UBS Fin. Servs. Inc. v. Asociación De Empleados Del Estado Libre Asociado De P.R., CIVIL ACTION NO. 16-02017-WGY

• Decision Date: 20 December 2019
• Docket Number: CIVIL ACTION NO. 16-02017-WGY, CIVIL ACTION NO. 16-02237-WGY
• Parties: UBS FINANCIAL SERVICES INC., UBS Financial Services Incorporated of Puerto Rico, and UBS Trust Company of Puerto Rico, Petitioners, v. ASOCIACIÓN DE EMPLEADOS DEL ESTADO LIBRE ASOCIADO DE PUERTO RICO, Respondent. Asociación de Empleados del Estado Libre Asociado de Puerto Rico, Plaintiff, v. UBS Financial Services Inc., UBS Financial Services Incorporated of Puerto Rico, and UBS Trust Company of Puerto Rico, Defendants.
• Court: U.S. District Court — District of Massachusetts

419 F.Supp.3d 266

UBS FINANCIAL SERVICES INC., UBS Financial Services Incorporated of Puerto Rico, and UBS Trust Company of Puerto Rico, Petitioners,

v.ASOCIACIÓN DE EMPLEADOS DEL ESTADO LIBRE ASOCIADO DE PUERTO RICO, Respondent.

Asociación de Empleados del Estado Libre Asociado de Puerto Rico, Plaintiff,

v.UBS Financial Services Inc., UBS Financial Services Incorporated of Puerto Rico, and UBS Trust Company of Puerto Rico, Defendants.

CIVIL ACTION NO. 16-02017-WGY

CIVIL ACTION NO. 16-02237-WGY

United States District Court, D. Massachusetts.

December 20, 2019

Andres Saez-Marrero, Bellver Espinosa Law Firm, Eduardo A. Zayas-Marxuach, Roberto C. Quinones-Rivera, Maria C. Cartagena-Cancel, McConnell Valdes, LLC, San Juan, PR, Adriel I. Cepeda-Derieux, Peter J. MacDonald, Ross E. Firsenbaum, Wilmer Cutler Pickering Hale and Dorr, LLP, New York, NY, for Petitioners.

Manuel San-Juan-DeMartino, Manuel San Juan Law Office, San Juan, PR, for Respondent.

Osvaldo Carlo-Linares, Carlo Law, LLC, San Juan, PR, for Plaintiff.

Ari Savistzky, Washington, DC, Peter G. Neiman, New York, NY, for Defendants.

MEMORANDUM OF DECISION

YOUNG, D.J.¹

I. INTRODUCTION

The Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq., provides that arbitration awards are not to be undone by judicial review save for narrow grounds such as evident partiality, arbitrator corruption, or arbitrator misbehavior. 9 U.S.C. § 10(a). Before the Court are two consolidated actions which were brought to determine whether an arbitration award should be confirmed or vacated. While the procedural history of these actions is somewhat complicated because the arbitration award was confirmed in one action while the petition to vacate the arbitration award was pending in the other, the actions are now consolidated before this Court. The heart of this matter, on the merits, is whether two of the three arbitrators were evidently partial or guilty of misbehavior that prejudiced the rights of the losing party. As this Court ruled at the hearing on October 18, 2019, the motion to vacate the arbitration award was denied on the merits of those charges, the motion for judgment on the pleadings was denied as moot, and the motion for relief from judgment or for altering or amending the judgment was denied. This opinion explains those rulings.

II. BACKGROUND

On June 3, 2016, UBS Financial Services, Inc., UBS Financial Services Incorporated of Puerto Rico, and UBS Trust Company of Puerto Rico (collectively "the UBS Parties") brought an action to confirm an arbitration award styled UBS Financial Services, Inc. et al. v. Asociacion de Empleados del Estado Libre Asociado de Puerto Rico, Civ. No. 3:16-CV-02017 (the "Confirmation Action"). Pet. Confirm Arbitration Award ("Pet. Confirm"), Confirmation Action, ECF No. 1.²

On June 22, 2016, AEELA initiated a separate action in the Puerto Rico Court of First Instance, San Juan Superior Court, seeking to vacate the award claiming arbitrator partiality and misconduct. On June 30, 2016, the UBS Parties removed the case to this Court, styled Asociación de Empleados del Estado Libre Asociado de Puerto Rico v. UBS Financial Services, Inc. et al., Civ. No. 3:16-CV-02237 (the "Vacatur Action"). Notice Removal, Vacatur Action, ECF No 3.

After missing two deadlines to respond to the petition in the Confirmation Action, Judge Gelpí³ allowed AEELA's request to docket a proposed "Answer" late and denied a motion to consolidate the Vacatur Action. March 28, 2017 Electronic Orders, Confirmation Action, ECF Nos. 43 and 44. Judge Gelpí then confirmed the arbitration award and entered judgment because, among other things, AEELA failed to submit any evidence of bias or misconduct. Op. & Order, Confirmation Action, ECF No. 46; J., Confirmation Action, ECF No. 47.

On April 21, 2017, AEELA filed a motion to vacate the judgment under Rule 59 or 60, which UBS Parties opposed on May 5, 2017. Resp't's Mot. Relief J. Altering Amending J. Federal Rules Civil Procedure 59 & 60 Confirmation Action, ECF No. 48; Pet'r's Resp. Resp't's Mot. Relief J. Altering Amending J. Federal Rules Civil Procedure 59 & 60, Confirmation Action, ECF No. 60.

On April 28, 2017, AEELA moved for Judge Gelpí's disqualification on the grounds that Judge Gelpí's father had appeared as counsel in two of the underlying arbitration hearings. Mot. Recusal, Confirmation Action, ECF No. 51. The UBS Parties opposed the motion. Pet'r's Resp. Resp't's Mot. Recusal, Confirmation Action, ECF No. 53. Judge Gelpí denied the motion, but referred the matter to then-Chief Judge Aida Delgado-Colon for reassignment to another judge to consider the motion for reconsideration. Order, Confirmation Action, ECF No. 57. The case was randomly re-assigned to Judge Daniel R. Dominguez, who recused himself the next day. Confirmation Action, ECF Nos. 62 and 63. On May 11, 2017, this action was randomly re-assigned to this Court. Confirmation Action, ECF No. 64.

After the Confirmation Action was reassigned, this Court held a video conference motion hearing. The Court questioned whether there was any impediment for the Vacatur Action to proceed on the merits. Mot. Hr'g Tr. 4, Confirmation Action, ECF No. 83. The UBS Parties argued that because the arbitration award had been confirmed in the Confirmation Action, the pending motion for judgment on the pleadings in the Vacatur Action made it unnecessary to determine the merits of the Vacatur action. Id. The Court took a different approach:

THE COURT: Well, let me put this to you. I am not disposed to allow things to remain in that posture ... [AEELA's] motion ... raises very serious issues which are -- or I would like to see them before one of my colleagues. So what I propose to do here is to take their motion to vacate the judgment in this case under advisement. We've got sort of a chicken-and-egg problem here, because if Judge Delgado were to vacate the award [in the Vacatur Action], then the motion to vacate the judgment, which is before me, ... would have far more merit. On the other hand, if [Judge Delgado] does not vacate the award [in the Vacatur Action], then there does seem to me -- and I say this with respect, Mr. San-Juan, very little merit to this motion and I ought to deny it. But I would be loathe to have the entry of a judgment confirming an arbitration award used as a bar to addressing the merits at some stage.

Now, Mr. MacDonald [UBS Parties' counsel], I take it you're okay with that if I take this motion under advisement, ... close this case administratively, and it can be opened at any -- by any party once Judge Delgado has ruled, how does that suit you?

Id. at 4-5. The UBS Parties objected to waiting for Judge Delgado to determine the matter on the merits, but in the alternative suggested that the Court might consolidate the matters and dispose of the entire matter. Id. at 6. AEELA had no objection to consolidation. Id. at 7.

On June 8, 2017, the parties jointly moved to reconsider a renewed motion to consolidate Vacatur Action with the case before this Court. Joint Mot. Recons. Renewed Mot. Consolidate Related Cases, Confirmation Action, ECF No. 74.

On June 9, 2017, the Court granted the motion for reconsideration of consolidation, Order Mot. Recons., Confirmation Action, ECF No. 75, and the Vacatur Action was reassigned to this Court on June 19, 2019, with the consent of Judge Delgado. Mem. Clerk, Vacatur Action, ECF No. 53.

Thus, there came before the Court the following motions and related submissions:

1. AEELA's Motion to Vacate the Arbitration Award ("Motion to Vacate the Arbitration Award"), in the form of a supplemental brief ("AEELA's Suppl. Br.") AEELA's Suppl. Br., Confirmation Action, ECF No. 79-1, along with UBS Parties' Response, Resp. AEELA's Suppl. Br. ("UBS Suppl. Br."), ECF No. 95 and AEELA's Reply, AEELA's Reply UBS Resp. Suppl. Br. ("AEELA Reply Suppl. Br."), Confirmation Action, ECF No. 97;

2. AEELA's Motion for Relief from Judgment and/or for altering or amending the judgment pursuant to Federal Rules for Civil Procedure 59 and 60 ("Motion for Relief from Judgment"), Resp't's Mot. Relief J. Altering Amending J. Federal Rules Civil Procedure 59 & 60 Confirmation Action, ECF No. 48, along with UBS Parties' Opposition, Pet'r's Resp. Resp't's Mot. Relief J. Altering Amending J. Federal Rules Civil Procedure 59 & 60, Confirmation Action, ECF No. 60, and AEELA's Reply, Resp't's Reply Respon't's Pet'r's Resp. Resp't's Mot. Relief J. Altering Amending J. Federal Rules Civil Procedure 59 & 60, Confirmation Action, ECF No. 66; and

3. UBS Parties' Motion for Judgment on the Pleadings, Resp't's Mot. & Incorporated Mem. Law J. Pleadings Federal Rule of Civil Procedure 12(c) ("Motion for Judgment on the Pleadings"), Vacatur Action, ECF No. 41, along with AEELA's Opposition, Pet'r's Opp'n Resp't's Mot. J. Pleadings Federal Rule of Civil Procedure 12(c), Vacatur Action, ECF No. 42, UBS Parties' Reply, Resp't's Reply Supp. Mot. J. Pleadings Federal Rule of Civil Procedure 12(c), Vacatur Action, ECF No. 44, and AEELA's Surreply, Pet'r's Surreply Resp't's Mot. J. Pleadings Federal Rule of Civil Procedure 12(c), Vacatur Action, ECF No. 51.

III. ANALYSIS

This Court takes AEELA's allegations of arbitrator evident partiality and misbehavior very seriously, but AEELA fails to meet its burden to establish evident partiality or misbehavior warranting this Court's vacating the award. Alternatively, AEELA waived at least some of its challenges. Accordingly, the Motion to Vacate the Arbitration Award was denied. As a result, the Motion for Relief from Judgment in the Confirmation Action was denied, and the Motion for Judgment on the Pleadings in the Vacatur Action was denied as moot.

A. MOTION FOR VACATUR OF ARBITRATION AWARD

1. Review of Arbitration Awards Under the FAA.

Under the FAA, "[j]udicial review of an arbitral award is ‘extremely narrow and exceedingly deferential.’ " Ameriprise Fin. Servs., Inc. v. Brady, 325 F. Supp. 3d 219, 224 (D. Mass. 2018) (Woodlock, J.) (quoting ...