UPDATE: Court Confirms UBS Promissory Notes Arbitration Citing Delays And Doctor's Note

January 6, 2020

Our publisher Bill Singer loves to spin a good yarn. Some say Bill is one of Wall Street's great raconteurs. Some say he's just a loud-mouth pain in the ass. Frankly, there are those who say he's all of that, but, you know, to each his own, right? In today's blog, Bill regales us with yet another oddball tale from the annals of FINRA's arbitration forum. This time we are asked to consider a dispute involving seven promissory notes amounting to just shy of $800,000. On the Street, they don't give out such big bucks to deadbeats, so the recipient was likely among UBS's top producers. And if the Respondent in today's featured arbitration was sharp enough to earn the underlying loans, then he's probably going to do everything he can to fight his former employer's effort to obtain repayment. Sadly, as much as Bill would love to add his own color to this story, the arbitrators and a federal judge did such a great job penning their decisions that there's not much left for him to do. On the other hand, Bill did add some fun music videos from Jackson Browne, Humble Pie, and the Thompson Twins. Now that's quite the amalgamation!

Case In Point

In a FINRA Arbitration Statement of Claim filed in March 2016, Claimants UBS asserted breach of contract attendant to Respondent Walzer's alleged failure to repay seven promissory notes. In addition to interest, fees, and costs, Claimants sought $791,265.94 in compensatory damages representing the following notes and their principal balances due:

Note 1: $331,566.19
Note 2 : $79,092.89
Note 3:    $3,535.52
Note 4:    $6,068.37
Note 5:    $6,520.00
Note 6: $168,787.14
Note 7: $195,695.83

At the end of the hearing, Claimants specified that in addition to the previously requested compensatory damages, they be awarded $43,566.66 in interest; and $57,084.88 in attorneys' fees and costs. In the Matter of the Arbitration Between UBS Financial Services Inc. and UBS Credit Corp., Claimants, v. Howard Walzer, Respondent (FINRA Arbitration Decision 16-00888)

Respondent Walzer generally denied the allegations, asserted various affirmative defenses, and filed a Counterclaim asserting fraud in the inducement; misrepresentation; breach of the standards of commercial honor and equitable principles of trade; and slander and defamation. Walzer sought $1,000,000 in compensatory damages plus costs and attorneys' fees; and a declaration that the Notes were invalid and unenforceable. 

Postponed, Postponed, Postponed, Postponed . . . Postpone?

After Respondent was granted four postponements of the final hearings, he submitted a fifth postponement request on February 22, 2019, which was 13 days prior to the hearing date and 120 days after the parties were notified of the scheduled hearing dates. The fifth request was accompanied by what the FINRA Arbitration Decision characterizes as "a brief doctor's note which stated Respondent was unable to focus and concentrate and unable to remain in a sitting position." The arbitrators denied the fifth postponement but accommodated Respondent Walzer by allowing him to testify from his home via video conferencing with his lawyer expected to attend the hearing in person.

Funny thing about accommodations and expectations

As noted in the FINRA Arbitration Decision:

Respondent's counsel submitted yet another postponement request on March 1st, 2019, one business day prior to the hearing date. This request included previously unsubmitted records of medical treatment and a description of the drug Respondent alleged was causing him difficulties in vision and focus. The Panel declined to consider this late postponement request prior to the hearings. 

At the outset of the hearing, both Respondent and Respondent's counsel attempted participation via video conferencing but, due to technical issues, the Panel requested Respondent's counsel appear in person. Counsel arrived approximately two and a half (2 1/2) hours after the hearing was scheduled to begin. 

At the hearing, Respondent's counsel repeatedly asserted Respondent was unable to participate in the hearing and again requested the Panel consider the Motion made March 1st, 2019, together with the medical records then submitted. 

The Panel reviewed the medical evidence presented and made inquiries of Respondent. The medical treatment summaries provided were incomplete (only one page was presented although that one page indicated "Page 1 of 4") and made no reference to the symptoms Respondent was alleging, but rather stated that as recently as February 2019, less than a month prior to the hearing date, Respondent was alert and conversant. However, Respondent testified he had been experiencing symptoms since November 2018. 

The Panel determined that neither the medical records nor the description of the drug side effects provided by Respondent's counsel supported Respondent's assertions. The Panel took evidence and testimony from both parties on Claimants' initial claim. 

Respondent presented no evidence that the balances due on the Notes were not accurate and payable, but requested offset as a result of the allegations made in the Counterclaim, and relief from liability based on several technical issues. 

At the conclusion of the presentation of evidence and testimony on Claimants' claim, Respondent's counsel refused to proceed with the allegations made in Respondent's Counterclaim and instead proposed the Counterclaim be severed from the initial claim with the provision that this Counterclaim be allowed to be considered at a future date. FINRA regulations require that this Counterclaim be filed as a new claim, subject to all filing and other fees. Claimants agreed and further stipulated that they will not assert any Statute of Limitation defenses on the claims asserted in the Counterclaim.


The FINRA Panel of Arbitrators found Respondent Walzer liable to and ordered him to pay to Respondents UBS  $791,265.94 in compensatory damages. plus $43,566.66 in pre-judgment interest and $37.15 per diem in post-judgment interest, and $57,084.88 in attorneys' fees and costs. The Panel severed Respondent's Counterclaim without prejudice.

SDFL Order Confirming Arbitration Award

UBS petitioned the United States District Court for the Southern District of Florida ("SDFL") to confirm the FINRA Arbitration Award, which Walzer opposed in a pro se capacity. UBS Financial Servivces Inc. and UBS Credit Corp., Plaintiffs, v. Howard Walzer, Defendant (Order Confirming Arbitration Award, SDFL, 19-CV-81161) 
http://brokeandbroker.com/PDF/WalzerSDFLOrder191227.pdf The SDFL Order provided this additional context:

Defendant sought and obtained four postponements of the arbitration hearing. DE 1-1 at 3. On February 22, 2019, Defendant requested a fifth postponement of the hearing, which at that point had been scheduled for March 5, 2019. Id. at 3-4. The basis for the request was that Defendant suffered from a medical condition which made him unable to focus or remain in a sitting position, and Defendant submitted a letter from his neurologist indicating such. Id.; DE 10-1 at 19. The arbitration panel denied this request but asked that Plaintiffs and FINRA permit Defendant to appear by videoconference, with his counsel physically present. DE 1-1 at 4. This accommodation was permitted. Id. On March 1, 2019, one business day before the hearing, Defendant submitted another postponement request, including additional evidence of Defendant's medical treatment and side effects caused by Defendant's medication. Id. The panel did not consider this postponement request because of its proximity in time to the hearing. Id. 

On the date of the hearing, both Defendant and Defendant's counsel appeared by videoconference, but due to technical issues, the panel requested that Defendant's counsel appear in person as previously contemplated. Id. Defendant's counsel arrived two and a half hours after the scheduled start of the hearing. Id. He renewed his argument that the hearing should be postponed because of his client's inability to participate in the proceedings. Id. The panel then reviewed the previously submitted medical records, which the panel concluded were incomplete in various respects. Id. After taking evidence and testimony from both sides, the panel determined that Defendant had not adequately demonstrated this his medical condition prevented him from participating in the proceedings. Id. The arbitration continued, with Defendant observing by videoconference with intermittent technical issues, such as the video feed freezing and the audio cutting in and out. DE 10-1 at 4 ¶ 23.

at pages 2 - 3 of the SDFL Order 

In opposing UBS Motion to Confirm, Walzer argued that the FINRA Arbitration Award should be vacated because the arbitrators had failed to postpone the hearing upon a showing of sufficient cause; and, the arbitrators had exceeded their authority. In applying the Federal Arbitration Act to Walzer's pro se arguments, SDFL granted UBS's petition to confirm and found in part that:

[F]irst, and most importantly, the panel had already postponed the hearing four times at Defendant's request. This presumably contributed to the late date of the hearing, which was held more than two years after Defendant filed his answer and affirmative defenses in the arbitration. DE 1-1 at 2. Second, the panel permitted Defendant to appear by videoconference. Defendant argues that this was inadequate because the videoconference system experienced intermittent disruption. He also notes that a FINRA representative cancelled a planned test run of the videoconference system the day before the hearing. But the panel could have reasonably determined that the videoconference issues were not sufficient cause to postpone the hearing for a fifth time. Whatever the severity of the technical issues, the panel went out of its way to permit Defendant to appear remotely, and the panel delayed the proceedings for another two-and-a-half hours to allow Defendant's counsel to appear physically. 

Finally, the panel did not err in refusing to take a call from Defendant's neurologist in the middle of the proceedings. The panel had already received evidence on Defendant's medical condition in connection with Defendant's postponement requests of February 22 and March 1, and it concluded that Defendant's assertions were not supported by the medical records. The panel could have reasonably determined that a phone call from Defendant's neurologist after proceedings were already underway would be more disruptive than elucidating. At any rate, Defendant should have included any pertinent information from his neurologist in his February 22 postponement request. Accordingly, the panel's refusal to postpone the hearing for a fifth time is not a basis for vacating the Award.

at pages 6 -7 of the SDFL Order