A superior court judge in California has ruled for Smith Barney in a case related to a deferred compensation plan that has been the subject of several lawsuits from brokers who formerly worked for the firm.

In the case of David Schachter v. Travelers Group (then the parent of Smith Barney), Judge Victoria Chaney of Los Angeles Superior Court ruled against Schachter, who had worked as a broker at Smith Barney until 1996. The case was dismissed, with Chaney ruling that the firm’s capital appreciation plan (CAP)–a deferred compensation arrangement that lets employees purchase Citigroup stock through payroll deductions–is not unlawful and does not violate labor laws.

"We’re pleased with the decision and that we continue to believe CAP is upheld by applicable law," said a Smith Barney spokeswoman.

Attorney Ashley Posner of Los Angeles, who represents Schachter, says he will be appealing the decision. "It’s our position that the ruling is erroneous substantively and procedurally," he says. "I’m confident that we’ll be able to come back and get the decision reversed."

For Smith Barney, it was a win after a few consecutive decisions against the firm. An Illinois judge ruled in January that the brokerage firm’s plan did violate state wage laws, and a New Jersey judge also recently started hearing arguments asserting the same thing.

Brokers who previously worked for Smith Barney have brought a number of lawsuits against the firm in the last few years. Their attorneys have argued that the schedule on which payroll deductions turn into shares–which involves withholding of compensation on a deferred basis–is unfair.

SB's CAP has been under fire for quite some time. Every employee participates through fixed, company-determined deductions. The deductions are used to purchase restricted stock at a discount rate. After two years, the restricted shares turn into Citigroup common shares. The problem lies with the restricted shares: If an employee leaves the company voluntarily or is fired with cause, he forfeits them. The idea is to discourage employees from leaving the firm, but many construe the practice as holding employees’ money hostage.

However, Chaney, in her ruling, disagreed entirely. "When class members voluntarily terminated their employment, they were not forfeiting unpaid wages. Rather, it was a forfeiture of restricted shares purchased with wages," she wrote. "Moreover, there are sound policy reasons underlying the forfeiture clause–to encourage employees to remain in their position and discourage frequent turnover."