A good friend of mine, a plaintiff’s lawyer, tells me that he thinks one of the biggest problems with NASD arbitration is that the “public arbitrators” rarely represent the public, and, indded, they often have ties of various sorts to the securities industry. Putting intentional bias aside, such associations can certainly skew one’s perspective. (E.g., I’ve met several individuals over time who are very liberal on just about every issue except employment law, because they represented defendants in employment law cases and gradually adopted their clients’ perspectives on these cases. It’s hard not to; I’ve seen respected attorneys sincerely spout absolute drivel, because they became mentally so attached to their clients’ position.)
NASD panels are supposed to be composed of one “non-public” industry representative and two public arbitrators. The NASD has new rules trying to decrease the public arbitrators industry ties. The rules, among other things, “Exclude from the public arbitrator roster attorneys, accountants, and other professionals whose firms have derived 10 percent or more of their annual revenue in the previous two years from clients involved in the securities-related activities.”
However, there is no requirement that the “public arbitrators” individually not receive all or most of their own business from such clients. Thus, the law firm bio for the [“public arbitrator”] chairperson of my arbitration panel states that his assignments “have included representation of a defendant in civil, criminal and administrative proceedings arising from The Wall Street Journal insider trading case, a major utility in securities class actions arising from the Three Mile Island incident, issuers and underwriters in securities class actions arising from public offering or trading of securities, banks in letter of credit litigation and other matters and insurance companies in construction of policies.”
So, under NASD rules, a “public arbitrator” can, for example, spend his entire career representing defendant corporations in securities law cases, so long as his firm does a lot of other things. But a plaintiffs’ employment attorney whose firm happens to do ten percent of its business in municipal bond underwriting could not be a public arbitrator. Bizarre, no?
In my father’s case, he did not get any of the individuals he requested as arbitrators, so the arbitrators were chosen by NASD. A reform suggestion: the NASD should train individuals, some lawyers, some not, with no ties to plaintiff’s or defendants, in securities law, and have these neutral individuals serve as arbitrators, picked randomly from a pool.
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