An irreverent Wall Street Blog
by Bill Singer
 
Join BrokeAndBroker blog on Facebook  Follow the BrokeAndBroker blog on Twitter  Connect with BrokeAndBroker on LinkedIn  Join Bill Singer on Google+  Subscribe to RSS Feed

UBS Exposes Its Frivolous Briefs In $21 Million FINRA Customer Arbitration
Written: May 10, 2012


People in their underwear try clothes at a Des...

Far more briefs in this case than we cared to see

In a Financial Industry Regulatory Authority (“FINRA”) Arbitration Statement of Claim filed in August 2010, Claimants Rivadavia and Gerson alleged breach of fiduciary duty; unsuitability; misrepresentation; fraud; churning; negligence; and gross negligence in connection with their purchases of Class A and C mutual funds, among which were the Templeton BRIC Fund, the Franklin India Fund, the Templeton Latin American Fund, the Templeton Eastern Europe Fund, the Templeton Asia Growth Fund, the Templeton/Franklin Emerging Market Fund, and the Franklin Templeton China Fund. Claimants sought $7,000,000.00 in compensatory damages, $14,000,000 in punitive damages, interest, attorneys’ fees; costs; and expenses. In the Matter of the FINRA Arbitration Between Rivadavia S.A., a British Virgin Islands Company and Gerardo Gerson, Claimants, vs. UBS Financial Services, Inc. and Olga Nobrega Pereira, Respondents (FINRA Arbitration 10-03793, May 4, 2012).

Respondents UBS and Pereira generally denied the allegations and asserted various affirmative defenses.

Directed Verdict

During the final hearing and at the conclusion of Claimants’ case-in-chief. Respondents moved for a directed verdict, which the FINRA Arbitration Panel granted. Following that decision, the Panel allowed Claimants to introduce into evidence material that was not presented during their case-in-chief (such evidence may have been reserved for cross or rebuttal during Respondents’ case, if at all). With that expanded record, the Panel afforded Claimants’ attorneys the opportunity to cite to any evidence that would negate the directed verdict.  Following such an opportunity, the Panel confirmed its prior ruling in favor of the Respondents.

Expungement

During the final hearing and after the Panel granted Respondents’ Motion for a Directed Verdict, Respondent Pereira requested the expungement of the arbitration from her Central Registration Depository (the “CRD”) record.  Also, Respondents requested their costs and fees.  Claimants objected to both requests. The Panel determined that they would have separate hearings on Respondent Pereira’s expungement request and Respondents’ requests for costs and fees.

Briefs Galore

In its Brief In Support of its Application for an Award of Attorneys’ Fees and Costs of Litigation, Respondent UBS asserted, among other things, that

  • Claimants filed and prosecuted a frivolous claim;
  • at the time of filing the Statement of Claim, Claimants’ positions at UBS had total profits of $3,500,000.00;
  • Claimants still held $3,500,000.00 worth of the mutual funds at issue;
  • Respondents incurred at least $87,993.00 in attorneys’ fees, travelling, translation, and expert witness costs in defending the alleged frivolous claims; and
  • FINRA Code of Arbitration Procedure  Rule 12212(a) authorizes the Panel to assess attorneys’ fees, costs and expenses as a sanction for failure to comply with any Code provisions or Panel orders.

In Claimants’ Brief on the Tribunal’s Lack of Authority to Award Sanctions for Bringing a Claim In Bad Faith and Frivolous Litigation, it was asserted, in part, that FINRA Arbitration Panel lacked authority to award sanctions under the parties’ Submission Agreements under the Arbitration Code, and New York law. Moreover, Claimants asserted that the Panel had improperly carried out its powers applying procedural rules and mechanisms unknown to Claimants, and failed to advise Claimants of the rules applicable to the proceedings.

In its Reply to Claimants’ Brief on Attorneys’ Fees, Respondent UBS argued that cited caselaw allowed arbitration panels to award legal fees where both parties requested attorneys’ fees.  Further, UBS asserted  that the Panel should reject Claimants’ argument that FINRA rules do not expressly include any language regarding sanctions for bad faith pleading and that the absence of such express language precludes the Panel’s ability to award the specific sanctions sought.  To the contrary, UBS claimed that New York courts have recognized an arbitration panel’s inherent powers to sanction frivolous and bad faith behavior in arbitration. Finally, UBS characterized as frivolous, Claimants’ grievances concerning the propriety of the FINRA arbitration process and the Panel’s decisions.

Respondent Pereira’s Reply Brief adopted the positions of Respondent UBS and added that the Panel’s decision to grant a directed verdict is a substantive ruling on the merits and therefore her expungement is warranted.

In Claimants Brief on the Tribunal’s Lack of Authority to Award Attorneys’ Fees after Ruling on a Motion for a Directed Verdict, Claimants asserted that the FINRA Arbitration Panel had

  • deprived them of due process; and,
  • no authority to interpret the FINRA Code to determine whether to award attorneys’ fees, such determination being within the sole province of the courts.

Respondent UBS’s Brief In Support of Its Application for an Award of Costs of Litigation asserted that FINRA Rules expressly authorize panels to allocate among the parties FINRA fees, costs and expenses of litigation.

Decision

After hearing oral arguments, the Panel issued an order denyingRespondents’ Application for an Award of Attorneys’ Fees.  Thereafter, Respondent Pereira withdrew her request for expungement.

Finally, the Panel confirmed that Respondents’ Motion for a Directed Verdict was granted, Claimants; claim was dismissed with prejudice, and Claimants are jointly and severally liable and ordered to pay to Respondent UBS $92,847.00 in costs that exclude member fee.  Inherent in that award is the denial of all of Claimants’ damage requests and Respondents’ demand for attorneys’ fees.

Bill Singer’s Comment

I tend to doubt that we’ve heard the last of this case and suspect that Claimants may file a Motion to Vacate based upon many of the points that they raised before the Panel.  On the other hand, having filed a claim seeking $21 million in damages, not surviving a motion for a directed verdict (an exceptionally rare occurrence in FINRA customer arbitrations), and getting hit with nearly $93,000 in costs, perhaps this case will die a tortured death.  Who knows — it will be interesting to see what the future holds.

Among the more curious aspects of this case was this sentence in the Arbitration Decision:

Claimants further stated that the Panel improperly carried out its powers applying procedural rules and mechanisms unknown to Claimants, and failed to advise Claimants of the rules applicable to the proceedings.

You don’t see that one everyday.  It’s sort of tough to figure out just what the hell that sentence is all about because it could mean that either the Claimants are complaining that the Panel applied unique and non-codified rules and “mechanisms” to the adjudication of this case; or, that Claimants were unfamiliar with FINRA’s arbitration rules and procedures and had expected the Panel to explain the procedures being used. I’m guessing that the gist of this issue is in the former rather than latter camp, but that’s only speculation.

With the issuance of this Panel’s decision, this case finds itself in the odd posture of Claimants seeking millions in damages, having their case dismissed without the Respondents putting on their full fledged defense, and suffering the ignominy of getting dinged for some $93,000 in costs. If filed as a contingency case, the Claimants must surely be unhappy with not only losing the case but having to dig into their pockets for the costs; if handled on a billable fee basis, the Claimants must surely feel that insult has been added to injury.


 
[^top^]

Previous Entries
April 22, 2014
Stockbroker, Compliance, Legal, and Regulatory JobsEmployment Page BrokeAndBroker.com Jobs#brokeandbroker #billsinger #wallstreetjobs&n... Read On
April 21, 2014
I fully appreciate that FINRA has a legitimate concern about industry personnel impersonating customers. I also understand why it is appropriate in th... Read On
April 19, 2014
Will This Tax Season Lien On You?April 18, 2014We just made it through another tax season. The good news is that you filed and are fully paid up -- or... Read On
April 18, 2014
We just made it through another tax season. The good news is that you filed and are fully paid up -- or, the bad news is that you didn't file or you h... Read On
April 17, 2014
In this digital age there are still folks who physically cut-and-paste. How quaint. Of course, quaint or not, when you start using the terms "cut-and-... Read On
April 16, 2014
Here's an interesting cocktail of facts: an IRA, a mother, powers of attorney, and a stockbroker son. Add into that mix questions about whether a $60,... Read On
BrokeAndBroker.com Job Search
Related Topics
Tag Cloud
Internet FINRA Bear Stearns Bloomberg SEC NASD NYSE Money Laundering Due Diligence Waiver Forbes China Chepucavage Broy Woody Allen Madoff NAC NPR Marketplace Stanford UBS Ketchum Antitrust NASDAQ RRBDLAW Schapiro Bill Singer BrokerAndBroker USERRA Brokeandbroker.com Morgan Keegan Arbitration BrokeAndBroker.com Khuzami BrokeAndBroker Aleynikov Goldman Sachs brokeandbroker Promissory Note U4 Bill SInger EFL CFTC Huffington Post Flash Crash arbitration RBC RRBDLAW.com Ponzi Affinity Fraud Wachovia Raymond James BrokeandBroker.com Expungement Fraud Securities Fraud Outside Business Activity Registered Rep Magazine FOREX BrokerAndBroker.com FBI Banc of America Pro Se Supreme Court Morgan Stanley Smith Barney E*Trade Margin email Galleon Penson U5 Defamation Protocol Wells Fargo Punitive Damages Citigroup Merrill Lynch ARS Employee Forgivable Loan Street Legal Morgan Stanley AWC Fidelity Bankruptcy Broke And Broker HFT David Sobel Day Trading Ameriprise Commissions Spouse Schwab CRD Kenneth Starr IRS CNBC Complaint ATM Skimming Hacking Phishing Malware Naskovets Poteroba Koval Lincoln Financial Selling Away Outside Business Activities Rakoff 2nd Circuit Second Circuit IRA 401k Forgery Tax RRBDlaw.com Email Netschi Moore Whistleblower Street Sweeper Tran Bharara Facebook Online Severance Bonus Eligibility Rule TD Ameritrade Hedge Fund SAC 1099 Smith Barney Lehman Brothers IC3 Scottrade Lehman JPMorgan Chase Hertz Insider Trading Bank of America Elles Bribe Auction Rate Securities Raiding Spam Edward Jones Medicare Diabetes Dow Schumer Walter Bid Rigging Real Estate Discrimination Wall Street Statutory Disqualification Form U4 Form U5 Indictment Boyland DOJ Corruption bill singer FTC Do Not Call FINRA Arbitration Costa Rica Settlement LIBOR Varney Plea Rule 8210 RRBDlaw Appeal Fowler LPL Johnson US Airways Reg D MSSB Vault Loan SunTrust Discovery Employment Rosenthal Recruiting Lawyer Trading Platform JP Morgan Employment Tuesday Wrongful Termination Bank Guarantee WaMu Solicitation REIT Martin Credit Cards Away Account Credit Repair PN Advisor Placement Group Forex Mortgage Private Placement Moon Merrill Anderson Exam Lee Borrowing Tax Lien Conversion Oppenheimer Wedbush Felony Misdemeanor Expenses ING Lien OTR Estate Jobs Florida Credit Card Elderly Flash Drive Annuity FNMA BrokeAndBroke TIC DWI Promissory Notes Suitability Will POA Power of Attorney Casino NSF MF Global Counterfeit Preet Bharara Corzine Hacker Prison NASAA Aguilar FCPA Identity Theft Gold Dell Bar Injunction Bank Deutsche Bank God HSBC Private Placements Eric Stein Wire Fraud CCO Joshua Brown Backstage Wall Street Obstruction of Justice Retaliation Variable Annuity Outside Account Options Telephone Wine Social Media ADA Pacifico Non-Prosecution Agreement Confirm Tax Fraud Retirement OBA Equity Indexed Annuities EIA MetLife Continuing Education Impersonation Annuities BBVA Business Expenses OIP ETF JOBS Act Mail Fraud Parking Variable Annuities Signatures BitTorrent Wire Transfer Wire Crowdfunding Nasdaq Away Accounts WSP Laptop Dodd Frank Checks PST Solicited Unsolicited Congress SRO Wife Discretion Non-Solicitation Restaurant Commodities Private Securities Transaction Offer of Settlement employment jobs Great Recession Chase Investment Services Barclays Willful Apple Time And Price T&P Husband Letter of Authorization LOA Sexism Knight Test Practice Sale Unfair Competition Signature Judgments Undisclosed Settlement Trainee Fee Trust Laser Side Bar Mattera Female Sales Assistant Kennedy Sexist Argentina Judgment Bank Fraud TSSB Trustee Frumento 6th Circuit Proctor Beneficiary NYAG Schneiderman Gallagher White Compromise Website Supervision Piwowar Tax Liens signature VA
 
Email Bill Singer Connect with Bill Singer on Facebook Follow Bill Singer on Twitter Link up with Bill Singer on LinkedIn Join Bill Singer on Google+