Zoller et al v. UBS Securities LLC et al

Filing 66

MEMORANDUM Opinion and Order written by the Honorable Matthew F. Kennelly on 6/5/2019: For the foregoing reasons, the Court grants the defendants' motion to compel arbitration [dkt. no. 25]. Because the plaintiffs' claims will proceed, if at all, in arbitration, the Court directs the Clerk to administratively terminate the case as a pending case. Civil case terminated. Mailed notice. (pjg, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
SHANNON ZOLLER and ALEXANDER
BEIGELMAN, on behalf of themselves
and all others similarly situated,

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)
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Plaintiffs,
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vs.
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UBS SECURITIES LLC, UBS FINANCIAL
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SERVICES INC., and UBS AMERICAS INC., )
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Defendants.
)

Case No. 16 C 11277

MEMORANDUM OPINION AND ORDER
MATTHEW F. KENNELLY, District Judge:
Shannon Zoller and Alexander Beigelman are former employees of UBS
Securities LLC, UBS Financial Services Inc., and / or UBS Americas Inc. (collectively
UBS). Zoller and Beigelman brought a putative class action against UBS, alleging that
the company unlawfully fired employees before it had to pay out their promised
bonuses. UBS moved to compel arbitration, and the Court has ordered the plaintiffs to
show cause why the motion should not be granted.
Background
The Court assumes familiarity with its prior written ruling in which it denied the
defendants' motions to compel arbitration of Zoller's claims and to dismiss Beigelman's
claims for improper venue. See Zoller v. UBS Securities LLC, No. 16 C 11277, 2018
WL 1378340 (N.D. Ill. Mar. 19, 2018). UBS appealed that decision to the Seventh
Circuit. While UBS's appeal was pending, the Supreme Court decided Epic Systems

Corp. v. Lewis, 138 S. Ct. 1612 (2018), in which it reversed the Seventh Circuit's
holding that section 7 of the National Labor Relations Act rendered unenforceable an
arbitration provision that barred employees from bringing class, collective, or
representative proceedings. See Lewis v. Epic Systems Corp., 823 F.3d 1147 (7th Cir.
2016). In light of the Supreme Court's decision, the Seventh Circuit panel reviewing
UBS's appeal vacated this Court's ruling and remanded the case for further
proceedings. See dkt. no. 62.
The Court has ordered the plaintiffs to show cause why the Court should not
grant the defendants' motion to compel arbitration. For the reasons stated below, the
Court concludes that the plaintiffs have not shown cause and grants UBS's motion to
compel arbitration.
Discussion
The plaintiffs do not dispute that their claims fall within the scope of their
arbitration agreements or that those agreements are enforceable under Epic Systems.
Instead, they contend that the arbitration organization—the Financial Industry
Regulatory Authority (FINRA)—is not a suitable forum because it does not permit the
effective vindication of their rights. They also argue that UBS is judicially estopped from
moving to compel arbitration of Beigelman's claim under the Age Discrimination in
Employment Act (ADEA).
A.

Suitability of the arbitral forum
The plaintiffs contend that FINRA arbitration is not a suitable forum in which to

bring their claims. They make three arguments: first, that FINRA lacks appropriate
standards for hiring and training its arbitrators; second, that it lacks a system for

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ensuring that the arbitral panel receives the parties' filings; and third, that FINRA's
arbitrator pool and selection process leads to systemic bias.
UBS argues that the plaintiffs have waived these arguments by failing to raise
them in their original response to the motion to compel arbitration. UBS perhaps means
to argue that these arguments are forfeited rather than waived. "The terms waiver and
forfeiture—though often used interchangeably by jurists and litigants—are not
synonymous. '[F]orfeiture is the failure to make the timely assertion of a right[;] wavier
is the intentional relinquishment or abandonment of a known right.'" Hamer v.
Neighborhood Hous. Servs. of Chi., 138 S. Ct. 13, 17 n.1 (2017) (alterations in original)
(quoting United States v. Olano, 507 U.S. 725, 733 (1993)).
Regardless of whether UBS's argument is construed in terms of forfeiture or
waiver, however, the Court concludes that the plaintiffs' failure to raise these suitability
arguments in response to the motion to compel precludes the plaintiffs from making
them for the first time now. The plaintiffs argue that there is no waiver or forfeiture
because the Supreme Court's decision in Epic Systems "altered the applicable legal
framework." Pls.' Resp. to Show Cause Order, dkt. no. 64, at 15. They cite Indiana Bell
Telephone Co. v. McCarty, 362 F.3d 378 (7th Cir. 2004), in which the Seventh Circuit
stated that if "the Supreme Court decides a relevant case while litigation is pending . . .
omission of an argument based on the Supreme Court's reasoning does not amount to
a waiver. . . ." Id. at 390 (alterations in original). It is true that Epic Systems altered the
legal framework of the arbitration agreement, but the plaintiffs' new arguments are not
based on the Supreme Court's reasoning in that case. Rather, the plaintiffs rely on
cases that predate Epic Systems—including American Express Co. v. Italian Colors

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Restaurant, 570 U.S. 228 (2013), and Jackson v. Payday Financial, LLC, 764 F.3d 765
(7th Cir. 2014)—for the proposition that the arbitral forum must be adequate to protect
the parties' rights. Epic Systems therefore did not change the legal framework in any
way relevant to the plaintiffs' new arguments.
At most, Epic Systems altered the strategic rather than the legal framework of the
motion to compel. For example, if Epic Systems had already been decided when the
plaintiffs submitted their response brief, they might have devoted more pages to raising
additional arguments about FINRA's suitability. But even if this may sometimes suffice
to avoid forfeiture, it is unconvincing in the particular circumstances of this case. When
the plaintiffs submitted their response brief, they were aware that "if the Seventh
Circuit's decision [in Lewis] is not affirmed, their individual claims will be compelled to
arbitration." Pls.' Mot. to Stay, dkt. no. 17 ¶ 4. Perhaps to hedge against that very risk,
the plaintiffs did not rest their response entirely on the Seventh Circuit's ruling in Lewis,
but also argued that FINRA was not a suitable forum because its "outrageous" costs
would prevent them from effectively vindicating their rights. Pls.' Resp. to Mot. to
Compel Arbitration, dkt. no. 31, at 9–11. The plaintiffs' choice not to make more or
different arguments about FINRA's suitability as a forum does not excuse their
forfeiture. See, e.g., Holder v. Ill. Dep't of Corr., 751 F.3d 486, 493 (7th Cir. 2014)
("When a party selects among arguments as a matter of strategy, he also waives those
arguments he decided not to present.").
The plaintiffs were also aware of the factual basis of their new arguments when
they responded to the motion to compel. Their objections to the alleged deficiencies in
FINRA's hiring and training procedures, arbitrator selection process, and document filing

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systems relate to policies and practices that predate the response to the motion. The
Court acknowledges that plaintiffs cite anecdotes from Beigelman's arbitration
proceedings to support their arguments and that they did not have this evidence when
they responded to the motion to compel. See, e.g., Friedman Decl., dkt. no. 64–1 ¶ 8.
But these anecdotes are merely additional evidence for arguments that were already
available to the plaintiffs based on FINRA's published policies, and the plaintiffs do not
contend that they could not have raised these issues before observing Beigelman's
arbitration proceedings.
Because the Court concludes that the plaintiffs have forfeited their new
arguments concerning FINRA's suitability as an arbitral forum, it need not reach the
merits of those arguments.
B.

Judicial estoppel
The plaintiffs next argue that UBS is judicially estopped from moving to compel

arbitration of Beigelman's ADEA claim. "Judicial estoppel is an equitable doctrine
designed 'to protect the integrity of the judicial process' by preventing litigants from
'deliberately changing positions according to the exigencies of the moment.'" Matthews
v. Potter, 316 F. App'x 518, 522 (7th Cir. 2009) (quoting New Hampshire v. Maine, 532
U.S. 742, 749–50 (2001)). The plaintiffs point to statements by UBS's attorney during
the arbitration hearings in which the attorney cited FINRA rule 13201, which provides
that both parties must agree to arbitrate claims of employment discrimination. At the
hearing, UBS's lawyer stated, "To be clear, there is no agreement, so there is no
discrimination claim before the panel." Arbitration Hearing Tr., Pls.' Ex. B., at 767:25–
768:3. The plaintiffs argue that by making this argument UBS knowingly chose not to

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proceed with the arbitration of Beigelman's ADEA claim and that judicial estoppel bars
them from reversing their position.
UBS first contends that the plaintiffs forfeited this argument by failing to make it
sooner. This contention is unpersuasive. The plaintiffs filed their response to the
motion to compel in May 2017, and the two arbitration hearings did not take place until
October 2017 and March 2018. The plaintiffs therefore could not have made this
argument in their response brief. In response, UBS points out that this Court did not
issue its previous written decision on the motion to compel arbitration until shortly after
the second arbitration hearing, and it argues that the plaintiffs were required to bring this
issue to the Court's attention. Under these circumstances, however, the Court declines
to hold that the plaintiffs forfeited this argument by failing to submit an additional filing
after briefing on the motion had already concluded.
Although it is not forfeited, however, the plaintiffs' judicial estoppel argument is
without merit. The plaintiffs argue that UBS's alleged admissions during arbitration
show that it knowingly chose not to arbitrate Beigelman's ADEA claim, but this
mischaracterizes the context of UBS's statements. Beigelman himself initiated the
arbitration proceeding and elected not to include his ADEA claim in that suit. During the
hearings, UBS's attorney emphasized that there was no discrimination claim before the
panel and that FINRA's rules would allow that claim only if both parties agreed to
arbitrate it. In context, it is apparent that UBS was not selecting one forum over another
but rather describing which issues were in the case at that time. It does not follow that
in so doing UBS disclaimed its intent to pursue arbitration of a hypothetical ADEA claim
that Beigelman had not yet raised. The Court therefore concludes that UBS, in moving

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to compel arbitration of all the claims in this case, has not taken "clearly inconsistent"
positions that would warrant applying judicial estoppel. Matthews, 316 F. App'x at 522.
Conclusion
For the foregoing reasons, the Court grants the defendants' motion to compel
arbitration [dkt. no. 25]. Because the plaintiffs' claims will proceed, if at all, in arbitration,
the Court directs the Clerk to administratively terminate the case as a pending case.

________________________________
MATTHEW F. KENNELLY
United States District Judge
Date: June 5, 2019

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