April 10, 2008
My legal practice is concentrated on representing public investors in the Midwest.
Although I support the proposed limitations on pre-hearing motions to dismiss, I believe that these limitations should apply to all dismissal motions, whenever filed. Investors are entitled to a hearing, which means both the claimant and the respondent present their evidence to the arbitrators, and the arbitrators hear that evidence and issue a decision on the merits of the parties arguments. Allowing a respondent to file motions to dismiss during the arbitration hearing (at any time it decides) introduces a legal procedure into a non-legal proceeding, which is inappropriate. It is inappropriate because arbitration is not a judicial proceeding. Arbitrators are often not lawyers and do not have the training or experience to apply technical legal standards such as those that apply to dismissal motions (or what may become motions for summary judgment, or motions for a directed verdict) and their decisions, even if explained, are not subject to the appellate review that ensures due process. FINRA is basically asking an arbitrator to make a decision in the context of private arbitration that only a state or federal judge could otherwise make if the same issue was raised in court. It is unrealistic to expect an arbitrator (lawyer or non-lawyer) to make that type of technical decision.
I strongly recommend that the proposed rule be amended to provide that motions to dismiss be rejected at any stage in the arbitration proceeding, subject only to the narrow exceptions in the current proposal. These types of motions are unnecessary because arbitration is already sufficiently expeditious that little cost savings is created by a pre-hearing dismissal. FINRAs attempt to create a place in arbitration for Motions to Dismiss is simply unnecessary, and its solution as to how to regulate such Motions has the potential for disaster and confusion.