Morgan Stanley Faces Suit Over Evidence
Morgan Stanley Faces Suit Over Evidence Fri May 6, 4:31 PM ET
NEW YORK - A Florida law firm has sued Morgan Stanley, seeking $100 million in damages from the Wall Street firm for failing to provide disgruntled clients with evidence that may have been relevant in hundreds of past arbitration cases.
The purported class-action suit comes in the wake of Morgan Stanley's acknowledgment last month that it has found electronic tapes that potentially could contain documents of interest to plaintiffs who claim they received faulty stock-research and investment advice from Morgan Stanley.
The lawsuit, filed last week in a Florida court and served to Morgan Stanley on Thursday, alleges that the Wall Street firm violated contracts with clients by not giving them access to the recently discovered documents. It seeks to represent as a class all people who filed arbitration claims against Morgan Stanley since 1999.
Darren C. Blum, the Coral Springs, Fla., lawyer whose firm filed the suit, said he has signed up "dozens" of clients but sees the class-size ultimately expanding to about 1,000.
Morgan Stanley spokeswoman Andrea Slattery said Friday that the firm considers the suit to be "entirely without merit" and expects it to be dismissed.
"We made a good-faith effort to notify litigants and regulators that there may — underscore may — be additional responsive e-mails, and the result is a class-action lawsuit," Slattery said.
In addition to the $100 million in compensatory damages and unspecified
punitive damages, the lawsuit seeks to reopen cases that New York Stock
Exchange and NASD arbitration panels have ruled on involving Morgan Stanley since 1999.
Morgan Stanley said it recently discovered the potential evidence as it reviewed its e-mail-retention policies as part of financier Ronald Perelman's fraud suit against Morgan Stanley.
In a letter last month to lawyers who had represented plaintiffs in arbitration cases, an outside attorney for Morgan Stanley wrote that the firm "has recently come to appreciate that there are additional sources that might contain additional responsive e-mail. ... It will take an as-yet-unknown period of time to determine if there is e-mail or other electronic data from those sources" that should have been turned over during the discovery process in the arbitration cases.
The letter outraged some plaintiffs' attorneys, who say they long-suspected that Morgan Stanley wasn't being forthcoming with disclosures.
"Morgan Stanley's actions demonstrate a history of discovery abuse preventing plaintiffs from obtaining a full and fair hearing," the lawsuit asserts. "Morgan Stanley has abused the arbitration process for years, and has violated the discovery rules repeatedly."
Shares of Morgan Stanley fell 20 cents to close at $50.05 Friday on the New York Stock Exchange.