October 10, 2006
I am an attorney in Kansas City, Missouri, and I represent investors in securities arbitration disputes. I oppose the NASDs proposal to provide specifically for dispositive motions in arbitration.
Motions to dismiss are filed almost exclusively by the industry in arbitration, and they have become just another tool by which the industry seeks to enjoy all of the benefits of court procedure in arbitration, while denying customers the protections that court provides. Claimants are entitled to a hearing, regardless of the legal status or merit of their claim. If brokerage firms desire the threshhold claim challenges available in court, then they need to drop the adhesive arbitration clauses from their customer agreements and go to court.
If motions to dismiss which deny a hearing are approved, investors must receive some protection from erroneous decisions. Motions should not be considered when there are material questions of fact, nor should they be used to dismiss cases on the pleadings. Since there is no appeal, arbitrators granting such motions must be required to provide a reasoned opinion, which then must be subject to review by the Director of Arbitration. Finally, investors should be awarded costs and attorneys fees when a motion to dismiss is denied.
Motions to dismiss, which deny investors a full evidentiary hearing, are fundamentally inconsistent with arbitration. For these reasons, the NASD's proposal should be rejected.