UBS’s Appeal to Vacate $11-Mln Finra Award Faces Uphill Battle: Lawyers
UBS Wealth Management USA faces stiff odds with its appeal of an Illinois state court ruling denying its request to vacate an $11 million arbitration award, according to lawyers who are not involved in the case but typically represent brokerage firms.
UBS lost its initial motion to vacate one year later when Cook County Circuit Judge Caroline K. Moreland upheld the arbitrators’ decision without a written explanation. Munizzi had argued before Moreland that UBS had failed to meet any of the five “limited grounds” that permit courts to overturn decisions under the Illinois Arbitration Act.
The wirehouse continued to push with a notice of appeal filed on November 17, 2020, an initial appeal brief filed on February 16, and an additional brief filed in April in the First Judicial District for the Appellate Court of Illinois.
But its chances of overturning the lower court ruling appear slim given that courts are often reluctant to overturn arbitrator decisions and that it has already been upheld once before in court, according to Tom Lewis, a lawyer with Stevens & Lee in Princeton, N.J.
“It is an uphill battle to overturn any Finra award,” said Lewis, who was not involved in the case and typically represents firms and brokers. “If a judge…wrote a decision, the appellate court has a lot more scrutiny to review a court decision, as compared to an arbitration award.”
A spokesman for UBS declined to comment on the litigation.
In its April brief, the wirehouse reiterates claims it made in the lower court that the Finra award violates Illinois public policy, which “strongly favors the protection of the public through the disclosure of information concerning negligent and dishonest securities professionals.”
The award penalizes UBS “for disclosing precisely this type of information,” the wirehouse’s lawyers, a team led by Thomas Hungar, a Gibson, Dunn & Crutcher partner in Washington D.C., argue in the brief.
Munizzi had “failed to adequately supervise employees and gave varied responses during an internal review,” UBS lawyers wrote.
The UBS brief also asks the court, if it decides to not vacate the entire award, to at least eliminate its punitive damages, which are $7.5 million of the $11 million total.
“[T]he punitive award is clearly repugnant to public policy and should be reversed,” the UBS brief states, arguing that such a steep amount is “disincentivizing financial firms from providing clear, accurate and comprehensive Form U5 disclosures.”
Still, UBS will likely face the same test as to whether it can justify the vacature under the narrow bands of Illinois law, according to Chicago-based lawyer Alan Wolper of Ulmer & Berne.
“UBS has its work cut out for it,” said Wolper, who also was not involved in the case.
But even if the odds of victory are slim, brokerages still see a deterrent value to pressuring their case often “want people to understand that the firm is ready, willing and able to go to battle.”
Munizzi’s lawyer Stephen Gomberg of Lynch Thompson in Chicago argues in a brief filed with the same appellate court in March that the lower court held that the arbitrators found that “UBS was not truthful” when disclosing its reasons for Munizzi’s termination rendered. Therefore, any further analysis of the wirehouse’s arguments is unnecessary, the lawyer wrote.
The Munizzi brief also objects to UBS’s attempt to eliminate the punitive damages, arguing the wirehouse’s contention that those are “somehow subject to a different type of judicial scrutiny is without any legal basis.”
The $7.5 million damages are “needed to deter UBS, and other financial institutions, from including defamatory statements on Form U5s,” Munizzi’s brief states.
Munizzi, who had 30-years experience in the industry, and worked for Prudential Securities, Smith Barney, Lehman Brothers and Merrill Lynch, is no longer registered, according to his BrokerCheck record.
By press time, the Illinois appellate court had not decided if it will schedule a hearing for the pending case, as UBS has requested, or alternatively, issue a ruling solely based on the briefs filed.