By Jonathan Stempel
NEW YORK (Reuters) -The U.S. Department of Labor has been sued by former Morgan Stanley financial advisers for allegedly issuing an illegal advisory opinion sought by the Wall Street bank that could scuttle hundreds of arbitration claims against the bank.
In a complaint filed on Tuesday in Manhattan federal court, the plaintiffs said the Labor Department’s finding that Morgan Stanley’s deferred incentive compensation plan wasn’t an employee benefit pension plan under the federal law known as ERISA, contradicted two court decisions that said the opposite.
The plaintiffs Steve Sheresky, Jeffrey Samsen and Nicholas Sutro, all from Westchester County in New York, said the September 9 opinion was arbitrary and capricious, and if enforced would prevent financial advisers from arbitrating the cancellation of their deferred compensation.
They also said Morgan Stanley was using the opinion as a “sword” in pending arbitrations, to show claims are frivolous and recoup costs for challenging its decisions.
Sheresky and Samsen are among 12 former Morgan Stanley advisers who previously sued the bank for allegedly not paying all their deferred compensation when they left.
Morgan Stanley is not a defendant in Tuesday’s lawsuit. ERISA is the Employee Retirement Income Security Act of 1974.
Neither the Labor Department nor Morgan Stanley immediately responded to requests for comment on Wednesday.
“This case seeks to stop an illegal agency overreach by the Department of Labor by having the court rescind the advisory opinion,” Doug Needham, a lawyer at Motley Rice representing the plaintiffs, said in a statement. “This is exactly what the (federal) Administrative Procedure Act was designed to prevent.”
The case is Sheresky et al v U.S. Department of Labor et al, U.S. District Court, Southern District of New York, No. 25-08935.
(Reporting by Jonathan Stempel in New York. Editing by Mark Potter)
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