Labor & Employment Law

FINRA Changes Arbitration Hearing Practices

By Dobin & Jenks

In an email from FINRA, formerly NASD, dated April 14, 2008, the agency announced that the arbitrators' procedures on damages and closing the hearing will be changing. This is, ostensibly, to unify the scripts between NASD and NYSE arbitration codes.

The first change has to do with damages. In an effort to have the percentage "win" rate more accurately reflect what was sought at hearing, the arbitrators will be asking for a summary of the "final request" for damages. It is off of this amount that the statisticians calculate customer "win" rates and percentages. Since the statisticians use the amount sought as described in the award, this amount will now be based upon what the party asks for at hearing.

Frankly, I don't see how this will make a difference. If it makes FINRA feel better, so be it.

The next change is more interesting. The NASD script always ended with the chairperson asking the parties if they had a "full and fair opportunity to be heard." Every once in a while a party would say "no." Interestingly, there's nothing that I recall from the chair's script that tells the arbitrators what to do in the case of "no." Basically, it causes a fire drill. Or the chair says that the objection is not relevant or necessary. I once used the threat of a "no" in a case where I felt the arbitrator was being unfair in the allocation of time to present my case. The arbitrator, an otherwise fair-minded individual, changed course and I was given the opportunity to present my client's case in full (successfully, as well).

The new script will ask the following "Do the parties have any other issues or objections that you would like to raise that you have not previously raised?" This was, I think, the intent of the prior question anyway. But there is a big perceived difference between "full and fair" and "any other issues or objections."

FINRA states that "full and fair" is nowhere to be found in its arbitration codes. Given some of the results I've received, "fair" certainly isn't in there.

These are hardly earth-shattering changes. But ever since I attended my first arbitration (when dinosaurs roamed the earth) I have heard the "full and fair" language. I'll miss it.

That's the view from The Law Planet - Jupiter, Florida.

Full post as published by The Law Planet Blog on April 21, 2008 (boomark / email).