UBS Prevails in $500,000 Promissory Note EFL Arbitration

December 30, 2013

It's that time of year -- the end of the year -- and lots of folks have happy feet. You're gettin' ready to jump ship. Move on to another, better firm. It's time to tell your jerk of a manager to drop dead and kiss your . . . Well, you got the picture. Of course, there are a few issues keeping you awake at night. What's gonna happen with that six-figure Employee Forgivable Loan balance? Where the hell is that copy of your Employment Agreement and did it have both a Non-Compete and a Non-Solicitation clauses, and, geez, how are you going to ask for a copy without alerting your firm to your plans?

In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in September 2011, Claimant UBS Financial Services Inc. alleged a breach of promissory note by Respondent Atlas and sought $497,844.23 in compensatory damages, accrued interest, post-award interest, costs, and attorneys' fees. In the Matter of the FINRA Arbitration Between UBS Financial Services Inc., Claimant, vs. Gia Gauri Atlas, Respondent (FINRA Arbitration 11-01556, December 12, 2013).

Respondent Atlas generally denied the allegations, asserted various affirmative defenses, and counterclaimed based upon:
  • sex discrimination, 
  • hostile work environment, 
  • racial discrimination, 
  • discharge,
  • constructive discharge, 
  • breach of contract, 
  • breach of the covenant of good faith and fair dealing,
  • tortious interference with prospective business relations, 
  • unjust enrichment, 
  • national origin discrimination, and
  • violations of:
    • the Pennsylvania Human Relations Act, 
    • Philadelphia Fair Practices Ordinance, 
    • Title VII of the Civil Rights Act, and 
    • the Pennsylvania Wage Payment and Collection Law.
Upon the completion of  Respondent's case-in-chief attendant to her Counterclaim and after hearing oral arguments, the FINRA Arbitration Panel granted Claimant UBS's Motion to Dismiss Respondent's Counterclaims on the grounds that Respondent failed to establish a prima facie case. 

The FINRA Arbitration Panel found Respondent Atlas liable and ordered her to pay to Claimant UBS:
  • $497,844.23 in compensatory damages;
  • $33,084 in  accrued interest;
  • $75,000 in attorneys' fees 
Bill Singer's Comment

I offer this arbitration largely to demonstrate the potential breadth of available defenses and/or counterclaims for registered persons embroiled in promissory note repayment cases. Clearly, Respondent Atlas got her money's worth and her lawyer is to be complimented for going the extra mile in articulating his client's bases for seeking an excusal or reduction of the repayment. 

On the other hand, note that despite this virtual kitchen sink of defenses and causes of action, the employer UBS still prevailed; moreover, the Panel dismissed the counterclaims in response to a finding that the legal bases for advancing such claims had not be satisfied.

What was the cost of pursuing the defense against full repayment by Respondent? Well, that's a nuanced answer. For starters, let's imagine that the old rule of thumb was in play here (which is by no means a given), and that UBS was willing to compromise its roughly half a million dollar demand by 20% -- so that would possibly have resulted in a net settlement offer of about $400,000.  Similarly, for the sake of imagining how a typical case initially sets up during the settlement negotiations phase, lets imagine that Claimant offered to repay 20% of the disputed balance -- so that leaves us with a $100,000 Bid versus a $400,000 Ask. That gap may be more like a chasm but, regardless, that's often the space between the adversaries when they first sit down to negotiate a settlement.

Assuming that mediation and settlement talks proceeded, crashed and burned, we find ourselves with a Panel's award of nearly $600,000, and that amount is not parsed over a few years but due immediately with the possible consequence that a failure to honor a FINRA arbitration award could result in a suspension and, thereafter, a Bar.  Of course, lawyers rarely work for free or cheaply, so also impute a legal fee on top of the award.  You could likely posit that fee anywhere between $50,000 to $100,000, if not considerably higher.

Was fighting the good fight worth it?  Alas, that's a personal decision for each litigant. Nonetheless, before you unsheathe your sword and prepare to do battle, consider the disclosed and also the hidden costs.
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