April 5th, 2008
This page will be consolidated with
Posted by Jeffrey Kaplan
:
Updated April 3rd, 2008
I am sorry to be the bearer of bad news, but the arbitration clause is, in fact, enforceable.
In other words, you will not be able to bring your individual claim in court.
There is a lot of misinformation on this blog and it is important that investors know the facts about FINRA arbitration
and not to rely on speculation and conspiracy theories written by non-lawyers.
First, FINRA's arbitration system is not perfect, but neither is the court system.
Regardless, it is the system that you will be required to use to file a claim. As such, it is important to know the facts.
Arbitration panels are comprised of 3 people, not 3 to 7. And only one has securities industry ties.
Second, not all arbitations result in a loss for the customer.
(And comments about mediation resulting in a loss reflect a lack of understanding of what mediation is.
Mediation is merely a voluntary settlement conference.
You cannot lose a mediation. You can either accept a settlement offer after lengthy negotiations or
you can reject a settlement offer as unacceptable and proceed to your arbitration final hearing.)
Also, losing an arbitration does not automatically result in your having to pay the other side's fees,
just like winning does not mean you automatically get your fees paid by the other side.
In order for that to happen, you have to have brought a statutory claim that provides for the prevailing
party to collect their fees from the other side. Some states have such statutes and some do not.
And you are not obligated to bring such a claim. Some statutes provide for either party to get their
fees paid by the other side if they win (such as Florida) and some only provide for the winning plaintiff to get
their fees paid (such as Nevada). Finally, if you hire a lawyer on a contingency fee arrangement you do not pay the lawyer if you lose.
My firm would be willing to do group ARS arbitrations. Again, the main reason why we have not done so as of yet is that no unified group has approached us. As such, we have been filing cases based on individual clients' desires. I do not fault investors for waiting several months before pursuing arbitrations. When and if cohesive groups are interested in pursuing claims, I would be happy to speak with them about bringing a group case. It would be easy to set up a dial-in conference call during which I could answer questions about the arbitration process, etc. As you previously suggested, such groups could be based by region and brokerage firm with whom they dealt. I believe you have my contact info, but if you do not, my phone number is 305-374-1920, my email is jkaplan@dkrpa.com, and my website is www.dkrpa.com.
Statutes of limitation presently are not a problem. With the exception of a 6 month limitations period for limited circumstances, waiting several months would not be a problem for most people. By the way, the 6 years eligibility period in FINRA is not a statute of limitation. In any event, that time period is a long way from coming into play in ARS cases.
Mar 23rd 2008 9:19AM
I write in response to a request for a legal opinion concerning the UBS class action. This opinion also applies to the class actions filed against the other broker-dealers as well. First, my law firm (Dimond Kaplan & Rothstein, P.A.) practices in the areas of both claimants' (plaintiffs') securities arbitration and plaintiffs' class actions. As such, my comments come from experience, not conjecture. Full disclosure: We specifically have declined to file class action against the broker-dealers for the reasons I will discuss below. Instead, we were one of the first firms in the country to file arbitration claims on behalf of aggrieved ARS investors. We continue to file such claims each week.
Before I answer the specific questions that Mr. Ecohls asked, I first will provide my view of the landscape and investors' options.
Option number one is to do nothing and wait to see what the markets do. That is not a very attractive option, as you are completely at the mercy of the decisions made by banks, regulators, etc. (I consider blogging for weeks on end and "putting pressure" on the banks, getting media attention, and e-mailing politicians and Oprah Winfrey to be the close cousin of doing nothing.) None of those things will result in a short-term fix for this massive fraud. This is a $300+ billion problem ($60 billion if you only consider ARPS) and there is no quick fix to such a huge problem. And the media and regulators already are well aware of the problem.
Your second choice is to bring a FINRA arbitration claim. (Notwithstanding comments in the blog that it is the investor's choice to go to court or arbitration, the arbitration clauses in your customer agreements are enforceable. You can bring a claim in court, but the brokerage firm will almost certainly prevail if it moves to dismiss your case and compel arbitration.) There has been some discussion of whether bringing a group arbitration claim or a number of individual arbitrations is the better way. Over the years, I have done both and have found little difference as far as one manner being more effective than the other. Here, I believe that each ARS case, standing alone, generally has very strong merit. There is no doubt that the broker-dealers recommended and sold these products as cash-equivalent or money market-equivalent products that would provide investors with safety and liquidity. Also, the cumulative effect of many investors telling the same story is not precluded by bringing individual claims. You can bring in other witnesses, i.e., other ARS investors, to testify in each case. We believe that individual arbitrations will be the most efficient and effective way to achieve a favorable resolution for ARS investors. (Most arbitration final hearings, i.e., the trial, will take place within 12 to 14 months from the filing of the case. UBS's Answer to the first case we filed is due April 18.)
That brings us to class actions, a third option. (Note that the arbitration clause in each investor's customer agreement generally will not preclude a class action.) I have not read any of the complaints that the Gibbs firm has filed. That said, your question concerning who is covered by the UBS class action depends on the definition in the complaint of the class on whose behalf the complaint was filed. They could have limited it to UBS customers in a particular issuers ARPS, only UBS customers who invested in ARPS, or all UBS customers in any ARS. Note, however, that class definitions can change in amended complaints. If you fall into the definition of the class in the case you would be covered by the case without being a named plaintiff.
Note, however, that a class action complaint does not automatically give rise to a viable class action. A class action complaint merely alerts the court and the parties of the intent to have the case proceed as a class action. Several months (or longer) down the road the Gibbs firm will need to file a motion for class certification, at which point the defendant will argue, and court will consider, myriad arguments that, among other things, the case has too many individualized issues to treat everyone the same way and certifiy the case as a class action. One of the most obvious arguments against classing the case up is that "point-of-sale" discussions between each individual ARS investor and their individual broker precludes a uniform treatment of the case. In other words, the court could determine that the unique answer as to what was said to each investor by their broker overrides all other common issues, thereby precluding a class action. Another argument is that each investors has a sufficient amount of money at stake that a class action is not necessary. All told, we believe there are significant hurdles to the class actions.
Finally, assuming all hurdles can be overcome to get the case certified as a class action. You must decide whether you want to be part of a class action or whether you want to opt out of the class action. (You would be given the opportunity to opt out of the class during the pendancy of the case.) We believe that for smaller ARS investors, it may not be a bad alternative to be in the class. But for larger investors who have high six figures, seven figures, or more in ARS, we think being a member of a class action is a bad idea. Such investors have far too much money at issue to be subjected to what often are cents on the dollar class action recoveries. And the class action attorneys' fees likely would eat up a large percentage of any such settlement. (Arbitration fees likely would not reach the heights that class action fees would.) Finally, a class action is likely to last several years, as opposed to a year or so for an arbitration. And unless you are the named plaintiff, you essentially will have no say in how the case is handled, unlike in an individual arbitration proceeding.
I would be happy to discuss any of the above or other issues with anyone who would like to contact me. My email is jkaplan@dkrpa.com and my toll-free number is 888-578-6255.
P.S.
Mar 23rd 2008 11:09AM Ms. Swanson and I have discussed the fee issue at length.
The decision to hire a lawyer hourly or on a contingency fee depends on a number of factors, including the contingency fee and hourly rates being offered.
For a small case, a contigency fee might make more sense, of course depending on what the contingency percentage is. On a hourly case the fees that the lawyer bills easily could be more than a contingency fee and could amount to a substantial percentage of the amount at issue. For a larger case, contingency fees can get quite large, again, depending on what the contingency fee percentage is. And for these ARS liquidity cases contingency fees should be much lower than the typical contingency fee charged in a principal loss case.
Some people want to know the exact amount they would be charged in given outcome and only want to pay if they win. This would achieved in a contingency fee structure. Other people only want to pay for work performed, win or lose, which is accomplished in a billable hourly fee structure. (Note that many lawyers will not put a cap on their total hours/fees in a billable matter, unless the cap is very high. That is because the unpredictability litigation/arbitration could result in far more work than predicted.)
That said, my firm is handling ARS cases on contingency fee and hourly fee structures, depending on what makes sense for our client and my firm.
I maintain this web page to gather as much information as possible and spread the word to help other victims of this financial misrepresentation and alleged crime by the major financial institutions.
I can be reached via e-mail at russkyserge@hotmail.com
Serge Birbrair and I am not just a web page publisher, but also a victim who trusted UBS and got burnt. Do YOU want to be next?
No? Don't believe everything you hear from your Financial Adviser, as they are played by the management too.