In a blistering rebuke of UBS’ litigation tactics, the Second Circuit on Monday upheld a New York federal judge’s decision to deny the financial giant’s attempt to push a charitable trust’s mismanagement lawsuit into arbitration—declaring that UBS forfeited that right by wading too far into the courtroom waters before trying to pivot.
UBS Tried to “Have It Both Ways,” Panel Finds
The three-judge panel concluded that UBS “acted inconsistently” with the right to arbitrate when it first moved to dismiss all claims against it—without mentioning arbitration—before seeking it only after their dismissal efforts failed.
“Arbitration is not a fallback position,” the court wrote. “One cannot have it both ways.”
The panel held that UBS’ conduct clearly waived any right to arbitrate, emphasizing that their primary dismissal argument based on the Colorado River abstention doctrine—which seeks to defer to parallel state proceedings—was “particularly inconsistent with arbitration.”
Judge’s Ruling Affirmed: Trust Showed Arbitration Agreement Dispute
The Second Circuit’s ruling affirms U.S. District Judge Frank P. Geraci Jr.’s February 2024 decision, which determined that there was sufficient factual dispute over whether John Blair, a former attorney-trustee of the Peter and Elizabeth C. Tower Foundation, had the authority to bind the foundation to UBS’ arbitration clause.
Judge Geraci noted a genuine issue of material fact surrounding whether a 2006 agreement was valid in light of later trust charter developments. That question alone was enough to deny arbitration at that stage, he ruled.
