Judge: UBS can't use arbitration clause to sidestep class action by fired employees over bonus payments

By Robert Davis | Apr 12, 2018

CHICAGO — A federal judge has denied an attempt by UBS to sidestep a class action suit accusing the company of terminating employees to avoid paying their bonuses.

The decision was handed down by U.S. District Judge Matthew Kennelly on March 19.

The case centers around plaintiffs Shannon Zoller and Alexander Beigelman, who allegedly were terminated by UBS in March 2013 and January 2015, respectively. They claim UBS used a system that "defrauds its employees through a scheme in which it promises employees yearly bonuses but fires many employees before the bonus accrues."

UBS, however, sought to force arbitration for Zoller's claims and dismiss Beigelman's claims, who had previously entered into arbitration regarding a series of other complaints stemming from his firing. UBS argued that "no matter the merits of the dispute, the plaintiffs agreed to arbitrate disputes with the company," according to the decision.

Linda D. Friedman   Friedman & Stowell

UBS contended both Zoller and Beigelman are required under contract to seek arbitration based on Zoller's offer letter, Zoller's compensation agreement and Beigelman's offer letter.

The plaintiffs, for their part, argued that UBS' system allegedly allowed it to: "1) benefit from its employees' labor without fully paying for it, 2) accrue tax benefits, as it writes off bonuses that it never actually pays, and 3) insulate itself from subsequent litigation through its coercive use of severance agreements that require ex-employees to release UBS from any claims."

Kennelly disagreed with UBS.

"The court denies UBS's motion to... compel arbitration of Zoller's claims" and "sees no appropriate basis to stay litigation of Beigelman's claims pending resolution of his arbitration," Kennelly wrote in the opinion.

The plaintiffs contended the court should not force them to arbitrate because Financial Industry Regulatory Authority (FINRA) Rule 13204 bars arbitration of class actions brought before FINRA arbitrators, according to the decision. 

UBS countered the argument by claiming the Federal Arbitration Act (FAA) stipulates arbitration clauses are "'irrevocable.'" UBS further argued that a 'contrary congressional command' is required to 'override' the FAA's language on arbitration, and FINRA Rule 13204 "is not such a command."

"FINRA Rule 13204 states that '[a] member... may not enforce any arbitration agreement against a member of a certified or putative class action with respect to any claim that is the subject of the certified or putative class action,' until one of four conditions are met, such as the decertification of the class," Kennelly wrote in the decision. "UBS cannot show any of those conditions are met."

Additionally, Kennely held that even though the plaintiffs are required under contract to arbitrate, their complaints do not violate their arbitration clauses. 

Plaintiffs are represented by attorneys Linda Debra Friedman and Matthew J. Singer, of the firm Stowell & Friedman Ltd., of Chicago. 

UBS is represented by the firms of Howard & Howard PLLC, of Chicago, and Gibson, Dunn & Crutcher LLP, of Washington, D.C.

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Organizations in this Story

Financial Industry Regulatory Authority Gibson, Dunn & Crutcher LLP Howard & Howard Attorneys PLLC Stowell and Friedman U.S. District Court for the Northern District of Illinois UBS

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