Within weeks of your departure from your former brokerage firm, the first of what are typically three letters arrives. It's sort of friendly and all. “Sorry that you left. You may recall that we gave you a $140,000 Employee Forgivable Loan (‘EFL’) secured by seven years of promissory notes. You left after only five and one-half years. You didn't make it to the sixth anniversary. You owe us a two-year refund in the amount of $40,000.”

You think that you should at least get full credit for the partial sixth year of service, and, at most, owe your former employer $20,000. Of course, you're still fuming at having to pack up and leave. You blame that on lousy management. So you toss the letter into the garbage.

The next letter is less friendly. Perhaps you didn't understand? “You owe us $40,000, plus interest that is now adding up since the date you left. If we go to court, we will seek attorneys' fees. You better call us or send a check within ten days or we're going to pursue our legal remedies.” Again, you shoot a three-pointer into the garbage can.

The third letter is so hot and nasty that it arrives smoking. “You have ten days to pay us in full or we are filing a FINRA arbitration Statement of Claim against you. And, by the way, we may go into court to get a restraining order against you and your current firm because we think you violated your Non-Solicitation Agreement.”

Now your hands are trembling and you opt to phone a lawyer rather than try for yet more garbage-can basketball. You and the lawyer discuss the things that you anticipated. You could offer to settle for 10 percent. They will likely start off at 80 percent. If you want to roll the dice, you could go to a FINRA arbitration hearing and take your chances with the ever-dicey panels. No guarantees either way.

In a recent FINRA arbitration case, Wells Fargo Advisors requested $26,171 plus interest (nearly $600 in past-due interest and some $3 a day going forward) arising out of the breach of repayment of a promissory note executed on October 19, 2007, by former employee Bret Tackett. In the Matter of Wells Fargo Advisors, LLC f/k/a Wachovia Securities, LLC., Claimant, v. Bret Tackett, Respondent (FINRA Arbitration 09-06435, May 25, 2010). After the case was filed but before verdict, the parties reached an agreement, which the arbitrator granted.

Essentially, the former employee agreed to repay $21,000, or $5,171 less than the $26,171 sought by the employer. That is about a 20 percent discount, and is even greater if you factor in the interest that was forgiven. On the other hand, if the former employee fails to pay the settlement in a timely manner, Wells Fargo goes to Plan B, which gives it the right to collect the full balance of $26,171 (minus any payments made) plus thousands of additional dollars in all sorts of expensive fees and costs. The old carrot and stick approach.

For a more dire outcome, consider the FINRA arbitration filed May 28, 2008, in which Banc of America Investment Services (Bank of America's legacy wealth management offering, now Merrill Lynch Wealth Management) sought $35,698 on two promissory notes, plus interest, attorneys' fees and other relief. In the Matter of the Arbitration Between Banc of America Investment Services, Inc. Claimant, v. Mark H. Pollack Respondent (FINRA Arbitration 08-01708, May 24, 2010). The FINRA panel found former employee Pollack liable and ordered him to pay the $35,698 plus $7,535 in interest (plus interest at the rate of 5 percent thereon until the award is fully paid). Respondent was also ordered to pay $14,333 in attorneys' fees and $344 in costs.

As in chess, not all gambits lead to a winning endgame. In this case, not factoring in any legal fees that Pollack may have paid to his own lawyer, his roll of the dice added a whopping $22,212 plus interest above the principal balance of $35,698.

Be careful when you wish for your day in court or arbitration — the bill could be more than you bargained for. Sometimes it just pays to settle. Not always. But sometimes.

Bill Singer is the publisher of RRBDLAW.com and BrokeAndBroker.com