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

A UBS Promissory Note Arbitration Disclose The Hidden Costs Of Litigation
Written: April 29, 2013

In a Financial Industry Regulatory Authority (“FINRA”) Arbitration Statement of Claim filed in August 2011, Claimant UBS asserted : breach of contract; common count for money lent; and common count for account stated, in connection with the firm’s effort to compel repayment of five promissory notes executed with former-employee Respondent Yrizarry, around April 30, August 9, and October 29, 2010; and January 13, and April 30, 2011.  Claimant sought the principal balance due on the notes of $1,503,120.22 plus interest, costs, and fees.  In the Matter of the FINRA Arbitration Between UBS Financial Services, Inc., Claimant/Counter-Respondent, vs. Nicholas Yrizarry, Respondent/Counter-Claimant (FINRA Arbitration 11-03133, April 25, 2013).

Respondent Yrizarry generally denied the allegations, asserted various affirmative defenses; and Counterclaimed on the basis of breach of contract; fraud; violation of the California Labor Code; and defamation and tortious interference with his client relationships. Yrizaary sought $2,000,000 in compensatory damages, punitive damages, interest, costs, and fees. At the close of the hearing, Yrizarry requested $5,068,323.32 in compensatory damages.

Award

The FINRA Arbitration Panel found Respondent Yrizarry liable and ordered him to pay to UBS:
  • $1,503,120.22 plus post-judgment interest at 10% per annum from April 4, 2013 until paid; 
  • $83,949.96 in accrued interest; 
  • $302,374 in attorneys fees; and
  • $12,722.08 in costs.
Also, the FINRA Arbitration Panel found Counter-Respondent UBS liable and ordered it to pay $79,200.00 in compensatory damages to Yrizarry.

Bill Singer's Comment

For those registered respondents contemplating a defense in a promissory note case that would take the dispute to the mat in the hopes of achieving a favorable FINRA Arbitration Panel's Decision, this may prove to be an instructive arbitration. Assuming that Yrizarry was on the hook for the $1.5 million in principal and some $84,000 in accrued interest, his additional litigation costs were the roughly $302,000 in UBS' attorneys' fee and $13,000 in costs (about $315,000). Taking the $315,000 in lit costs and deducting the off-setting $79,000 in damages that Yrizarry was awarded, the principle involved in fighting over the principal cost Yrizarry about $236,000 net.  Also, keep in mind that Yrizarry likely ran up a considerable legal bill of his own.

The rule of thumb is that good-faith settlement offers from employers in promissory note / Employee Forgivable Loan disputes should provide for something like a 20% discount off the principal in dispute -- admittedly, that's a very, very rough estimate and one easily influenced higher or lower by the facts and circumstances of each case; however, a rule of thumb is what it is. Consequently, if Respondent Yrizarry could have settled this dispute for 80% of the principal due, let's just call that $1.2 million. On top of getting a $300,000 principal discount (and possibly the forgiveness of interest), Yrizarry may well have been able to save nearly $315,000 in avoided fees and costs..  Of course, that's all mere speculation and the parties in this case may never, ever have approached any offer close to an 80% discount; and even if that were on the table, Yrizarry may have sincerely believed that he did not owe a single cent. Given that Yrizarry's Counterclaim sought $5 million in damages, it's pretty obvious that there was more than enough bad blood to go around in this case.

Nonetheless, for those of you planning on donning the armor and going into battle, make sure to add up all the costs.  If you save $20,000 in repaid principal and interest by going to a hearing but your lawyer's bill is for $50,000, that hardly makes sense. Similarly, if there is an 80% of principal offer on the table from your former employer, put a spreadsheet together and figure out the likely future costs and fees involved in rejecting that offer.  Sometimes the math is less favorable than you think -- other times, you may have your eyes opened to the hidden costs and net, net value of a supposed victory.

Also READ:



 
[^top^]

Previous Entries
October 31, 2014
On June 3, 2013, the Securities and Exchange Commission ("SEC") announced the second-largest trading suspension in its history as part of its "Operati... Read On
October 31, 2014
For one reason or another, stockbrokers may not want to maintain their personal accounts at their employer's brokerage firm. Some of the reasons often... Read On
October 30, 2014
As with virtually every job, the practice of law often becomes mind-numbingly boring. Every so often, however, the profession presents you with a fasc... Read On
October 29, 2014
When it comes to in-house compliance and industry regulatory matters, a loan is a loan and a gift is a gift -- and the two have very different meaning... Read On
October 28, 2014
Stockbroker, Compliance, Legal, and Regulatory JobsEmployment Page BrokeAndBroker.com Jobs#wallstreetjobs @brokeandbrokerNOTICE TO EMPLOYERS... Read On
October 27, 2014
They got a name for it: padding the old expense account. The way I see it, whenever some misconduct has an acronym or generally accepted term, it mean... Read On
October 25, 2014
Merrill Lynch, Edward Jones, Large Hotel Man, And Double Charges For A Few Glasses Of WineOctober 24, 2014Voices were raised, a waitress was upset, an... Read On
October 24, 2014
Voices were raised, a waitress was upset, and large man with hotel bar intervened. Now if that doesn't pique your interest, I might as well get m... 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 Counterclaim 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 Commission 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 SIPC IC3 Scottrade Lehman JPMorgan Chase Hertz Insider Trading Bank of America Department of Justice Elles Bribe Auction Rate Securities Raiding Spam Edward Jones Medicare Diabetes Dow Schumer Thain 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 Eligibility 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 Rule 3050 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 Expense Reimbursement FNMA BrokeAndBroke TIC DWI Promissory Notes Suitability Will POA Power of Attorney Casino NSF MF Global Counterfeit Preet Bharara Corzine Hacker RIA Prison Disclosure NASAA Aguilar FCPA Subway Identity Theft Gold Dell Bar Injunction Bank Deutsche Bank Hospital God HSBC Private Placements Eric Stein Wire Fraud CCO Joshua Brown Backstage Wall Street Obstruction of Justice Reuters Retaliation Variable Annuity Arbitraiton Outside Account Options Telephone Wine Social Media ADA Pacifico Non-Prosecution Agreement Confirm Tax Fraud Retirement OBA Equity Indexed Annuities EIA MetLife Continuing Education OIP Tax Liens Willful CE Unregistered Impersonation Annuities BBVA Business Expenses ETF JOBS Act Mail Fraud Parking Variable Annuities Signatures BitTorrent Impersonator Wire Transfer Wire Crowdfunding Nasdaq Away Accounts WSP Laptop Dodd Frank Checks RMBS AML PST Solicited Unsolicited Congress SRO Wife Discretion Non-Solicitation Restaurant Commodities Private Securities Transaction Offer of Settlement Money Market employment jobs Great Recession Chase Investment Services Arrest Barclays Liens Failure To Supervise Apple Time And Price T&P Willfully Husband Letter of Authorization LOA Sexism Debit Card Knight Test Practice Sale Unfair Competition Signature Judgments Undisclosed Settlement Trainee Fee Trust Laser Side Bar Mattera Female Sales Assistant Kennedy Charge Sexist NML Argentina Embezzlement Silver Investor Alert Judgment Bank Fraud Deceased TSSB Mary Jo White Trustee Motion To Dismiss Frumento Conspiracy 6th Circuit Proctor Rule 3040 Class Action Beneficiary NYAG Schneiderman Gallagher White Self Regulation Short Sale Compromise Website TRO Supervision Vacatur SDNY BrokeAndBroker Bill Singer Piwowar Stifel Rule 1122 Article V signature Inside Information VA Regulation SP Customer Rule 3270 Rule 3240 OWB 2Cir Stockbrokers
 
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+