September 19, 2005
In my experience arbitrators do try to reach an equitable outcome, but nationwide that has resulted in unconscionably inconsistent outcomes. 90 of all public arbitrators are professionals,come out of, or serve in the business/financial community. Unfortunately, most claimants come from the pigeon class, a category never represented on the arbitrator lists.
Id suggest three lists, Public, Industry, and Chair. Claimant chooses from the Public List, Respondents choose from the Industry list. No peremptory challenges permitted. The respective Industry and Public arbitrators select the Chair from a list of 10 where each party has one peremptory strike. Public and Industry arbitrators are limited to one hearing per 12 months. Chair Arbs are permitted 6 hearings per year to foster consistency. Voila a balanced panel of biased arbitrators, something Id prefer to the present system in every case.
The NASD Proposal is a small step towards restoring fairness to securities industry arbitration. More important however, the proposal does nothing to address the vast disparity of outcomes in cases with virtually identical fact patterns, not only in varying hearing districts, but within the same hearing district,
As long as investors must arbitrate before totally business biased panels, they rarely will get a truly fair hearing and are likely to be held to overly sophisticated standards they were never aware of.
Finally, Industry arbitrators are always industry affiliated personnel, but public arbitrators are rarely pigeon class. Rather public arbitrators are drawn from that part of the business community that the Industry deems acceptable to arbitrate pigeon class claims. The system survives only because we tolerate injustice.It is far from the best of all possible worlds