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.

The Suit: Family Ties, Alleged Abuse of Trust, and UBS’ Role

Filed in 2022, the lawsuit accuses John Blair—a former trustee and attorney—of manipulating the foundation’s elderly creators and steering assets under the control of his son, Jay Blair, a senior VP of wealth management at UBS. The plaintiffs allege this maneuver was designed to benefit the Blairs personally at the expense of the charitable trust’s mission.

According to the complaint, UBS “sanctioned” Jay Blair’s actions and prevented other trustees from exercising any authority over the foundation’s accounts since taking control.

The Tower Foundation, created in 1990, supports organizations in New York and Massachusetts that assist children and youth with intellectual and learning disabilities, mental health, and substance use disorders.

Panel Slams UBS’ Strategic Flip-Flop

The court criticized UBS’ litigation strategy as a classic case of forum shopping.

“They intentionally availed themselves of the district court’s authority... then sought to compel arbitration only after losing,” the panel observed.

Had UBS succeeded in its Colorado River motion, the case would have been dismissed or stayed in favor of state court—making any future arbitration attempt impossible, the court emphasized.

Legal Teams and Panel Composition

• Trustees are represented by Brian E. Whiteley and Benjamin Reed Zakarin of Barclay Damon LLP.

• UBS and other defendants are represented by Terrance P. Flynn of Harris Beach Murtha Cullina PLLC and Joshua S. Bratspies of Sherman Atlas Sylvester & Stamelman LLP.

• Panel included Circuit Judges John M. Walker Jr., Beth Robinson, and Sarah A. L. Merriam.