It’s well-known that if punishments are too harsh, triers of fact will be less willing to convict, so long as they are aware of the punishment. [Almost] no one would want a burglar to face the death penalty.
An analogous problem can come up in NASD arbitration. If a brokerage employee is named in an arbitration, and the defendants lose on any count, this goes on the employee’s public record. Apparently, this is a big deal, because folks go to a lot of trouble to get arbitration records expunged when they win on all counts.
At my arbitration, the defendants’ attorney emphasized in her closing argument that the defendant broker had not previously been subject to an arbitration, and that unless the arbitrators ruled for her side on all counts, he would have a black mark on his record.
In my dad’s case, this may or may not account for the arbitrators’ failure to even rule on the very small claim that was obviously legitimate, and may also account for the funny ruling on the bond issue, each discussed in previous posts. My father, at least, got the distinct impression that this issue weighed heavily on the arbitrators’ conscience. Certainly, defendants’ in-house counsel, very experienced in these matters, thought this would influence the arbitrators.
Regardless of what effect it had on my father’s claim, the system I’ve described puts a lot of pressure on arbitrators to rule against Claimants on small claims. Why harm someone’s career, I’m sure they say to themselves, over a few hundred or a few thousand dollars (easy for them to say, it’s not they that were harmed)? Of course, if brokerage houses know that this is arbitrators’ attitudes, they have no less incentive [Update: well they do have the incentive to avoid the costs of arbitration, counterbalanced against the desire for a reputation for fighting each claim to the death] to settle small but legitimate claims.
I can think of a several ways around this problem, but none of them seem satisfactory.
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