March 26, 2008
My name is Jeff Sonn and I have been practicing securities litigation for over 20 years. I have represented hundreds of investors in disputes with the securities industry. I am a member of the Board of Directors of the Public Investors Arbitration Bar Association.
Motions to Dismiss have become an abusive, regular routine in all arbitration cases. Defense attorneys were advised at securities industry conferences or seminars that motions to dismiss should be filed in every arbitration. Accordingly, they were.
In my experience, almost all motions to dismiss are frivolous and are denied, except in cases where there is a serious eligibility issue.
The fact is that motions to dismiss are being misused as an opportunity for the defense to argue all sorts of facts not even mentioned in the "statement of claim" or the respondent's "answer" as a way to try to climatize panels to the defense's view of the case. FINRA's rules of practice, for far too long, allowed the practice to go unabated. FINRA, to its credit, did publish its view that motions to dismiss are discouraged in arbitration, but that view is absent from the proposed rule. Hopefully, FINRA will remedy that situation.
I commend FINRA for trying to make the best of a bad situation. While I philisophically oppose any rule that allows motions to dismiss in arbitration, I have to accept the fact that FINRA will get some kind motion to dismiss rule passed. FINRA has opted to try to limit them until after the claimant's case in chief. The proposed rule is far better than the present situation, and provides for sanctions in the event a motion to dismiss was filed in bad faith.
The question then becomes is how well arbitrators will be trained to actually enforce the rule as written. It is my hope that this will become a significant issue in all arbitrator training sessions, since most arbitrators are woefully unprepared to handle motions to dismiss, most of which make legal arguments that only lawyers could understand, and most of which are mistatements of the law from jurisdictions that have no place in the jurisdication where the case is pending. In other words, I regularly see New York law cited in Florida arbitrations, even where there is a Florida case that controls the legal issue. Nonlawyer arbitrators (and even some lawyer-arbitrators) simply don't understand that New York law, for example, has no place in a case pending in Florida. The fact is that nonlawyer arbitrators cannot make these legal judgments as they are totally untrained to do so.
Motions to dismiss truly should be banned in all
situations. Arbitration is an equitable proceeding, but it has wrongly morphed into legal, court-like proceedings.
Arbitration has failed its intended purpose to be cheap, efficient and fair, into a cumbersome motion practice of motions to dismiss, motions to compel, motions for sanctions, motions to strike, motions in limine, motions for rehearing, motions for reconsideration, and other creative motions.
Hopefully, the proposed rule is the first step in curbing abusive motion practice.
While I am not happy with the proposed rule, it is better than the present situation, which is a motion to dismiss in every case. I therefor support the proposed rule, and commend FINRA for making the effort to curb abusive motions to dismiss.
I encourage the Commission to approve the rule, and encourage FINRA to propose more rules to curb abusive motions practice.