JAMS Arbitration Better Than FINRA?

All of our readers know that I am a big fan of arbitration, and despite its flaws, a fan of FINRA arbitration, for both my investor and industry clients. As I have written dozens of times, FINRA arbitration is faster, less expensive, and at least as fair as court proceedings.

That is not to say that it does not have its flaws. Scheduling hearings is often a mess, too often arbitrators don't want to make decisions, and the certainty of evidentiary rulings is iffy, at best.

I have represented parties in other forums, notably the NYSE when it was conducting arbitrations and some of the commodity exchanges. Those all have similar issues.

I have also represented parties in AAA arbitrations, both in the securities and non-securities industries. While the experience at AAA is much smoother than FINRA, there is a significant cost difference. Arbitrations at AAA can cost thousands of dollar more than a FINRA arbitration

I have never conducted a hearing through JAMS, but Alan Wolper, of Ulmer & Berne has written a blog post regarding his recent experience at JAMS. He points out the problems with FINRA arbitration that do not exist at JAMS and gives his JAMS experience a positive review.

AAA and JAMS are more expensive, and sometimes significantly more expensive. However, you often get what you pay for.

Alan's post is at JDSupra.

End Mandatory Arbitration?

Elizabeth Warren has once again taken up the charge to end pre-dispute arbitration agreements, which she calls "forced arbitration." I have addressed the topic on numerous occasions and while I am a fan of arbitration, pre-dispute arbitration agreements can be an issue, particularly in consumer cases, such as car rental and credit card agreements.

The process and issues are quite different in the securities dispute area, and we must remember that it was the United States Government that forced all brokers and brokerage firms to arbitrate disputes, whether they agreed to do so or not. The rest of the pre-dispute arbitration issues arise from that unilateral government action.

Alan Wolper, another securities attorney, has an excellent blog post on the topic. In addressing the issue, he says that he would welcome the end of mandatory arbitration. While I suspect Alan is being a bit tongue in cheek, his point is well taken:

I wonder, however, if the claimants’ bar can say the same thing. Some of the Statements of Claim I receive likely could not survive a motion to dismiss for failure to state a claim. (Of course, I can’t file that motion in arbitration, as the Code of Arbitration Procedure doesn’t allow it.) Some could not survive a motion to dismiss based on the statute of limitations (an argument that makes arbitration panels really uncomfortable, for some reason). Some could not survive a motion on the pleadings. Some could not survive a motion for summary judgment. Some might even subject the lawyer who signed it to sanctions under Rule 11, given how far removed some of these things are from the truth. I acknowledge that court will cost my clients more, and will take longer. But, if it means that justice is really served, that the playing field is truly level, and I can go into battle armed with the various procedural devices that don’t exist in arbitration, then I would be all in.

Are We Looking At The End Of Mandatory Arbitration? That’d Be OK With Me

I have been representing investors, financial professionals and firms in securities arbitrations for over 30 years, in over 600 arbitrations. In nearly every case, the process was at least as fair as court litigation, with significant savings in time and money. However, if we want to remove pre-dispute arbitration agreements, and only arbitrate when everyone agrees to do so AFTER the dispute arises, I too am fine with that. My investor clients may not be, as many of them will be shut out from bringing their claims at all. 

The costs of court litigation are simply too high.

Related Commentary:

The End to Mandatory Arbitration?

Opponents of Predispute Arbitration Agreements Seek Neither Fairness Nor Equality; Rather, They Seek An Unfair Strategic Advantage.

State Regulators Attempting to Ban Customer Arbitration

All Mandatory Arbitration Posts from SECLaw.com

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Mark J. Astarita, Esq. represents investors, financial professionals, and financial firms across the country in securities disputes and investigations. He can be reached at mja@sallahlaw.com or by phone at 212-509-6544.

FINRA Proposes Arbitration Changes

The FINRA Board of Governors met this week to discuss a number of issues, including several rulemaking items. A summary of the arbitration rule proposals, as approved by the Board:

Chairperson Eligibility in Arbitration
The Board authorized filing with the SEC proposed amendments to Rules 12400 and 13400 (Neutral List Selection System and Arbitrator Rosters) to revise the arbitration forum chairperson eligibility requirements. Specifically, an attorney arbitrator would be eligible for the chairperson roster if he or she completes chairperson training and serves as an arbitrator through award on at least one arbitration, instead of two arbitrations, administered by a self-regulatory organization in which hearings were held.

Motions to Dismiss in Arbitration
The Board authorized filing with the SEC proposed amendments to Rules 12504 and 13504 (Motions to Dismiss) to provide that arbitrators in its forum may act upon a motion to dismiss prior to the conclusion of a party’s case in chief if the arbitrators determine that the non-moving party previously brought the same dispute against the same party, and the dispute was fully and finally adjudicated on the merits.

Panel Selection in Customer Cases with Three Arbitrators
The Board authorized filing with the SEC proposed amendments to Rule 12403 (Cases with Three Arbitrators) to increase the number of public arbitrators on the list that FINRA sends parties during the panel selection process in customer cases. Specifically, FINRA would increase the number of public arbitrators on the list from 10 to 15. FINRA would also increase the number of strikes to the public list from four to six, to keep the proportion of strikes the same under the amended rule as it is under the current rule.

- See more at: http://www.finra.org/industry/update-finra-board-governors-meeting-17#sthash.yOpUisct.dpuf