| NEW YORK
NEW YORK Dec 4 A U.S. judge has sided with a
UBS AG request for arbitration in a proposed
class-action lawsuit seeking overtime pay brought by three
former financial advisers at a brokerage unit of the bank.
The ruling by U.S. District Judge Barbara Jones in Manhattan
marks the latest legal skirmish over contract clauses that
require arbitration. The court battles follow a landmark U.S.
Supreme Court decision handed down last year.
Arbitration provides companies a way to resolve disputes
with employees and customers privately outside the courts.
Plaintiffs' lawyers contend that so-called "class-action
waivers" in arbitration agreements prevent workers from suing
employers because of the cost of going it alone.
In the UBS case, the plaintiffs argued the waivers in their
contracts conflicted with Financial Industry Regulatory
Authority's arbitration rules that say class-action claims may
not be arbitrated.
Jones found that FINRA rules recognize that parties can
enter into agreements beyond the scope of its code and do not
affect enforcement of those agreements.
"The court accordingly finds that there is nothing within
the FINRA rules which would preclude enforcement of the
arbitration agreements between the parties," Jones said.
Jones also rejected the plaintiffs' contention that the
arbitration agreements were unenforceable.
The lawsuit, filed in March, names Eliot Cohen, Philip
Ricasata and Charles Shoemaker as the plaintiffs suing on behalf
of a group of current and former financial advisers at UBS. They
accused UBS of violating the federal Fair Labor Standards Act
and California state law by not paying them overtime.
Jeffrey Smith, a lawyer for the plaintiffs at law firm Wolf
Haldenstein Adler Freeman & Herz said: "We're disappointed in
the result and we're reviewing the opinion."
Megan Stinson, a spokeswoman for UBS, said the company was
"pleased with today's result."
Contracts that require brokers to waive class-action rights
and pursue compensation claims in individual FINRA arbitrations
are becoming more common, said Marc Dobin, a securities
arbitration lawyer in Jupiter, Florida, who represents brokers.
The purpose is to discourage brokers from filing claims, but
the strategy could backfire for big brokerages, which could face
potentially thousands of individual overtime cases.
"Instead of fighting one war with a unified enemy, they
could be fighting 1,500 battles across the country," Dobin said.
In April 2011, the Supreme Court enforced contract
provisions between two consumers suing a unit of AT&T and the
company that required arbitration, and waived their ability to
bring a class action.
While the AT&T case was about consumer rights, companies
have since sought to apply it to employment cases such as the
one facing UBS.
Apart from employment, Charles Schwab Corp also
used the Supreme Court ruling to add a new provision to millions
of account agreements in October precluding customers from
starting or joining class-action lawsuits against the brokerage.
FINRA is pursuing a disciplinary case against Schwab,
arguing that FINRA rules do not allow arbitrators to hear class
action cases. Its rules also restrict brokerages from limiting
investor rights to file court cases in certain situations.
The case is Cohen, et al., v. UBS Financial Services, Inc.,
et al., U.S. District Court, Southern District of New York,