (2d Cir. 2015), that doctrine does not apply to the discrete acts at issue in retaliation cases - in this case, Plaintiff's alleged exclusion from certain meetings, ultimate termination, and the filing of a retaliatory U5. . .

make it clear that ʺ[t]he boys were in charge.ʺ  Id. ¶ 93; J. App. 106 (emphasis omitted). 

The plaintiff further alleges that her supervisor, James Messina, ʺconstantly demanded that [she] disclose material non‐public information of which he knew she was in possessionʺ so that ʺhe could pass the information along to his favored clients.ʺ  Id. ¶¶ 121‐22; J. App. 110.  On November 19, 2014, Daly conveyed those accusations to Citi attorneys and human resources employees.      

On December 1, 2014, less than two weeks later, Daly was notified that she was being terminated.  The defendants later filed a Uniform Termination Notice for Securities Industry Registration Form (ʺForm U‐5ʺ) with the Financial Industry Regulatory Authority (ʺFINRAʺ), as required when a registered representative of a firm departs therefrom for any reason. It contained assertions that, among other things, the plaintiff had been late to work and had mishandled confidential information.  The plaintiff asserts that these statements are ʺfalse, malicious, and defamatory.ʺ  Id. ¶¶ 36‐38; J. App. 17‐18.  Because the plaintiffʹs Form U‐5 is available in the FINRA database, which allows FINRA members to search for information about individual financial professionals, the plaintiff alleges that the defendantsʹ statements continue to have an adverse impact on her employment opportunities.

The plaintiff‐appellant, Erin Daly, is a former employee of Citigroup Inc., Citigroup Global Markets, Inc., and Citibank, N.A., the defendants‐appellees.   She brought suit against them in the United States District Court for the Southern District of New York alleging gender discrimination and whistleblower retaliation claims under several local, state, and federal statutes, including the 18‐665 Daly v. Citigroup Inc., et al. 2 Dodd‐Frank and Sarbanes‐Oxley Acts.  In response, the defendants filed a motion to compel arbitration and to dismiss the plaintiffʹs claims, arguing that each of the plaintiffʹs claims, with the exception of her Sarbanes‐Oxley claim, was subject to mandatory arbitration under her employment arbitration agreement, and that her Sarbanes‐Oxley claim should be dismissed for lack of subject matter jurisdiction.  The district court (Richard J. Sullivan, Judge) issued an opinion and order granting the defendantsʹ motion in its entirety.  On appeal, the plaintiff argues that the district court erred in dismissing her Sarbanes‐Oxley claim and compelling arbitration of the remainder of her claims.  We disagree.  The district court appropriately compelled arbitration of all but the plaintiffʹs Sarbanes‐Oxley claim, including her Dodd‐Frank whistleblower retaliation claim, because her claims fall within the scope of her employment arbitration agreement and because she failed to establish that they are precluded by law from arbitration.   The plaintiffʹs Sarbanes‐Oxley claim was also properly dismissed because the district court lacked subject matter jurisdiction over it inasmuch as the plaintiff failed to exhaust her administrative remedies under the statute.  Accordingly, the district courtʹs order is:  AFFIRMED.     

[C]arryl held himself out as an investment advisor to his victims and operated Carryl Capital Management (CCM), an investment management firm with offices in New York City.  CCM maintained a website that purported the firm adhered to rigorous risk control measures, and was dedicated to achieving the investment goals for its clients.

In or about February 2015, Carryl induced a victim identified as "M.G." to hand over money which he promised to invest in stocks. Over the course of two years, M.G., who was Carryl's childhood friend and a retired nurse living in North Carolina, wired more than $90,000 to an account controlled by Carryl, based on Carryl's misrepresentations that M.G.'s money would be used to purchase stocks on M.G.'s behalf. Similarly, in or about May 2015, Carryl solicited victims "W.B.," a retired, decorated United States Air Force veteran, and his wife "A.B.," both of North Carolina, to invest approximately $350,000 in a purported investment fund that was managed by Carryl. To induce the retired couple to part with their money, Carryl claimed that he was a successful investment adviser who managed investments for the country of Saudi Arabia and that he was friends with wealthy celebrities.  

According to court records, rather than invest the victims' funds as promised, Carryl used the money to pay for personal and other expenses, to repay his other victims other misconduct, and to make substantial cash withdrawals.

Unbeknownst to his victims, Carryl was being investigated and ultimately was convicted of federal wire fraud charges related to a separate investment scheme at the same time he was defrauding his victims in North Carolina. Carryl was sentenced in August 2017 by a federal judge in New York to 12 months and one day in prison for the other fraud.  After his sentencing but before he reported to the Federal Bureau of Prisons to begin serving his sentence, Carryl continued to be in contact with W.B., assuring W.B. that his investments were doing ok, all the while failing to disclose any information about his conviction or his impending report date to the Federal Bureau of Prisons.   

[B]eginning in April 2014, Gallego began servicing the Capital One accounts of an elderly Austin couple.  Gallego told one of her victims that if the spouse should die, another family member could take control of the money in their bank account-approximately $4.4 million. In September 2016, the victim took $400,000 and opened up an account at Wells Fargo Bank with Gallego's assistance.  Over the next two weeks, Gallego spent $94,779.13 on personal and family expenditures including a $50,000 wire transfer to Bancolombia on September 28, 2016, and a $20,586.81 online credit card payment to Chase Bank to an account in the name of her mother.  Wells Fargo closed that account on suspicions of elder abuse.

Gallego and her victim subsequently opened another joint checking account, this time at J.P. Morgan Chase (Chase Bank).  Gallego told a Chase Bank employee that she was her victim's caretaker and a stay-at-home mother, which was false.  Gallego then opened up a separate individual bank account at Chase Bank.  Between October 14, 2016 and April 20, 2017, Gallego's victim withdrew $1.2 million from the joint Capital One account via cashier's checks with the understanding that Gallego would deposit those funds into their joint account at Chase Bank for investment purposes.  Instead, Gallego deposited those checks into her own Chase Bank account and used the money for personal expenses, including purchasing a Range Rover Sport HSE, shopping, a Hawaiian vacation, making home improvements including a pool, making mortgage payments, paying off family member's credit card balances, and purchasing a VW Passat for her parents.

[I]COBox raised funds in 2017 to develop a platform for initial coin offerings by selling, in an unregistered offering, roughly $14.6 million of "ICOS" tokens to over 2,000 investors. The complaint alleges that defendants claimed the tokens would increase in value upon trading and that ICOS token holders would be able to swap them at a discount for other tokens promoted on the ICOBox platform. According to the complaint, the ICOS tokens are virtually worthless. The complaint further alleges that ICOBox failed to register as a broker but acted as one by facilitating initial coin offerings that raised more than $650 million for dozens of clients.

• Securities Industry Commentator
• Bill Singer