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A Manhattan Supreme Court justice has confirmed an arbitration panel’s award of $1.37 million in deferred compensation, and $937,495 in related attorney fees and severance pay, to a former trader terminated by UBS Securities for allegedly allowing an $18 billion trade without authorization.

Commercial Division Justice Eileen Bransten found that the arbitration panel was “well within its rights to declare [the trader’s] termination unjust” and did not exceed its authority when interpreting his employment agreement, despite UBS’s argument that the trader was an at-will employee who could be granted deferred compensation by an arbitrator only in limited circumstances.

“As it is clear from [Gianluca] Passaretta’s employment agreement, the remedies for contractual violations were contemplated by both parties when the initial arbitration agreement was signed, so this Court has little room to oppose the arbitration panel’s ultimate determination on this matter,” Bransten wrote. “Accordingly, [UBS] has failed to meet its burden showing that the panel exceeded its authority and rewrote the terms of the contract between the parties when such an arbitration was so clearly contemplated from the outset.”

The deferred compensation demand before the panel, and its awards confirmed by Bransten, were contested largely based on the trader’s original offer letter stating that he was an at-will employee, and UBS’ claim that the panel had misinterpreted a “pre-dispute arbitration agreement” signed by the parties, a “Form U-4.”

Bransten readily disagreed, ruling in Passaretta v. UBS Securities, 653340/2016, that the panel acted properly in awarding millions to Passaretta.

“This court finds the panel was well within its rights to declare Passaretta’s termination unjust and, understood the conditions with which Passaretta could be awarded his deferred compensation,” she wrote. “While the panel may not have stated it outright, it is clear to this court the panel agreed with Passaretta’s arguments insomuch as his unjust termination warranted payment of his deferred compensation.”

The justice further noted that to rule otherwise, and specifically to analogize the facts underlying the situation to a distinguishable UBS-cited case, Stolt-Nielsen v. Animaljeeds Int’l Cwp., 559 U.S, 662, 671, (2010), would be to “threaten[] the validity of a vast array of arbitrated contractual disputes and call[] into question the efficacy of the notion of arbitration.”

“This court finds the law mandates that this court give broad leeway to the arbitrators’ determinations of the meanings and remedies provided for under a particular contract,” she said.

In May 2013, an employee working on Passaretta’s trading desk at UBS executed an $18 billion trade without obtaining the required approval from UBS’ market risk team, Bransten wrote.

Passaretta hurriedly tried to get after-the-fact approval for the trade without advising that it had already happened. When no approval was given, he then informed the market risk team that it had been executed, Bransten said.

The next month, he was fired. Moreover, because UBS said it was “for cause,” the bank claimed he had forfeited his deferred compensation.

But according to Passaretta’s lawyer, Blaine Bortnick, a New York-based partner at Rasco Klock Perez & Nieto, it was not Passaretta, but rather his subordinate, who had actually placed the trade.

And after 17 days of hearings, the arbitration panel found that Passaretta had been terminated without cause, Bransten wrote.

In 2014, Passaretta commenced an arbitration against UBS, seeking, among other things, his deferred compensation, attorney fees and, later, severance pay as well.

The issue before Bransten, who was asked to confirm or vacate the award, was “whether the panel reached beyond its authority in finding Passaretta was entitled to his deferred compensation as a result of the panel’s determination [that] Passaretta was ‘unjustly terminated.’”

After dispensing with deferred compensation, Bransten turned to the attorney fees and severance pay awards of $868,264 and $69,231, respectively. In several paragraphs, she “decline[d] to find the panel overreached its authority or decided claims which were not in front of it.”

“The issue of severance was clearly raised in the hearing and, to the extent ERISA was not initially raised fully, the parties were directed to brief the issue thereby certainly putting it before the panel,” she wrote.

The justice also ruled in the Oct. 25 decision that there was no apparent impartiality or bias on the part of the panel, despite “several instances where the arbitrators expressed sympathy towards the petitioner [Passaretta] in stray remarks during the hearings.”

“Though these comments may give rise to an inference of empathy,” she wrote, “without more solid evidence of a concrete personal or business link between the arbitrator and Passaretta, they do not meet the heavy burden on a party attempting to prove partiality.”

Lloyd Chinn, a New York-based partner for Proskauer Rose representing UBS, could not be reached for comment.

Bortnick said in an email of Bransten’s opinion, “This decision … is in line with every other court that has considered the effect of an arbitration clause on the employment at-will doctrine. This includes both federal Circuit and District courts nationwide.”

He also said that, based on his research, Bransten’s decision appeared to be the first published decision in New York state recognizing that an employment agreement setting forth arbitration provisions alters an employment relationship from at-will to something more contractually bound, in this case to a standard of “justifiable cause” for termination.

Bransten herself did not state that her ruling represented a first in New York state case law.

Bortnick added that, if appealed, UBS “would stand virtually no chance of success and [it] would only serve to obtain the [Appellate Division,] First Department’s imprimatur upon the legal basis upon which the arbitrators decided in favor of Mr. Passaretta.”