UBS Agrees to Drop TRO Bid Against New Jersey Broker Who Joined RBC
UBS Wealth Management USA has agreed to dismiss a lawsuit seeking a temporary restraining order against a broker who had accused the firm of using the filing to gain a “tactical advantage” in a dispute over promissory note repayment.
While lawyers say it is unusual for a firm to end a TRO bid before a judge has a chance to rule, the stipulation likely reflects a resolution of a promissory note dispute underpinning the case, according to court filings and a lawyer not involved in the dispute.
UBS had initially alleged Gara “egregiously” violated non-solicitation clauses in his employment agreements before and after his move and sought a customer contact ban, as well as an order requiring him to return any customer contact information that he may have printed or emailed to himself.
Gara had fired back in a June 1 court filing denying the claims and alleging that the non-solicitation provisions were only triggered because UBS had unfairly characterized his promissory loan obligations as outstanding.
He said he had been working with UBS to pay off the unvested portion of a promissory note balance, but that he had been engaged in negotiations with the firm about its “inconsistent and seemingly improper deductions,” which made it unclear what he actually owed. UBS appeared to be using the TRO to try and gain an advantage in the negotiation, Gara alleged.
“I believe UBS filed this action on the eve of the Memorial Day Holiday solely to gain a tactical advantage over me in relation to our ongoing dispute concerning the tax withholdings it improperly deducted from my wages,” Gara said.
In a show of good faith, he had written UBS a check for $120,450.59, which the wirehouse did not cash, to cover his “outstanding loan balance” and put $400,066.16–the amount UBS said he owed as “principal receivable”–in an escrow account controlled by his lawyer, according to the June 1 filing.
“My guess is they have come to an agreement on payment of the outstanding promissory note, thus negating the need for a TRO,” said Brady Hermann, lawyer with Maurice Wutscher in Dedham, Massachusetts, an outsider to the lawsuit.
A UBS spokesman declined to comment, and Gara’s lawyer, Thomas B. Lewis of Stevens & Lee in New Jersey, declined to comment
It was not clear whether UBS would continue to press its claims in arbitration with the Financial Industry Regulatory Authority.
Gara said in the initial response that he had planned to seek in the Finra case “substantial damages against UBS for blocking clients from transferring to RBC and for damaging me.”
“By seeking an injunction and misrepresenting facts and omitting material documents, UBS seeks to gain an unfair competitive advantage by stopping me from communicating with clients that I cultivated and serviced for decades,” Gara said. “Moreover, I believe that UBS sought an injunction to damage my personal and professional reputation.”
Gara could not immediately be reached for additional comment on the move or whether the payroll inconsistencies were related to a flub by processor ADP, which made errors that resulted in overpayments on forgivable loan balances to a significant number of UBS advisors in 2018 and required clawbacks.
Gara’s circumstances–including his ability to provide more than $500,000 cash to show a good faith willingness to cover any obligations–were so “specific” that Hermann doubts UBS will alter its approach to seeking TROs against defectors, although it may be a warning to those who consider skipping out on their note balance.
“It’s not going to change how they go about these cases,” Hermann said.
Only a few weeks prior to UBS seeking the TRO against Gara, it filed for a similar order against a Garden City, New York team that oversaw roughly $700 million in client assets and moved to Morgan Stanley.
The brokers in that case stipulated to an agreement with UBS to abide by a customer solicitation ban pending the outcome of a Finra hearing.