Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

UBS Financial Services, Inc. v. Bounty Gain Enterprises, Inc.

United States District Court, S.D. Florida

April 12, 2017

UBS FINANCIAL SERVICES, INC., a New Jersey corporation, Plaintiff,
v.
BOUNTY GAIN ENTERPRISES, INC. a foreign corporation, Defendant.

          ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT

          WILLIAM MATTHEWMAN, UNITED STATES MAGISTRATE JUDGE

         THIS CAUSE is before the Court upon Plaintiff/Counter-Defendant, UBS Financial Services, Inc.'s ("UBSFS") Motion for Summary Judgment [DE 1');">1');">1');">155], and Defendant/Counter-Plaintiff, Bounty Gain Enterprises, Inc.'s ("Bounty Gain") Motion for Summary Judgment [DE 1');">1');">1');">156]. The Motions are fully briefed and ripe for review. The Court held a hearing on the Motions on March 24, 201');">1');">1');">17. See DE 1');">1');">1');">173. The Court has reviewed the Motions, Responses, and Replies, the entire file in this case, and is otherwise duly advised in the premises.

         I. BACKGROUND

         Defendant Bounty Gain Enterprises, Inc. is a corporation organized under the laws of the British Virgin Islands with its principal place of business in Hong Kong. [DE 1');">1');">1');">157, 1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1, ¶ 2]. Kwok Chi Cheung ("Mr. Cheung")[1');">1');">1');">1" name="FN1');">1');">1');">1" id= "FN1');">1');">1');">1">1');">1');">1');">1] is the sole shareholder, sole director, and sole beneficiary of Bounty Gain and an authorized representative of Bounty Gain. [DE 1');">1');">1');">154, p. 3');">p. 3, ¶1');">1');">1');">15; DE 1');">1');">1');">164, p. 3');">p. 3, ¶1');">1');">1');">15]. Plaintiff UBS Financial Services, Inc. is a securities broker-dealer registered with the United States Securities and Exchange Commission and is a member of the Financial Regulatory Authority, INC. ("FINRA"). [DE 1');">1');">1');">154, 1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1, ¶2; DE 1');">1');">1');">164, 1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1, ¶2]. UBS International ("UBSI")[2] merged into UBSFS during December of 2009. [DE 1');">1');">1');">154, p. 2');">p. 2, ¶6; DE 1');">1');">1');">164, 1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1, ¶6]. From May 2008 through January 201');">1');">1');">10, Roger Lam ("Mr. Lam") was registered with UBSI in Hong Kong. [DE 1');">1');">1');">154, p. 2');">p. 2, ¶9; DE 1');">1');">1');">164, p. 2');">p. 2, ¶9]. From January 201');">1');">1');">10 through December 201');">1');">1');">12, Mr. Lam was registered with and worked for UBSFS. Id.

         UBS AG[3] is a banking institution located in and operating under the laws of Switzerland with a branch located in Hong Kong. [DE 1');">1');">1');">154, 1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1, ¶3; DE 1');">1');">1');">164, 1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1, ¶3]. UBS AG is not a member of FINRA. [DE 1');">1');">1');">154, 1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1, ¶4; DE 1');">1');">1');">164, 1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1, ¶4]. In early 201');">1');">1');">11');">1');">1');">1, Peter Ho, working for UBS AG in Hong Kong, approached Mr. Cheung about investing in Digital Domain Media Group, Inc. ("DDMG"). [DE 1');">1');">1');">154, p. 2');">p. 2, ¶1');">1');">1');">13 and p. 4, ¶23; DE 1');">1');">1');">164, p. 2');">p. 2, ¶1');">1');">1');">13 and p. 4, ¶23]. Eventually, Bounty Gain purchased $5, 000, 000 of DDMG stock. [DE 1');">1');">1');">157, p. 3');">p. 3, ¶¶8-9].

         Natalie Lau of CM Zurich was an agent of Bounty Gain and Mr. Cheung in regard to the DDMG shares in the name of Bounty Gain. [DE 1');">1');">1');">154, p. 3');">p. 3, ¶22; DE 1');">1');">1');">164, p. 4, ¶22]. An email chain from November of 201');">1');">1');">11');">1');">1');">1 between Natalie Lau and Peter Ho includes an email from Natalie Lau to Ed Lunsford stating, "Please kindly note that Bounty Gain and Liu Shiyang has couriered to you both the stock power form and the original share certificates...For Bounty Gain, the DDMG shares has [sic] to be registered in the name of Cheung Kwok Chi." [DE 1');">1');">1');">154-7, 1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1]. However, the shares were registered in the name "Bounty Gain Enterprises, Inc. Attn: Cliff Cheung Kwok Chi." [DE 1');">1');">1');">158-1');">1');">1');">15, p. 5');">p. 57; DE 1');">1');">1');">167, 1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">12].

         Mr. Cheung had a customer account at UBSFS ("***01');">1');">1');">172 Account") in his individual name. [DE 1');">1');">1');">154, p. 2');">p. 2, ¶1');">1');">1');">10; DE 1');">1');">1');">164, p1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1-2, ¶7]. Mr. Lam handled the individual ***01');">1');">1');">172 Account for Mr. Cheung, along with other UBSFS representatives Charles Chiu ("Mr. Chiu") and Elaine Cheng ("Ms. Cheng"). [DE 1');">1');">1');">157, p. 3');">p. 3, ¶ 1');">1');">1');">12]. Kittie Chan (also known as Hon Heng Chan), Mr. Cheung's assistant, held a Power of Attorney for Mr. Cheung's personal account at UBSFS. [DE 1');">1');">1');">154, p. 3');">p. 3, ¶1');">1');">1');">17; DE 1');">1');">1');">164, p. 3');">p. 3, ¶1');">1');">1');">17]. Bounty Gain never had an account maintained in its own name at UBSFS or at UBSI. [DE 1');">1');">1');">154, p. 2');">p. 2, ¶7; DE 1');">1');">1');">164, p1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1-2, ¶7]. Further, Bounty Gain never had a customer agreement in its own name with UBSFS or UBSI. [DE 1');">1');">1');">154, p. 2');">p. 2, ¶8; DE 1');">1');">1');">164, p1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1-2, ¶7, 8].

         The DDMG stock registered in Bounty Gain's name was transferred to Mr. Cheung's personal account at UBSFS on June 22, 201');">1');">1');">12. [DE 1');">1');">1');">154, p. 4, ¶24; DE 1');">1');">1');">157, p. 6');">p. 6, ¶ 26]. Mr. Cheung signed and submitted a stock power to UBSFS to effectuate this transfer. [DE 1');">1');">1');">154, p. 4, ¶25; DE 1');">1');">1');">164, p. 5');">p. 5, ¶25]. Bounty Gain never paid any compensation to UBSFS or any associated person of UBSFS for any commodities or services. [DE 1');">1');">1');">154, p. 3');">p. 3, ¶1');">1');">1');">14; DE 1');">1');">1');">164, p. 3');">p. 3, ¶1');">1');">1');">14].

         On July 1');">1');">1');">17, 201');">1');">1');">12, Ms. Chan requested that Mr. Lam open an account in Bounty Gain's name at UBSFS. [DE 1');">1');">1');">154, p. 3');">p. 3, ¶1');">1');">1');">18; DE 1');">1');">1');">164, p. 3');">p. 3, ¶1');">1');">1');">18; DE 1');">1');">1');">165-4, 1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1]. On that same date, Mr. Lam responded to Ms. Chan's request to open a Bounty Gain account at UBSFS by sending her the documentation necessary to open a corporate account for Bounty Gain at UBSFS. [DE 1');">1');">1');">154, p. 3');">p. 3, ¶1');">1');">1');">19; DE 1');">1');">1');">164, p. 3');">p. 3, ¶1');">1');">1');">19; DE 1');">1');">1');">165-4, pp. 2-54]. However, the account-opening documents sent by Mr. Lam to Ms. Chan were never completed, executed, or returned to UBSFS by Bounty Gain. [DE 1');">1');">1');">154, p. 3');">p. 3, ¶20; DE 1');">1');">1');">164, p. 4, ¶20]. Without completion of account-opening documents, an account at UBSFS cannot be opened for a potential customer. [DE 1');">1');">1');">154, p. 3');">p. 3, ¶21');">1');">1');">1; DE 1');">1');">1');">164, p. 4, ¶21');">1');">1');">1].

         II. PROCEDURAL HISTORY

         On or about September 1');">1');">1');">10, 201');">1');">1');">14, Bounty Gain Enterprises, Inc. submitted a Statement of Claim to FINRA Dispute Resolution. [DE 1');">1');">1');">154, 1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1, ¶1');">1');">1');">1; DE 1');">1');">1');">164, 1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">1, ¶1');">1');">1');">1]. On December 24, 201');">1');">1');">14, UBSFS filed its Complaint for Declaratory Judgment and Injunctive Relief against Bounty Gain in this Court. See DE 1');">1');">1');">1. In the Complaint, UBSFS explains that it is a New Jersey-based FINRA member. [DE 1');">1');">1');">1, p. 2');">p. 2]. UBSFS states that Bounty Gain instituted FINRA arbitration against UBSFS and is seeking upwards of five million dollars in damages, along with pre-judgment interest and costs. [DE 1');">1');">1');">1, p. 3');">p. 3]. According to UBSFS, it never had an agreement to arbitrate with Bounty Gain, UBSFS did not consent to arbitration, Bounty Gain is not a customer of UBSFS, Bounty Gain never had a brokerage account with UBSFS, and Bounty Gain did not purchase any securities from UBSFS or receive any investment advice or guidance from UBSFS. Id. Consequently, UBSFS maintains that it is not required to submit to FINRA arbitration. Id. Therefore, UBSFS initially requested that this Court enter judgment against Bounty Gain preliminarily and permanently enjoining Bounty Gain from proceeding in any way with the FINRA arbitration, declaring that Bounty Gain's dispute with UBSFS is not arbitrable, awarding UBSFS its attorney's fees and costs associated with this action, and any other further relief the Court deems just and proper. [DE 1');">1');">1');">1, p. 7].

         In Bounty Gain's Answer, it alleged three affirmative defenses: failure to state a claim, the doctrines of waiver and/or estoppel, and unclean hands. [DE 1');">1');">1');">18, p. 6');">p. 6].

         On July 9, 201');">1');">1');">15, following an evidentiary hearing, the undersigned issued a Report and Recommendation recommending that the District Judge grant Plaintiffs Motion for Preliminary Injunction [DE 7] to prevent the FINRA arbitration from going forward. See DE 43. On November 1');">1');">1');">19, 201');">1');">1');">15, the District Judge adopted the Report and Recommendation, overruled Bounty Gain's objections, issued a preliminary injunction in favor of UBSFS, and required UBSFS to post a $25, 000 security bond. See DE 59. The Court temporarily enjoined Bounty Gain from requiring UBSFS to participate in FINRA arbitration. Id. After the undersigned entered its Report and Recommendation, but before the Court issued its preliminary injunction, Bounty Gain filed an Amended Statement of Claim in the FINRA arbitration, adding Mr. Cheung individually as a party and adding Roger Lam individually as a party. See DE 55.

         Subsequently, both parties consented to U.S. magistrate judge jurisdiction, and the case was referred to the undersigned. See DEs 65, 66. On April 1');">1');">1');">11');">1');">1');">1, 201');">1');">1');">16, the undersigned denied Bounty Gain's Corrected Motion to Set Aside Order Granting Plaintiffs Motion for Preliminary Injunction [DE 73]. See DE 99. The case is currently set for the 5-day trial period beginning on Monday, May 22, 201');">1');">1');">17, on UBSFS' request for a permanent injunction and declaratory judgment against Bounty Gain.[4" name="FN4" id= "FN4">4] Both parties have filed motions for summary judgment [DEs 1');">1');">1');">155, 1');">1');">1');">156], which the Court will now address.

         III. UBSFS' MOTION FOR SUMMARY JUDGMENT [DE 1');">1');">1');">1551');">1');">1');">1

         A. Motion

         UBSFS filed its Motion for Summary Judgment [DE 1');">1');">1');">155] and Statement of Uncontested Material Facts [DE 1');">1');">1');">154] on February 24, 201');">1');">1');">17. In UBSFS' Motion, it requests that the Court enter a permanent injunction and a declaratory judgment in favor of UBSFS. [DE 1');">1');">1');">155, p. 2');">p. 2]. UBSFS argues that, because Bounty Gain did not have an agreement in writing to arbitrate with UBSFS, and because Bounty Gain was not a "customer" of UBSFS under FINRA Rule 1');">1');">1');">12200, Bounty Gain cannot force UBSFS to arbitrate. [DE 1');">1');">1');">155, pp. 8');">p. 8');">p. 8');">p. 8-1');">1');">1');">13].

         According to UBSFS, the definition of customer, "as used in FINRA Rule 1');">1');">1');">12200, [means] a person or entity, 'not a broker or a dealer, who purchases commodities or services from a FINRA member in the course of the member's business activities in so far as those activities are related by FINRA-namely investment banking and securities business activities.'" [DE 1');">1');">1');">155, 1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">10]. UBSFS alleges that Bounty Gain never purchased commodities or services from UBSFS. [DE 1');">1');">1');">155, 1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">13]. UBSFS claims that "Bounty Gain seeks to argue an amalgam of minutia that, in its view, demonstrates customer status, " which is an improper attempt to coalesce a myriad of facts into a functional equivalent of a customer relationship. Id. Therefore, UBSFS contends that it has shown all of the elements of a permanent injunction, including success on the merits of its claim, and therefore this Court should enter a permanent injunction barring Bounty Gain from proceeding with the FINRA arbitration. [DE 1');">1');">1');">155, p1');">1');">1');">1');">p. 1');">1');">1');">1');">1');">1');">1');">1');">p. 1');">1');">1');">13-1');">1');">1');">14].

         In support of its Motion, UBSFS filed a portion of the transcript of the deposition of Gene Carasick, Bounty Gain's expert witness in this case. See DE 1');">1');">1');">155-1');">1');">1');">1. Also attached to UBSFS' Motion is correspondence between certain individuals in support of the Motion [DE 1');">1');">1');">155-2], documents allegedly supporting the Motion [DE 1');">1');">1');">155-3], correspondence between Kittie Chan (the assistant of Mr. Cheung) and Roger Lam (a representative of UBSFS) [DEs 1');">1');">1');">155-4, 1');">1');">1');">155-5], Defendant's Answers to Plaintiffs First Set of Interrogatories [DE 1');">1');">1');">155-6], correspondence regarding conversion of the DDI shares to DDMG shares [DE 1');">1');">1');">155-7], a portion of the deposition transcript of Elaine Cheng (a corporate representative of UBSFS) [DE 1');">1');">1');">155-8], and a portion of the deposition transcript of Sherry Straley (UBSFS' Rule 30(b)(6) corporate representative) [DE 1');">1');">1');">155-9].

         B. Response

         Bounty Gain filed a Response [DE 1');">1');">1');">163] in opposition to UBSFS' Motion for Summary Judgment, a Response [DE 1');">1');">1');">164] to UBSFS' Statement of Undisputed Material Facts, and a Declaration of David C. Silver [DE 1');">1');">1');">165] with exhibits attached to oppose UBSFS' Motion for Summary Judgment. Bounty Gain contends that the evidentiary record demonstrates that a permanent injunction should not issue. [DE 1');">1');">1');">163, pp. 2');">p. 2, 8]. Bounty Gain argues that "at the very least, a reasonable inference can be made that Bounty Gain was a UBSFS customer." [DE 1');">1');">1');">163, p. 8');">p. 8');">p. 8');">p. 8].

         Bounty Gain asserts that UBSFS rendered services to Bounty Gain by taking possession of Bounty Gain's DDMG shares in Mr. Cheung's individual UBSFS account. [DE 1');">1');">1');">163, p. 9');">p. 9]. According to Bounty Gain, UBSFS represented "both internally and externally" that Bounty Gain was its customer. Id. Bounty Gain contends that the DDMG shares were properly registered in the name of Bounty Gain and not supposed to be in the individual name of Mr. Cheung, as alleged by UBSFS. [DE 1');">1');">1');">163, pp. 2');">p. 2-3]. Further, Bounty Gain claims that UBSFS was providing services for Bounty Gain, not Mr. Cheung, because Bounty Gain was the only one that had ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.