Court Opinion

ID: 4306085
Source: CourtListenerOpinion
Date Created: 2018-08-22 15:00:18.90481+00
Date Added: 2024-06-11T14:38:16.878679
License: Public Domain

17-2763
UBS Securities LLC v. Leitner

                                     UNITED STATES COURT OF APPEALS
                                        FOR THE SECOND CIRCUIT

                                           SUMMARY ORDER
        Rulings by summary order do not have precedential effect. Citation to a summary
order filed on or after January 1, 2007, is permitted and is governed by Federal Rule of
Appellate Procedure 32.1 and this Court’s Local Rule 32.1.1. When citing a summary order in
a document filed with this Court, a party must cite either the Federal Appendix or an
electronic database (with the notation “summary order”). A party citing a summary order
must serve a copy of it on any party not represented by counsel.

       At a stated term of the United States Court of Appeals for the Second Circuit, held at
the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York,
on the 22nd day of August, two thousand eighteen.

PRESENT:           JOSÉ A. CABRANES,
                   GERARD E. LYNCH,
                                Circuit Judges,
                   EDWARD R. KORMAN,
                                District Judge. *

UBS SECURITIES LLC,

                                Plaintiff-Appellee,               17-2763

                                v.

GREGORY M. LEITNER,

                                Defendant-Appellant.

    Judge Edward R. Korman, of the United States District Court for the Eastern District of New
    *

York, sitting by designation.

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FOR PLAINTIFF-APPELLEE:                                    DAVID L. GOLDBERG, Katten Muchin
                                                           Rosenman LLP, New York, NY.

FOR DEFENDANT-APPELLANT:                                   SAMUEL A. BLAUSTEIN, Dunnington,
                                                           Bartholow & Miller LLP, New York, NY.

     Appeal from a judgment of the United States District Court for the Southern District of
New York (Laura Taylor Swain, Judge).

        UPON DUE CONSIDERATION WHEREOF, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the August 7, 2017 judgment of the District Court be and
hereby is AFFIRMED.

        Defendant-Appellant Gregory M. Leitner (“Leitner”) appeals a judgment of the District
Court permanently enjoining him from proceeding with an arbitration before the Financial Industry
Regulatory Authority (“FINRA”) against Plaintiff-Appellee UBS Securities LLC (“UBS Securities”).
Beginning in April 2015, Leitner invested over $750,000 in an exchange-traded product called the E-
TRACS 2x Leveraged Long Alerian MLP Infrastructure Index (“MLPL”), which had been issued by
non-party UBS AG in July 2010. When the securities were redeemed pursuant to an acceleration
provision in the offering documents, Leitner lost approximately $500,000.

         On February 8, 2017, Leitner filed a statement of claim with FINRA, naming UBS Securities
as the sole respondent. UBS Securities then commenced this action and moved to enjoin Leitner
from proceeding with the arbitration. On May 12, 2017, the District Court granted UBS Securities’
motion, entered a preliminary injunction, and directed Leitner “to show cause, in writing filed by
June 16, 2017, why th[e] injunction should not be made a permanent judgment.” UBS Sec. LLC v.
Leitner, No. 17 CIV. 1365 (LTS), 2017 WL 5054739, at *3 (S.D.N.Y. May 12, 2017). Unpersuaded by
Leitner’s arguments in response to the show cause order, the District Court entered final judgment
in UBS Securities’ favor, permanently enjoining Leitner from proceeding with the arbitration. We
assume the parties’ familiarity with the underlying facts, the procedural history of the case, and the
issues on appeal.

                                          *       *       *

        “We review the District Court’s entry of a permanent injunction for abuse of discretion,
which may be found where the Court, in issuing the injunction, relied on clearly erroneous findings
of fact or an error of law.” 16 Casa Duse, LLC v. Merkin, 791 F.3d 247, 254 (2d Cir. 2015) (quoting
Knox v. Salinas, 193 F.3d 123, 128-29 (2d Cir. 1999) (per curiam)) (internal quotation marks omitted).
Finding no abuse of discretion here, we affirm the District Court’s judgment.

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         As a threshold matter, the District Court was entitled to determine whether Leitner’s claims
are arbitrable. “In the absence of an agreement by the parties to submit the matter of arbitrability to
the arbitrator, the question of whether or not a dispute is arbitrable is one for the court.” Citigroup
Glob. Mkts. Inc. v. Abbar, 761 F.3d 268, 274 (2d Cir. 2014) (quoting Wachovia Bank, Nat’l Ass’n v.
VCG Special Opportunities Master Fund, Ltd., 661 F.3d 164, 171 (2d Cir. 2011)) (internal quotation
marks omitted); see also Bensadoun v. Jobe-Riat, 316 F.3d 171, 175 (2d Cir. 2003) (requiring “‘clear and
unmistakable’ intent to submit the issue of arbitrability to arbitrators” (quoting John Hancock Life Ins.
Co. v. Wilson, 254 F.3d 48, 55 (2d Cir. 2001))). Leitner and UBS Securities did not enter into an
arbitration agreement in connection with Leitner’s purchase of MLPL, and Leitner has failed to
point to clear and unmistakable indicia that the parties intended to submit the issue of arbitrability to
the arbitrator.

         The District Court also correctly concluded that Leitner’s claims are not arbitrable. As a
FINRA member, UBS Securities “must arbitrate a dispute” if “[r]equired by a written agreement” or
“[r]equested by the customer.” FINRA Rule 12200. Because the parties did not enter into a written
arbitration agreement, UBS Securities is obliged to arbitrate the dispute only if Leitner was its
customer within the meaning of Rule 12200. In Abbar, we defined “customer” as “one who, while
not a broker or dealer, either (1) purchases a good or service from a FINRA member, or (2) has an
account with a FINRA member.” 761 F.3d at 275. We agree with the District Court that Leitner has
not identified any evidence suggesting that he purchased a good, such as MLPL, or service from
UBS Securities, and it is undisputed that Leitner does not have an account with UBS Securities. 1 We
therefore see no error in the District Court’s conclusion that Leitner was not UBS Securities’
customer for purposes of Rule 12200.

        Leitner’s remaining arguments, relating principally to alleged procedural errors, are meritless.
For instance, Leitner contends that the District Court erred by entering a permanent injunction
without first allowing him to conduct discovery. Though “discovery (and possibly a trial) may be
required” if “it is unclear whether goods or services were in fact purchased from the FINRA

    1
      Leitner contends that he purchased a service from UBS Securities by virtue of having paid fees
in connection with his investment. This argument is unavailing. Leitner does not argue that he paid
fees directly to UBS Securities; while his brief for the most part fails to distinguish the UBS entities,
the documents he submitted to substantiate his claim to have paid fees come from UBS AG, which
issued MLPL, and which is not a FINRA member. Even if UBS Securities received from UBS AG
some portion of the fees Leitner incurred, his claim to customer status would still fail. In such
circumstances, the services of UBS Securities would have been purchased by, and performed for the
benefit of, UBS AG rather than Leitner. See id. (no customer relationship where FINRA member
“provided services” in connection with investment, but (1) investor “did not purchase those services
from” FINRA member and (2) FINRA member “acted primarily for” its affiliate, to which investor
paid fees).

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member,” Abbar, 761 F.3d at 276, that is not the case here, where the facts relevant to the District
Court’s determination are undisputed. Moreover, before the District Court, Leitner made no effort
to identify the discovery he sought or to describe how it would have enabled him to establish
customer status. See Arch Trading Corp. v. Republic of Ecuador, 839 F.3d 193, 207 (2d Cir. 2016)
(affirming denial of discovery where “plaintiffs did not specify—and on appeal still have not
specified—what discovery they might seek”); Gualandi v. Adams, 385 F.3d 236, 245 (2d Cir. 2004)
(affirming denial of discovery where plaintiffs “failed to show how the information they hoped to
obtain from this discovery would bear on the critical issue”). Leitner’s argument that the District
Court erred by entering the permanent injunction without first holding a hearing suffers from a
similar problem: Leitner has failed to identify a factual dispute that would warrant a hearing. See Beck
v. Levering, 947 F.2d 639, 642 (2d Cir. 1991) (no requirement that district court hold a hearing before
entering a permanent injunction where no dispute of fact).

                                           *       *       *

       We have considered any remaining arguments and find them to be without merit.
Accordingly, we AFFIRM the August 7, 2017 judgment of the District Court.

                                                        FOR THE COURT:
                                                        Catherine O’Hagan Wolfe, Clerk

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