A federal judge has rejected UBS’ longshot attempt to have overturned a $1 million penalty FINRA arbitrators awarded a broker fired over questionable trades made on behalf of a client.
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Judge David Nye of the U.S. District Court for the District of Idaho on Friday tossed UBS’ petition for review of the $1 million arbitration award it was hit with in June over its firing of a broker named Randy Anderson nearly five years earlier. Anderson was let go in November 2020 in response to allegations that he had executed nearly $480,000 in trades on behalf of a client without first obtaining her permission.
Anderson filed a complaint to the Financial Industry Regulatory Authority, the broker-dealer industry’s self-regulator, accusing UBS of wrongful termination, breach of contract, age discrimination, defamation and other violations. In their June decision, two arbitrators on a three-person panel awarded $1 million in compensatory damages after finding merit to his discrimination claims.
“Claimant was above 60 years and the termination was disproportionately severe,” wrote the two arbitrators in the majority.
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Courts have a ‘very short leash’ for overturning arbitration awards
A third arbitrator dissented, though, noting that Anderson was an at-will employee of UBS. That meant the firm could fire him “for any reason other than those protected by statute.”
It was that dissent, from a lawyer named Dean Dietrich, that UBS cited heavily in its attempt to have the $1 million award overturned in court. But Judge Nye found that the firm had not cleared the high bar set for having arbitration decisions overturned.
Nye in his order noted that the Federal Arbitration Act requires courts to be “highly deferential” to decisions made by arbitrators. Nye noted that arbitrators are not even obliged by the law to provide reasons for their awards.
In trying to pull apart the award given to Anderson, Nye said, UBS failed to show that the arbitrators had willfully ignored the law. Even if they committed an error in applying the law, that alone is not valid grounds for throwing out their decision, he wrote.
“The Court has a very short leash when it comes to reviewing an arbitration award
for vacatur under … the FAA,” Nye wrote. “Even when arbitration awards contain ambiguities, little to no explanation, serious errors in the law and application of the law, or complete disregard for the facts, the Court may only vacate the award if the Petition shows the arbitration decision was the result of a manifest disregard of the law or was completely irrational.”
Was the $1 million award really over age discrimination?
In his earlier objection to the original arbitration decision, the dissenting panelist Dietrich had also cast doubt on Anderson’s claims of age discrimination. Dietrich said his arguments before the FINRA panel included almost no mentions of discrimination. Instead, according to Dietrich, Anderson implied he believed his firing was the result of UBS’ anxiety that was planning to leave and take his book of business to a competitor.
Nye also rejected those arguments after finding the stated reasons for the $1 million arbitration award to be legally ambiguous. He noted that the $1 million award could reasonably have been tied to Anderson’s defamation or equity claims rather than solely the disputed claim of age discrimination.
UBS declined to comment for this article. Anderson’s lawyers did not immediately return a request for comment.
Anderson, now a broker at Stifel, until recently had a page on BrokerCheck saying he was fired by UBS “for violating firm policy by failing to obtain verbal authority from client in connection trades made in client’s account and failure to report customer complaint when client complained about the trades.” The page has since been revised to say that Anderson and his client had previously discussed the trades he ultimately made, although he completed before obtaining her official sign-off.
He contended he needed to complete them by a certain date to prevent her assets from moving over to a brokerage account, which would have cost her more. His BrokerCheck page now states that Anderson “thus placed the trades in the client’s best interest to avoid the client being charged additional fees. A subsequent investigation, by UBS’s outside counsel, in February 2020, confirmed in a letter to the client the trades were made in the client’s best interest and in pertinent part states, ‘Please understand your financial advisor made these trades in your best interest.'”
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UBS’ other challenge of a FINRA arbitration award
This isn’t the only longshot attempt UBS is making in court to have a recent FINRA arbitration decision quashed.
This spring, it filed a petition in federal court in Iowa seeking to overturn or reduce a $95.3 million FINRA arbitration award it was hit with in a case over a broker accused of inappropriately recommending a client short Tesla stock. A decision in that case is pending.
