AdvisorHub (June 7, 2022) - After beating back a $9.3 million claim from an investor in arbitration, UBS Financial Services has asked a court to hold them liable for its nearly $1 million in attorney fees based on the allegation that they filed a “frivolous” complaint.

UBS, which filed its motion in late May in a federal court in Florida, claims they are entitled to have the investor cover its $945,000 legal bill under state law that favors shifting costs to the losing side in arbitrations. 

UBS had asked the Financial Industry Regulatory Authority arbitrators in the case, which was heard in Boca Raton, to assign attorneys fees, but they made an unusual decision to defer and referred UBS to make a claim with “a court of competent jurisdiction,” according to the UBS’s court filing. 

The investors— Karim Maskatiya, a co-founder and former owner of a company that produces slot machines and other technology for casinos, and trusts he controls—first filed their claim in October 2020, based on allegations of unsuitable investments, unauthorized and excessive trading, negligence and other allegations dating back to 2011. 

Maskatiya alleged that UBS had mismanaged accounts by accruing management fees, executing unauthorized and excessive trades and making “commercially improper investment decisions” including the purchase of certain retail bond funds, according to the award.

The claimants named UBS and three brokers in Coral Gables, Florida, who early this year left the wirehouse for NewEdge Securities, a Stamford, Connecticut-based broker-dealer and advisory firm. The team, which had generated $15 million in annual revenue at UBS, left on January 28, the day after the arbitrators issued the award in the case and granted the brokers expungement of the complaint from their records. 

“The Panel found no credible evidence that the account was churned or was invested in unsuitable investments,” the arbitrators wrote in their award. “The Panel found credible testimony that the trades were executed to increase Claimants’ return and not for the purpose of enriching the brokers.”

The arbitrators also said the investor’s claims were “not supported by the material facts.”

In asserting that Maskatiya’s arbitration claims were frivolous, UBS noted that evidence produced in discovery showed that the firm “had acted reasonably and lawfully at all times” but Maskatiya and his trusts “chose to continue the litigation.”

UBS was represented in the matter by lawyers at Katten Muchin Rosenman, LLP in Chicago. The arbitration itself took place over seven hearing sessions in January. The panel assessed $12,000 of the hearing session fees to Maskatiya and the claimants and $1,500 to UBS. 

While the legal fees seem high for the relatively short arbitration, they are not atypical of wirehouses’ costs to defend against a complaint exposing them to $9 million in liabilities, according to Michael Edmiston, the president of the Public Investors Advocate Bar Association and a lawyer in Studio City, California. 

UBS’s motion sends a warning to other potential claimants to think twice before filing complaints seeking such large damages based on allegations they are unable to substantiate before arbitrators, Edmiston, who was not involved in the case, added.

Edmiston said UBS has a “clear” path to prevailing on the attorney fee claims provided they can prove they were reasonable for the hours billed. 

Neither a spokesperson for UBS nor the lawyer representing Maskatiya and his trusts returned requests for comments for this story.