UBS Financial Services, Inc. et al v. Asociacion de Empleados del Estado Libre Asociado de Puerto Rico
Filing
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OPINION AND ORDER: Granting 1 Petition to Confirm Arbitration Award. Signed by Judge Gustavo A. Gelpi on 3/28/2017. (GC)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
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UBS FINANCIAL SERVICES INC.,
UBS FINANCIAL SERVICES
INCORPORATED OF PUERTO RICO,
and UBS TRUST COMPANY OF
PUERTO RICO,
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Petitioners,
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CIVIL NO. 16-2017 (GAG)
v.
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ASOCIACIÓN DE EMPLEADOS DEL
ESTADO LIBRE ASOCIADO DE
PUERTO RICO,
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Respondent.
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OPINION AND ORDER
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In this action, UBS Financial Services Inc., UBS Financial Services Incorporated of Puerto
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Rico, and UBS Trust Company of Puerto Rico (“UBS”) seek to confirm an arbitration award (the
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“Award”) issued against Asociación de Empleados del Estado Libre Asociado de Puerto Rico
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(“AEELA”). (Docket No. 1; see also Docket No. 1-1.) AEELA answered UBS’s petition. (Docket
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No. 39-1.) Upon review of the parties’ submissions and applicable law, UBS’s petition to confirm
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the Award is GRANTED.
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I.
Relevant Factual and Procedural Background
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AEELA and UBS were parties to an investment consulting and brokerage services
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agreement. (Docket No. 1, ¶ 13.) Their agreement provided for arbitration of disputes before the
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Financial Industry Regulatory Authority’s (“FINRA”) arbitral regime. Id. at ¶ 16. The parties
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agreed that the results of arbitration would be final and binding. Id.
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Civil No. 16-2017 (GAG)
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After the Puerto Rican bond market collapsed in 2013, AEELA commenced arbitration
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against UBS seeking $70 million in damages. (Docket Nos. 1-1; Docket No. 17-2.) On April 22,
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2014, AEELA filed a Statement of Claim before FINRA alleging violations of the federal securities
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laws and Puerto Rico state law. (Docket No. 1, ¶ 8.) The FINRA claim centered on alleged
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misrepresentations by UBS and the related losses sustained by AEELA on investments in Puerto
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Rican municipal bonds. Id. Specifically, AEELA alleged the losses it suffered were “caused by
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unsuitable recommendations” received from UBS. (Docket Nos. 1-1; 1-2.)
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After two years of proceedings and a ten-day evidentiary hearing, the FINRA panel issued a
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unanimous Award denying AEELA’s claims in their entirety. (Docket No. 1, ¶¶ 17-18.) The Award
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also included fees in favor of UBS, as set forth under the FINRA code. (Docket No. 1-1, 3-4.) The
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Award did not expound upon the basis for its conclusions.
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On June 3, 2016, UBS filed this petition to confirm the Award rendered by the FINRA panel.
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(Docket No. 1.) AEELA moved to dismiss for lack of subject matter jurisdiction. (Docket No. 9.)
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This Court denied AEELA’s jurisdictional challenge, looking through the petition to the substance
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of the dispute submitted and decided in arbitration, which arose under the federal securities laws.
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UBS Fin. Servs. Inc. v. Asociación de Empleados del Estado Libre Asociado de P.R., --- F. Supp.
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3d ----, No. 16-2017 (GAG), 2016 WL 7408828, at *4 (D.P.R. Dec. 22, 2016).
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Following the Court’s jurisdictional ruling, AEELA answered UBS’s petition. (Docket No.
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39-1.) AEELA’s answer admitted and denied certain facts, and contested confirmation of the award
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through affirmative defenses based on the alleged bias and misconduct of the arbitration panel.
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(Docket No. 39-1.) AEELA did not submit any evidence to this Court in support of its theory of
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arbitrator bias and misconduct.1
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II.
Discussion
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The Federal Arbitration Act, 9 U.S.C. §§ 1-16 (“FAA”), sets the framework for judicial
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review of arbitration awards. Section 9 provides that any party to the arbitration may apply for an
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order confirming the arbitration award, “and thereupon the court must grant such an order unless the
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award is vacated, modified, or corrected as prescribed in sections 10 and 11” of the FAA. 9 U.S.C.
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§ 9. Grounds for vacating an award include: a fraudulently procured award; evident arbitrator
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corruption; arbitrator misconduct; or when the arbitrators exceeded their authority. Id. at § 10; see
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also Raymond James Fin. Servs., Inc. v. Fenyk, 780 F.3d 59, 63-65 (1st Cir. 2015).
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District court review of arbitral awards is “extremely narrow and exceedingly deferential.”
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Bull HN Info. Sys., Inc. v. Hutson, 229 F.3d 321, 330 (1st Cir. 2000) (quoting Wheelabrator
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Envirotech Operating Servs. Inc. v. Mass. Laborers Dist. Council Local 1144, 88 F.3d 40, 43 (1st
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Cir. 1996)). Judicial review is deferential because the parties contracted to resolve their dispute
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through an arbitrator, so it is the arbitrator’s view of the dispute that matters. Hutson, 229 F.3d at
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330 (citing United Paperworkers Int’l Union v. Misco, Inc., 484 U.S. 29, 37-38 (1987)). As a result,
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“[a]rbitral awards are nearly impervious to judicial oversight.” Teamsters Local Union No. 42 v.
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Supervalu, Inc., 212 F.3d 59, 61 (1st Cir. 2000).
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Rather than litigate its affirmative defenses before this Court, AEELA opted to file a petition to vacate
the arbitration award before the Puerto Rico Court of First Instance of San Juan. (Docket No. 9 at 1.) UBS
subsequently removed AEELA’s petition to federal court. AEELA’s petition to vacate is currently pending before
Judge Pedro Delgado-Hernández. See Asociación de Empleados del Estado Libre Asociado de P.R. v. UBS Fin.
Servs., Inc., No. 16-2237 (PAD).
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UBS seeks to confirm the Award under section 9 of the FAA. (Docket No. 1.) Section 9
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dictates that courts “must grant” a petition to confirm an award, unless an exception from sections
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10 or 11 applies. 9 U.S.C. § 9. “There is nothing malleable about ‘must grant,’ which unequivocally
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tells courts to grant confirmation in all cases, except when one of the ‘prescribed’ exceptions
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applies.” Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 587 (2008).
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AEELA protests against confirmation of the Award. First, AEELA challenged the Award
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based on jurisdiction. (See Docket No. 9, 22.) This Court considered and rejected AEELA’s
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jurisdictional arguments. UBS Fin. Servs., 2016 WL 7408828, at *4. The First Circuit recently
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confirmed this approach to determining jurisdiction of a post-arbitration petition. Ortiz-Espinosa v.
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BBVA Securities of P.R., Inc., --- F.3d ----, 2017 WL 343525, at *7 (1st Cir. Jan. 20, 2017).
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After losing the jurisdictional argument, AEELA answered UBS’s petition. (Docket No.
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39-1.) Now, AEELA grounds its efforts to resist confirmation of the Award in section 10(a) of the
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FAA, alleging bias and misconduct by the FINRA arbitrators. Id. at 3-4. However, AEELA has
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presented no evidence to support this argument. Id. AEELA’s barebones answer does not appear
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to contemplate the FAA’s instruction that an application to the Court should resemble a motion,
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complete with an argument and supporting evidence. See 9 U.S.C. § 6. Although AEELA had the
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opportunity, it elected not to support its theory with evidence.
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Barring certain statutorily defined exceptions, section 9 of the FAA requires that courts “must
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grant” a petition to confirm an arbitration award. 9 U.S.C. § 9. AEELA has presented no evidence
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or argument for the application of any of the FAA’s exceptions. Rather, UBS’s petition easily clears
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the “exceedingly deferential” standard of judicial review for confirmation of an arbitration award.
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See Fenyk, 780 F.3d at 63 (quoting Weelabrator Envirotech, 88 F.3d at 43). Therefore, the Court
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grants UBS’s petition to confirm the arbitration award.
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III.
Conclusion
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For the reasons stated above, UBS’s petition to confirm arbitration award is GRANTED.
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SO ORDERED.
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In San Juan, Puerto Rico, on this 28th day of March, 2017.
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s/ Gustavo A. Gelpí
GUSTAVO A. GELPI
United States District Judge
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