An Alberta judge has found that a brokerage firm did not have just cause to dismiss a top-performing financial advisor, awarding Kurt Soost $2.2 million in damages as a result.

The case, which was heard by Alberta’s Court of Queen’s Bench in 2008, pitted Soost against Merrill Lynch Canada Inc. The court’s decision was released on Oct. 13, 2009.

In August 1998, Soost was recruited by Merrill predecessor Midland Walwyn. At the time, his book of business was between $100 million and $110 million, and he managed to bring between $70 million and $80 million of that to Midland/Merrill.

By the time Soost was dismissed in May 2001, his book was at $150 million. A couple of weeks later he joined Lightyear Capital but only about $10 million of his book followed him over “and he had a major drop in income such that he could no longer afford to remain in the industry and therefore left it Dec. 31, 2001” the court noted.

Soost was terminated in May, the court said, over concerns that he was “he was out of sync with the firm’s policy and direction”; in particular Merrill had concerns about ensuring that Soost sought pre-approvals for various private placements, among other things.

The court decision reports that the Merrill argued that Soost failed “to adhere to the minimum standards required in the brokerage industry and constitute breaches of the employment agreement which destroyed the root of the employment relationship”, and that Soost claimed that the decision to terminate him “was based on erroneous information and assumptions based upon incomplete and inaccurate information.”

Ultimately, Justice C.S. Brooker concluded that there was “some merit or substance to some of the grounds for dismissal alleged by the defendant but not others.”

“The question then becomes whether, having regard to the authorities cited earlier, the defendant has proved there was sufficient basis to summarily dismissal the plaintiff . After much consideration, I have concluded that it has not,” Brooker said. “In my opinion, none of the defaults which I have found either singly or in combination, are sufficient to justify summary dismissal of someone in Soost’s position.”

“To terminate for cause someone in Soost’s position in the financial industry would foreseeably have the effect of mortally wounding that persons’s ability to successfully carry on as an investment advisor. Merrill Lynch knew or ought to have known that. There was no good reason why, once Merrill Lynch had decided to let Soost go, it could not have done so with some minimal notice or allowed Soost to resign of his own accord. The suggestion by the defendant that they had some sort of duty or obligation to the industry to fire Soost rather than to let him resign is not persuasive,” Brooker said the decision.

“But most significantly, in my view, is the fact that despite having reached a consensus after the April 26th meeting that Soost had to go, and within days to dismiss for cause on May 4th, the defendant waited until May 18th to execute its decision to terminate. That delay suggests to me that whatever faults the defendant thought Soost had, they were not sufficient to justify immediate action. And if that is so, there is no reason why the defendant could not have given Soost some notice of his termination,” Brooker added. “The suggestion by Merrill Lynch that it could no longer trust Soost or had questions about his honesty were clearly not so profound or pressing as to cause it to immediately terminate him once it had reached its decision. Instead, it waited almost two weeks to do so.” Also, Brooker notes that there was no evidence that any client suffered any loss as a result of any of the firm’s concerns.

“I am of the view, given Soost’s position and years of service in the industry, that before purporting to terminate him for the defaults it alleged, the defendant should have given him a specific warning to fix these defaults by a certain date failing which he would be terminated,” Brooker said.

As a result, the court concluded that the firm did not have just cause to dismiss Soost, and it set the damages for wrongful dismissal at $2.2 million plus prejudgment interest.

IE