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Morgan Stanley, FA Win Suit Over Annuity Distribution

January 10, 2018

A federal judge in Maryland has ruled in favor of Morgan Stanley and one of its reps in a lawsuit seeking damages as a result of an annuity distribution, InvestmentNews writes.

District Court judge Paula Xinis agreed with the plaintiffs, who alleged they were slapped with $287,000 in tax liabilities after Morgan Stanley advisor Gary Lenet recommended they opt for lump-sum annuity distributions, according to the publication. Brandon Berkenfeld, Barbara Holland-Eytan and Sandra Ricki Diamond, in a suit filed in April 2016, also alleged Lenet "specifically and incorrectly" told them there were no other distribution options available to them, InvestmentNews writes. Xinis ruled Lenet had indeed given "erroneous" and "negligent” advice,” according to the publication.

Nonetheless the judge ruled in favor of Lenet and Morgan Stanley last week because of “contributory negligence” on the part of the plaintiffs, InvestmentNews writes.

Under Maryland state law plaintiffs aren’t permitted to recover damages in such cases, according to court documents cited by the publication. According to Xinis, the plaintiffs didn’t seek independent tax advice on the distribution, even though Lenet had recommended they do so and ignored information about alternative distributions available in the annuity documents, InvestmentNews writes.

Even the forms the plaintiffs filled out to process the lump-sum distribution clearly showed other options as available choices, according to the court order cited by the publication.

A spokeswoman for Morgan Stanley tells InvestmentNews the firm is pleased with the decision, declining further comment. An attorney for the plaintiffs declined comment, citing the likelihood of an appeal on the case, according to the publication.

By Alex Padalka
  • To read the InvestmentNews article cited in this story, click here.