UBS Loses Bid to Vacate $11 Million Defamation Award

A Chicago court has upheld a headline-making $11-million arbitration award to a former compliance official that was challenged by UBS Wealth Management USA.

Cook County Circuit Judge Caroline K. Moreland confirmed the December 2019 award to Mark Munizzi, a former complex supervisory officer in Chicago who claimed UBS had defamed him in its U-5 regulatory dismissal notice in 2018. The firm had accused him of responding evasively to questions about the supervision of a Wisconsin broker who lost millions of dollars for himself and his mother in an uncovered options strategy.

UBS’s attempt to vacate Munizzi’s award failed to meet any of the five “limited grounds” that permit courts to overturn decisions under the Illinois Arbitration Act, Munizzi argued in court papers. Such grounds range from arbiter corruption to decisions such as refusing to postpone hearings if they rise to the level of arbiter misconduct.

The judge did not explain her decision, but ordered UBS to pay an additional $909,000 in interest and $100,000 in attorneys’ fees and costs to cover Munizzi’s costs in defending the arbitration decision, according to the November 5 order in the Circuit Court of Cook County, Illinois.

Judges in local, state and federal courts give high degrees of deference to arbitration decisions, and orders to vacate awards are rare.

UBS, however, is continuing to challenge the award. It filed an appeal of Judge Moreland’s ruling in an Illinois appellate court, according to a notice filed two weeks ago.

A UBS spokeswoman declined to comment.

Munizzi’s lawyer, Steven Gomberg of Lynch Thompson in Chicago, also declined to comment.

Munizzi, who has not been registered in the securities industry since UBS dismissed him two-and-a-half years ago, could not be reached for comment. At the time of his dismissal, he had been a registered rep for 30 years, half of the time with UBS.

When Munizzi won the arbitration, Gomberg said UBS had scapegoated him for the aberrant options strategy that had wide repercussions for UBS employees. In June 2018, a month after Munizzi’s dismissal, UBS imposed options trading restrictions on employees and their families, citing “several situations” when margin accounts became undercollateralized or fell into a deficit.

In arguing to overturn the arbitration award, UBS said Illinois “public policy” required it to detail Munizzi’s alleged failures as a matter of investor protection, according to court papers. The “manifest weight of the evidence” showed that its disclosures on the U-5 form were truthful, it said.

A person familiar with the case said that the judge opined at a hearing that the “manifest weight” argument was irrelevant to the high procedural bar required for a vacature decision, and deferred to the panel’s decision that the U-5 language was defamatory.

The arbitration panel last December authorized Munizzi to clear the termination from the Central Registration Depository database, and from the publicly available BrokerCheck record summarizing the U-5 language.

The three arbitrators awarded Munizzi $3.1 million in compensatory damages, $7.5 million in punitive damages and almost $497,000 in attorneys’ fees. It also required UBS to pay all but $800 of the $30,000 of hearing and prehearing session fees, a charge that is typically split evenly among arbitration disputants.