Page 4 - Alternative Dispute Resolution

S4 | MONDAY, NOVEMBER 17, 2014 | Alternative Dispute Resolution
| NYLJ.COM

relating to who should attend the mediation,
Mediation in Securities
and the pros and cons of extensive “opening
statements.” Lastly, this article will address
certain “best practices” to ensure that an
agreement reached at mediation is inal and
Arbitration Cases: enforceable.

The Numbers Do Not Lie
Regain Control
Industry statistics indicate that mediation

is an effective way of resolving securities
industry disputes without having to incur the
costs of proceeding to a inal hearing. FINRA
Dispute Resolution reports that approximate-
Of the Process
ly 80 percent of the cases that are mediated
through its voluntary mediation program are
successfully resolved before inal hearing.2 In
addition, some of the more experienced and

well-known securities mediators tout “suc-
cess rates” that run as high as 90 to 95 per-
cent. Moreover, even in those cases in which
a settlement is not achieved, the mediation
process can provide useful “discovery” about
the parties and their respective claims and
defenses in a forum in which discovery is
otherwise relatively limited. (FINRA arbitra-
tion rules generally do not permit the par-

ties to take depositions or even propound
interrogatories.) Thus, while mediation, in
and of itself, can be an economic event—in
terms of attorneys fees’ for preparation and
attendance, and mediator fees that can run as
high as $7,000 per day—the potential beneits
of resolving, or at least learning more about,
a matter makes mediation a worthwhile con-
sideration in many cases.

Initial Questions

Given the costs of mediation, the thresh-
old question generally is whether to pursue
mediation at all. This determination turns
on several, relatively common sense factors. K
First, the parties should consider the nature TOC
IGS
and complexity of their claims and defenses. B
If the issues in a given case are relatively
simple and/or undisputed (or involve rela-
tively smaller amounts), then the parties may
not “need” a mediator to help sort them out, BY GREGG J. BREITBART
ties cases are notoriously unpredictable, and FINRA arbitration rules expressly state that
and instead may choose to engage in “direct” AND GEORGE F. MEIERHOFER
(2) the economic and psychological costs to motions to dismiss are “discouraged.” (See
negotiations. On the other hand, if there are clients of preparing a case and proceeding FINRA Rules 12504(a)(1) and 13504(a)(1)).
signiicant, disputed factual issues or legal Since 1987, when the U.S. Supreme Court through a inal hearing—while likely less than This, in turn, encourages the iling of what
theories that should be “tested” before a issued its opinion in Shearson/Ameri- what would be spent in litigation in state or euphemistically might be described as cases

decision is made to proceed to inal hear- can Express v. McMahon, 482 U.S. 220 federal court—are substantial. There are a of “less certain merit,” because experienced
ing, then mediation should be considered. (1987), customers of securities broker-deal- few reasons why this is so. First, it is rela- claimants’ counsel understand that they have
Second, counsel should consider how a client ers generally have been required to resolve tively easy to become a FINRA arbitrator, a good chance of getting an arbitration panel
will respond to the process of mediation. In any disputes with their broker-dealers (and and no industry experience is required. In to hear their client’s case, without having
some cases, counsel may determine that a their associated personnel) by way of binding fact, amendments to FINRA arbitration rules to overcome summary judgment motions or
client may “need” the process of mediation arbitration conducted under the auspices in 2011 and again in 2013 actually promote other costly and potentially case-dispositive
to understand potential weaknesses in their of the industry’s self-regulatory organiza- the increased use of so-called “public” arbi- obstacles that would exist in court. Third,
case and the value of a settled resolution. On tion, formerly the National Association of trators1 who, by deinition, do not have any arbitration awards are extremely dificult
the other hand, more sophisticated and/or Securities Dealers (NASD), and now known recent or material involvement in—and, to reverse or modify (for either side), even

experienced clients may be more capable of as the Financial Industry Regulatory Author- therefore, may not have any relevant expe- where it is fairly obvious that the arbitra-
making a “business decision” without going ity (FINRA). For several decades, commen- rience in or understanding of—the securi- tors simply got it wrong under applicable
through that process. Third, some clients tators and practitioners have railed about ties industry. And, while most arbitrators law and/or the facts of a given case.
may be concerned that suggesting mediation supposed pro-industry or pro-investor biases presumably are honest and well-intentioned, Because of these inherent uncertainties
may convey “weakness” or a lack of coni- that allegedly “infect” the process. Regard- anyone who has practiced for any length of and costs associated with securities arbi-
dence in their claims or defenses. However, less of which side of the argument one takes time in this area has experienced the arbitra- tration, many participants are turning to
as mediation becomes more widely used in in that debate, two things are reasonably tor who is frequently distracted or inatten- voluntary, non-binding mediation, before a
securities cases, this factor becomes less certain: (1) awards by arbitrators in securi-
tive, or who unduly prolongs the length of a qualiied, “neutral” mediator, in an effort to

relevant. Parties—and particularly their hearing by virtue of extended lunch breaks regain some control over the dispute resolu-
experienced counsel—should understand and abbreviated hearing sessions. Second, tion process and the outcome of their cases.
that seeking an eficient resolution of a mat- GREGG J. BREITBART is a partner with Kaufman Dolo- there is very little “motion practice” in securi- This article irst will address whether to medi-
ter does not necessarily convey weakness, wich & Voluck in its New York and Florida oices. ties arbitration, and very limited grounds on ate, when to mediate, and the importance
or anything other than sound business and GEORGE F. MEIERHOFER is a partner in the New York which a party may seek a summary disposi- of selecting a qualiied mediator. Next, this
legal judgment. Lastly, mediation, by contract
oice.
tion of a case before inal hearing. Indeed,
article will discuss certain considerations