UBS Wealth Management this week filed for a change in venue in a former employee’s appeal of an arbitration ruling that gave him $300,000 in damages but required him to pay back the firm nearly $1.9 million to cover promissory notes that were outstanding when he left UBS for another job.
According to the filing, UBS believed it was entitled to have William Paynter’s Oct. 26 appeal moved from the Arizona Superior Court for Maricopa County to the U.S. District Court for the District of Arizona because two parties reside in different states and the amount contested exceeds $75,000. The change of venue was approved.
An attorney for UBS did not return a call by press time to discuss any perceived advantage the move might give the firm. But Paynter’s attorney, Laurence Landsman of Chicago’s Latimer LeVay Fyock, said the change didn’t matter to him or his client.
“[Paynter] has a strong claim regardless of jurisdiction,” Landsman said.
According to documents within the filing, the $300,000 award in Paynter’s favor included $200,000 in a counterclaim of constructive discharge and $100,000 to cover what he alleged was a UBS misrepresentation of its loan program. To retain top talent, it’s not unusual for brokerages to extend loans to their best performers as part of their compensation packages, and the loans are typically forgiven if the employee stays a certain number of years. The amount due on the promissory notes is $1,897,662.34, excluding interest, of which Paynter would be responsible for 75%, the documents said.
Landsman said the awarded damages are the more important aspects of the arbitration award. “The constructive discharge and the negligent misrepresentation of their loan program are two very significant findings,” he said.
At issue, and part of the basis of Paynter’s appeal, is that by awarding Paynter damages for misrepresentation of the loan program and simultaneously awarding UBS repayment of those loans, the arbitration panel has created a misalignment where both those decisions can’t be correct.
In his filed response to UBS’s claims, Paynter described his employment with the firm as fraught from the start. He had been a successful wealth manager for more than 20 years and had built a book of business of $100 million at Morgan Stanley by the time UBS approached him, the document said. During their negotiation, Paynter said he had four conditions, according to the filing: UBS had to allow him to manage a partial share dividend reinvestment program, which was in place at Morgan Stanley; his customers would have use of an Android mobile app; he would be able to maintain client bond and debt strategies, and UBS’ bond desk would support him in this; and that his compensation structure would be the same as what he had at Morgan Stanley.
Paynter joined UBS in October 2014, and left in April 2017 for Wells Fargo after he alleged that UBS had reneged on all of his conditions, in some cases putting Paynter in the position of losing clients, and even assigning some of his clients to other advisors.
“After years of highly stable assets and strong production, Paynter’s assets and production plummeted because of UBS’s conduct,” the document stated. “Paynter felt a great deal of pressure and emotional stress, and was effectively forced to resign.”