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$39 million settlement in stock brokers' wages-and-hours action
Amanda Bronstad
May 13, 2009

LOS ANGELES — A federal judge in Los Angeles has approved a $39 million preliminary settlement to resolve the multidistrict litigation between Wachovia Corp. and more than 10,000 stock brokers who alleged that they were denied overtime pay and other wages.

U.S. District Judge David O. Carter also approved a final settlement in which Prudential Financial Inc., whose retail brokerage division was sold to Wachovia in 2003, agreed to pay $11 million to former stock brokers.

The settlements approved on May 11 are the latest involving overtime allegations brought by stock brokers.

"They're both good settlements, and we're pleased with them," said Jeffrey Smith, a partner at New York's Wolf Haldenstein Adler Freeman & Herz, lead plaintiff's attorney in the Prudential settlement and co-lead counsel in the Wachovia deal with Cotchett Pitre & McCarthy of Burlingame, Calif.

The stock brokers, referred to as financial advisers or financial adviser trainees, alleged that they were misclassified as exempt from overtime under the federal Fair Labor Standards Act (FSLA) and state wage and hour laws.

They also claimed that they were not reimbursed for business expenses and did not receive timely paychecks upon leaving the company.

California stock brokers alleged that they were not given breaks for meals and rest periods as required by state law.

In its motion for preliminary approval, Wachovia, recently acquired by Wells Fargo & Co. Inc., said that the recent change in its corporate ownership would result in changes in policy and practices that could complicate the litigation.

In addition, the economic collapse of the financial industry played a role.

"This settlement was reached in a context of extreme instability, in which the continued viability of once-unquestionably-stable financial institutions, including banks and brokerage houses, is uncertain," both parties said in court documents. "The settlement amount therefore supports preliminary approval."

Wachovia's lawyer, Lorie Almon, a partner in the New York office of Chicago's Seyfarth Shaw, referred calls to a company spokesman.

"We have a pretty solid track record when it comes to wage and hour compliance, so we're just pleased to be able to put this issue behind us," said Tony Mattera, a spokesman for Wells Fargo Advisors.

He said that the economy had little effect on the decision to settle, but added: "Obviously, when you settle you do avoid the expense associated with prolonged class action litigation."

The Wachovia deal includes attorney fees, litigation costs and $15,000 in enhancements paid to more than 30 named plaintiffs. Plaintiffs' attorneys are seeking less than 25% of the gross settlement amount.

The settlement applies to financial advisers and trainees who worked for Wachovia Corp., Wachovia Securities LLC or First Union Securities Inc. Most of the class members must make FLSA claims, but subclasses in the settlement are identified for workers with state claims in California, Illinois, Minnesota, Pennsylvania, New Jersey, New York and Ohio.

A final approval hearing is set for Oct. 5, 2009.

The Prudential deal involved seven class actions filed by various financial advisers and producing managers. The settlement includes 2,329 class members who worked at Prudential before July 1, 2003, when Wachovia acquired the brokerage division.

Bob DeFillippo, a spokesman for Prudential Financial Inc., declined to comment beyond noting that the company is no longer "in that business anymore."