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UBS Financial Services, Inc. v. Walzer

United States District Court, S.D. Florida

December 26, 2019




         This matter comes before the Court on Plaintiffs UBS Financial Services Inc. and UBS Credit Corp.'s (together, “UBS”) Petition to Confirm Arbitration Award. DE 1. Defendant Howard Walzer filed a Response in opposition, which incorporates by reference a Petition to Vacate filed pro se by Defendant in state court. DE 10. The Court has carefully reviewed Plaintiffs' Petition, Defendant's Response, and is fully advised in the premises. For the reasons set forth below, Plaintiffs' Petition is GRANTED.

         I. BACKGROUND

         Defendant was formerly employed by UBS as a financial advisor, and during his employment he received seven loans from UBS totaling $1, 267, 999.00, executing a promissory note in connection with each loan. DE 1 ¶ 8. Defendant resigned on December 18, 2015, and pursuant to the terms of the notes, his resignation caused the unpaid balances of the loans to become immediately due. DE 1 ¶¶ 9-10. Defendant failed to pay the balance due under the notes, and on March 25, 2016, Plaintiffs initiated an arbitration pursuant to the notes' express arbitration provision under the rules of the Financial Industry Regulatory Authority (“FINRA”). DE 1 ¶¶ 11- 13.

         Defendant sought and obtained four postponements of the arbitration hearing. DE 1-1 at 3. On February 22, 2019, Defendant requested a fifth postponement of the hearing, which at that point had been scheduled for March 5, 2019. Id. at 3-4. The basis for the request was that Defendant suffered from a medical condition which made him unable to focus or remain in a sitting position, and Defendant submitted a letter from his neurologist indicating such. Id.; DE 10-1 at 19. The arbitration panel denied this request but asked that Plaintiffs and FINRA permit Defendant to appear by videoconference, with his counsel physically present. DE 1-1 at 4. This accommodation was permitted. Id. On March 1, 2019, one business day before the hearing, Defendant submitted another postponement request, including additional evidence of Defendant's medical treatment and side effects caused by Defendant's medication. Id. The panel did not consider this postponement request because of its proximity in time to the hearing. Id.

         On the date of the hearing, both Defendant and Defendant's counsel appeared by videoconference, but due to technical issues, the panel requested that Defendant's counsel appear in person as previously contemplated. Id. Defendant's counsel arrived two and a half hours after the scheduled start of the hearing. Id. He renewed his argument that the hearing should be postponed because of his client's inability to participate in the proceedings. Id. The panel then reviewed the previously submitted medical records, which the panel concluded were incomplete in various respects. Id. After taking evidence and testimony from both sides, the panel determined that Defendant had not adequately demonstrated this his medical condition prevented him from participating in the proceedings. Id. The arbitration continued, with Defendant observing by videoconference with intermittent technical issues, such as the video feed freezing and the audio cutting in and out. DE 10-1 at 4 ¶ 23.

         On March 26, 2019, the panel issued an award in favor of Plaintiffs, granting $791, 265.94 in compensatory damages for the loan balances, $43, 566.66 in pre-judgment interest, $57, 084.88 in attorney's fees and costs, and $37.15 per diem in post-judgment interest (“the Award”). DE 1-1 at 13. Plaintiffs now seek confirmation of the Award under the Federal Arbitration Act. 9 U.S.C. § 9. Defendant argues that the Award should be vacated under the Florida Arbitration Code, alleging: (1) the arbitrators failed to postpone the hearing upon a showing of sufficient cause, in violation of Fla. Stat. § 682.13(1)(c); and (2) the arbitrators exceeded their authority in violation of Fla Stat. § 682.13(1)(d).


         “A federal court's review of an arbitration award is highly deferential and extremely limited.” United Steel, Paper & Forestry, Rubber, Mfg., Energy, Allied Indus. & Serv. Workers Int'l Union AFL-CIO-CLC v. Wise Alloys, LLC, 807 F.3d 1258, 1271 (11th Cir. 2015). The court should presume that the arbitration award will be confirmed and should defer to the arbitrator's resolution of the dispute whenever possible. Lifecare Int'l, Inc. v. CD Medical, Inc., 68 F.3d 429, 433 (11th Cir. 1995). An arbitration award can be set aside only in narrow circumstances. First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 943 (1995). The party requesting that the arbitration award be vacated has the burden to prove a basis for vacatur. Riccard v. Prudential Ins. Co., 307 F.3d 1277, 1289 (11th Cir. 2002). In the absence of such a basis, “the court must grant” an order confirming the award. 9 U.S.C. § 9.

         When an arbitration agreement involves interstate commerce, the Federal Arbitration Act (“FAA”) governs, supplemented by the Florida Arbitration Code (“FAC”) to the extent that the FAC does not conflict with the FAA. 9 U.S.C. §§ 1-2; see Kong v. Allied Prof'l Ins. Co., 750 F.3d 1295, 1303 (11th Cir. 2014) (explaining that the FAA applies to all contracts involving interstate commerce); Belz v. Morgan Stanley Smith Barney, LLC, No. 3:13-cv-636, 2014 WL 897048, *5 (M.D. Fla. Mar. 5, 2014) (stating that “the law is settled that in a case . . . involving interstate commerce, the FAC applies only to the extent that it is not in conflict with the FAA”); see also Commercial Interiors Corp. of Boca Raton v. Pinkerton & Laws, Inc., 19 So.3d 1062, 1064 n.2 (Fla. 5th Dist. Ct. App. 2009) (noting that the grounds to vacate an arbitration award under the FAA and the FAC “are essentially the same”).


         Plaintiffs seek confirmation of the Award under the FAA, and Defendant argues that the award should be vacated under Fla. Stat. § 682.13. When the underlying agreement between the parties is one involving interstate commerce, the FAA supersedes state regulation of arbitration agreements. Kong, 750 F.3d at 1303 (“[I]f a contract involves interstate commerce, a court must resolve arbitration disputes according to the FAA . . . .”). Although Defendant has couched his objection to the Award in terms of Florida law, he has not argued that the parties' agreement to arbitrate contained within the promissory notes are exempt from the FAA. The Court concludes that the FAA applies because the promissory notes between the parties involve interstate commerce. Plaintiffs are Delaware corporations, UBS Financial Services Inc. has its principal place of business in Delaware, and UBS Credit Corp. is one of its affiliates. DE 1 at 1-2 ¶¶ 2-3. Defendant is a Florida citizen. Id. at 2 ¶ 3. Because notes evidencing roughly $1.3 million in loans between diverse parties affect interstate commerce, the notes are contracts involving commerce and therefore the FAA applies. See Allied-Bruce Terminix v. Cos. v. Dobson, 513 U.S. 265, 277 (1995) (“[W]e conclude that the word ‘involving,' like ‘affecting,' signals an intent to exercise Congress' commerce power to the full.”). Accordingly, the Court construes Defendant's objections to the arbitration award under the FAA's substantially identical provisions to the Florida statutes he cites: 9 U.S.C. §§ 10(a)(3) and 10(a)(4).

         A. The arbitrators were not guilty of misconduct in refusing to postpone the hearing

         Subsection (a)(3) permits courts to vacate an arbitration award “where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced.” 9 U.S.C. § 10(a)(3); see also Fla. Stat. § 682.13(1)(c) (providing for vacatur when the “arbitrator refused to postpone the hearing upon showing of sufficient cause for postponement”). Defendant argues that he demonstrated sufficient cause to postpone the hearing because: (1) he provided a note from his neurologist describing his medical condition; (2) the ...

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