Morgan Stanley Advisers Object to Employee Expense Reimbursement Settlement

Some Morgan Stanley financial advisors have argued against a $10 million employee expense reimbursement, taking issue with the terms.

The objecting financial advisors argued that the $10 million deal is too small of an amount and the release of claims associated with the settlement is too broad considering the relatively low award.

“Morgan Stanley sought to escape massive trial exposure by choosing to negotiate not with the plaintiffs who had progressed to the eve of trial after dozens of motions, twenty depositions, and a quarter million pages of discovery, but with the newcomer who still had all the hurdles to surmount,” the Morgan Stanely former financial advisors argued. “This is the essence of a reverse auction — to bid down to a submarket price with the weaker party.”

Morgan Stanley is a wealth management company that offers wealth management services including investments. Financial advisors with the company reportedly manage $2 trillion in client assets. Although the company may help consumers manage their finances, they may fail to take care of their employees by not reimbursing work expenses.

In California, employers are required to compensate their employees for reasonable business expenses. This includes “all necessary expenditures or losses incurred by the employee” as a result of doing their job.

According to a May 2018 class action lawsuit filed by plaintiff Brandon H., Morgan Stanley violates California law by failing to properly reimburse their financial advisors for business expenses. The company allegedly uses a complicated employee expense reimbursement that makes it hard for employees to get the full compensation they are owed.

Morgan Stanley agreed to settle the class action against them by paying $8.5 million towards unreimbursed expenses and $1.7 million towards future work expenses incurred by the company’s California financial advisors. Although the multimillion dollar deal would compensate a significant number of business expenses, Class Members opposed to the deal argue that this amount would only cover 1.5 to 2.2 percent of unreimbursed expense claims.

“Most comparator cases settled for 25% to 49% of exposure, yielding approximately 200% to 800% more money per class member per month than [plaintiff Brandon’s] settlement,” the advisers said.

Some Class Members also argue that the deal is simply an attempt by Morgan Stanley to do away with another class action lawsuit filed under California’s Private Attorneys General Act (PAGA). Because Morgan Stanley expanded the settlement period from one year to five years, they may be able to escape the higher damages brought forward by the state and financial advisors in the PAGA complaint.

“The parties cannot eviscerate PAGA’s statutory scheme, or frustrate its law enforcement purpose, via private agreement,” the opposed Class Members claim in their objection.

If the settlement is approved, it will benefit a Class of around 2,800 financial advisers and private wealth advisors that have worked for Morgan Stanley in California from 2013 to the present.

The Morgan Stanley Employee Expense Reimbursement Class Action Lawsuit is Case No. 3:18-cv-02835 in the U.S. District Court for the Northern District of California.