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In re WorldCom

October 16, 2007


The opinion of the court was delivered by: Denise Cote, District Judge

This Document Relates to: ALL ACTIONS


Howard Gimbel ("Gimbel") and Marvin Davis ("Davis") have moved for reconsideration of a decision entered on July 5, 2007, which barred them from arbitrating claims against UBS Financial Services Inc. ("UBSFS") to the extent that those claims rest on transactions in WorldCom options or other WorldCom securities.

Gimbel and Davis were members of the class that brought federal securities law claims against individuals and entities associated with WorldCom, Inc. ("WorldCom"), including an underwriter affiliated with UBSFS. They did not opt out of the class action, and are bound by the release entered in the WorldCom class action. Indeed, Davis submitted a proof of claim to and recovered from the WorldCom class action settlement fund. Gimbel and Davis also challenge, pursuant to Rule 65(d), Fed. R. Civ. P., the injunction issued against them on July 20.

The Gimbel and Davis motion does not identify any basis for reconsideration; it either raises new issues or reargues issues already litigated and lost. At no point does it point to an argument or authority presented to this Court that was overlooked in the July 5 decision. Therefore, the motion for reconsideration is denied. The attack on the July 20 injunction is rejected, as the injunction fully complied with the requirements of Rule 65(d).


On June 22, 2006, Gimbel and Davis commenced an arbitration against UBSFS before the Chicago Board Options Exchange to recover losses they had incurred in trading WorldCom securities. UBSFS, which was formerly known as Paine Webber, Inc., had served as their broker. They claimed that they should have been advised to diversify their holdings instead of advised to sell naked put options on WorldCom stock.*fn1 UBSFS raised as an affirmative defense the claimants' failure to opt out of the WorldCom class action, and on May 11, 2007 requested an injunction barring the arbitration pursuant to the judgment entered in the WorldCom securities class action. Pursuant to a scheduling order, Gimbel and Davis submitted their written opposition to the UBSFS request on June 1.*fn2 It consisted of ten single-spaced pages and attachments. They also filed an unauthorized sur-reply on June 19. Counsel were heard at a conference held on June 22, and an Opinion of July 5 granted the request for an injunction. That Opinion is incorporated by reference, and familiarity with it is assumed. In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2007 WL 1946685 (S.D.N.Y. July 5, 2007)("July 5 Opinion").*fn3

The July 5 Opinion required UBSFS to submit its proposed injunction upon notice to the claimants not later than July 13.

On July 18, the claimants commented on the language of the proposed injunction.*fn4 A permanent injunction was issued that day ("July 20 Order"). In brief, the July 20 Order enjoined the claimants from arbitrating against UBSFS or its affiliates claims arising out of claimants' transactions in securities issued by WorldCom as well as options based on the value those securities.

On July 25, the claimants filed a motion for reconsideration. UBSFS has opposed the motion, and the claimants filed their reply on August 20.


I. Motion for Reconsideration

The standard for a motion for reconsideration is strict, and "reconsideration will generally be denied unless the moving party can point to controlling decisions or data that the court overlooked -- matters, in other words, that might reasonably be expected to alter the conclusion reached by the court." Shrader v. CSX Trans., Inc., 70 F.3d 255, 257 (2d Cir. 1995). Reconsideration "should not be granted where the moving party seeks solely to relitigate an issue already decided," nor may the moving party "advance new facts, issues or arguments not previously presented to the Court." Shamis v. Ambassador Factors Corp., 187 F.R.D. 148, 151 (S.D.N.Y. 1999). The decision to grant or deny the motion is within the sound discretion of the district court. See Devlin v. Transp. Commc'n Int'l Union, 175 F.3d 121, 132 (2d Cir. 1999).

Many of the arguments that Gimbel and Davis raise in the motion for reconsideration present new theories and issues that they did not raise in their June 1 and 19 submissions or at the June 22 conference. These include arguments premised on (1) a violation of their due process rights, (2) the doctrines of claim preclusion and res judicata, (3) the options having been issued by the Chicago Board Options Exchange as opposed to WorldCom itself, (4) the fact that there was no recovery for WorldCom securities sold before ...

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