UBS PaineWebber has lost two NASDR arbitrations involving employment restrictions on, and money paid to, former J.C. Bradford partners.
When PaineWebber bought J.C. Bradford in June 2000, 164 partners signed employment agreements requiring them to stay for four years. The documents contain a noncompete clause preventing them from working in the securities business for one year if they left before four years and a six-month nonsolicitation of clients clause.
On April 12, an NASDR arbitration panel found both clauses “void and unenforceable” in a case involving Scott Butler, an Atlanta-based rep. Butler sought a declaratory judgment from the panel in advance of resigning. As soon as the panel ruled, he quit and joined First Union Securities.
The arbitration panel also rejected UBS' bid to reclaim up to $864,000, which was some of the premium it paid Butler for his partnership interest. J. Pat Sadler, Butler's attorney, argued that PaineWebber bought the partnership interest from him as an asset and the sale had nothing to do with Butler's employment. Sadler says the employment agreement does not contain language suggesting partners would be expected to return money if they left.
“UBS PaineWebber strongly disagrees with the panel's award and intends to move [in court] to vacate,” a firm spokesperson says.
In the second case decided May 8, UBS also lost its claim seeking a refund of Glenn Brandon Jr.'s partnership premium of about $1.4 million. The Birmingham, Ala.-based rep quit UBS PaineWebber for Legg Mason on March 2.
Initially, Brandon was served with a temporary restraining order, but the U.S. District Court for the Northern District of Alabama, Southern Division, refused to enjoin him from working in the securities business, says his attorney, Dana Pescosolido.
Instead, the arbitrators ordered Legg Mason to remit 30% of Brandon's commissions to UBS PaineWebber for a six-month period, but denied any further injunctive relief.
“UBS PaineWebber is satisfied with the award and intends to enforce these contracts going forward,” a firm spokesperson says.