Former Morgan Stanley financial advisers have sued the U.S. Department of Labor for issuing an opinion that could impact arbitration claims against the bank. The opinion contradicts court decisions, preventing advisers from arbitrating deferred compensation cancellations. The advisers argue the opinion is arbitrary and capricious, and Morgan Stanley is using it to dismiss claims.

Plaintiffs Steve Sheresky, Jeffrey Samsen, and Nicholas Sutro claim the Labor Department’s opinion would prevent financial advisers from arbitrating deferred compensation cancellations. They argue Morgan Stanley is using the opinion to label claims as frivolous and recoup costs. Sheresky and Samsen previously sued the bank for unpaid deferred compensation.

The lawsuit does not include Morgan Stanley as a defendant. The Employee Retirement Income Security Act of 1974 (ERISA) is at the center of the dispute. The Labor Department and Morgan Stanley have not yet responded to requests for comment. The plaintiffs seek to rescind the advisory opinion through legal action.

The case, titled Sheresky et al v U.S. Department of Labor et al, is ongoing in the U.S. District Court for the Southern District of New York. The plaintiffs are represented by Doug Needham from Motley Rice. The lawsuit aims to challenge the Department of Labor’s advisory opinion and prevent what the plaintiffs see as an illegal agency overreach.

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