The U.S. Department of Labor is facing a lawsuit from three former Morgan Stanley financial advisers who claim the agency issued an unlawful advisory opinion that could derail hundreds of arbitration cases against the Wall Street bank.
The complaint, filed Tuesday in Manhattan federal court, alleges that the Labor Department’s recent finding — determining Morgan Stanley’s deferred incentive compensation plan does not qualify as an employee benefit pension plan under the Employee Retirement Income Security Act (ERISA) — directly contradicts prior court rulings.
Ex-Advisers Say Opinion Was “Arbitrary and Capricious”
The plaintiffs, Steve Sheresky, Jeffrey Samsen, and Nicholas Sutro, all from Westchester County, New York, argue that the Department of Labor’s September 9 opinion was “arbitrary and capricious.”
They claim that enforcing the advisory opinion would prevent former financial advisers from arbitrating disputes over the cancellation of deferred compensation.
The trio also accused Morgan Stanley of exploiting the ruling “as a sword” in ongoing arbitration cases to suggest that advisers’ claims lack merit and to justify recovering costs from those who challenge its compensation decisions.
Sheresky and Samsen are among a dozen former Morgan Stanley advisers who have already filed separate suits against the firm, alleging it withheld portions of deferred compensation after they departed the company.
Morgan Stanley Not Named as Defendant
While the Labor Department and Morgan Stanley are central to the dispute, only the federal agency is named as a defendant in this particular case.
Morgan Stanley has not been accused of wrongdoing in this new filing.
The lawsuit centers on whether the Labor Department’s decision overstepped its authority under ERISA — the 1974 law governing private sector retirement and health plans.
Neither the Labor Department nor Morgan Stanley immediately commented on the litigation.
Plaintiffs Accuse the Agency of “Overreach”
“This case seeks to stop an illegal agency overreach by the Department of Labor by having the court rescind the advisory opinion,” said Doug Needham, a lawyer with Motley Rice who represents the plaintiffs.
He added, “This is exactly what the (federal) Administrative Procedure Act was designed to prevent.”
The plaintiffs are asking the federal court to void the opinion and reaffirm earlier judicial decisions that recognized Morgan Stanley’s deferred compensation program as falling under ERISA’s protections.
Case Information
The case is Sheresky et al v. U.S. Department of Labor et al, filed in the U.S. District Court for the Southern District of New York, under case number 25-08935.
