What Happens When Potential Arbitrators Don't Answer The Phone

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I think that most lawyers who handle arbitrations, no matter what side of the table they occupy, would agree that one of the most important components of the case – perhaps the most important – is the selection of the arbitrators who comprise the hearing panel.  Doesn’t matter how good your case is, either from a legal or factual perspective, if the panelists are simply not going to care what you have to say.  For instance, as a defense attorney who represents brokers and broker-dealers, it would likely be devastating to my case to have a PIABA member sit on the panel (as a supposedly public arbitrator).

Given this, it comes as no surprise that diligent counsel devote a considerable amount of time, effort – yes, and client dollars – towards the arbitrator selection process.  We pore over the arbitrator profiles that FINRA provides.  We review in great detail every prior arbitration award with which each prospective arbitrator was involved (and with some very experienced arbitrators, you are looking at a LOT of awards).  We conduct Google searches, to see what information lurks on the internet.  For instance, if the arbitrator candidate is an attorney, we check his or her website to see what kind of cases they handle (and on what side of those cases they appear).  We try to scrounge up anything the arbitrator candidate may have published, ranging from learned treatises to letters to the editor of local papers.  Doesn’t matter what it is, we want to find it and read it.  It is such a labor intensive exercise that several vendors are making a good living selling arbitrator ranking packages to lawyers who may lack the time or inclination to undertake this expensive and time-consuming process themselves.

With that said, the effort is worth it.  The selection of the arbitrators is so important to the potential disposition of the case that corners simply cannot be cut.  Which makes it so infuriating when, after all this work and all this money spent, a prospective arbitrator who I have decided to rank simply decides that he or she has better things to do than participate in a case.

Let me tell you what got me started on this little rant.  I am defending an arbitration in which there will be only a single arbitrator.  That means that claimant’s counsel and I each got the same list of ten potential arbitrators. We were each permitted to strike up to four.  Doing the math, that means that even if we each strike the maximum to which we are entitled, AND we each strike completely different people, that only comes to eight strikes, so there will, necessarily, still be two arbitrators left for FINRA to select.

What happened in this case, however, is that when I got the letter from FINRA identifying the arbitrator, it was not someone who had been on the list of ten candidates.  How can that be, I wondered.  Perhaps it was a mistake.  So, I looked into this.  And what I discovered astounded me.

According to the FINRA Case Administrator who was assigned to this case, “the arbitrators selected were not available and we had to extend the list to generate random arbitrators from NLSS,” i.e., the Neutral List Selection System, described on FINRA’s website as “a computer algorithm, to randomly generate lists of arbitrators from FINRA’s arbitrator roster.”  “Not available?”  Not available for what?  I couldn’t figure it out, so I followed up and asked him what “not available” means.  In response, he told me that “[a]ll of the arbitrators on the list were either unreachable or declined to sit on the case.”

This is when I finally got angry.  According to FINRA, all my hard work reviewing and ranking and striking the potential arbitrators can be thwarted simply because someone doesn’t pick up the phone when FINRA calls to tell them they’ve been selected by the parties to sit on a case?  Or FINRA has an old phone number or email address?  Or, perhaps worse, the arbitrator simply punts?  That hardly seems fair to me or my client.

So I pursued the matter with Rick Berry, the head of FINRA Dispute Resolution, to try to get some clarification.  I have always found Rick to be reasonable and responsive, and that remained true here.  While he didn’t respond himself, he had of one his Regional Directors do so.  I was told that in my particular case, indeed, between claimant’s counsel and me, we had struck all but two of the ten names.  Of the two that remained, apparently “one did not respond to our request to serve, and one declined to accept the case.”  In response to my question about FINRA’s “efforts to contact arbitrators to serve, and how often they fail to respond or decline to accept a case,” the Regional Director said,

When appointing arbitrators to a case, we first reach out to them via email or phone, and then follow up with them if we haven’t heard back within a day or two.  Absent special circumstances, we wait for a total of four days before moving on to the next arbitrator.  We certainly understand the time, effort, and cost by the parties to review the list of potential arbitrators.  FINRA does not keep statistics regarding how often arbitrators fail to respond to a request to serve or decide not to accept a case.  However, we appoint ranked arbitrators in the vast majority of our arbitration cases, which would indicate that the circumstances in this case are unusual.

Unusual, perhaps, but still not fair.

I did ask a follow-up question, which was what, if anything, does FINRA do to arbitrators who can’t be bothered to respond, or who decline to participate in a case when the parties have jointly determined to rank him or her.  My hope was that I would learn that FINRA culls these individuals from the roster of potential arbitrators, so no other parties will have to suffer the same consequence as claimant’s counsel and I did in my particular case.  Unfortunately, that is not how FINRA handles it.  According to FINRA, “We don’t currently remove arbitrators from our roster for failing to respond to our request to serve on a case, but we appreciate your suggestion and will consider doing so.”

So, there you go.  They’re going to think about it.

Look, arbitration is hardly a perfect process.  There are a ton of procedural devices that parties in an arbitration agree voluntarily to forego by not having their dispute heard in court. But, one of the important trade-offs is that in arbitration, you have some control over who hears the case.  When that trade-off is taken away, however, and the hearing panel is simply appointed, it makes the process so much less appealing.  And I say this despite the fact that the arbitrator who was appointed in my case seems to be fine, and committed to do an excellent job.

The point is that the parties should always have the right and the ability to dictate the composition of the hearing panel under any circumstances.  If the ranked arbitrators decline to participate, the parties should be given the chance to rank replacement candidates, rather than having appointed arbitrators foisted upon them.  Moreover, FINRA should remove arbitrators from the roster if they bail when asked to participate.  And, finally, if FINRA doesn’t do that, then it should include in the arbitrator profile data about this, so I know when ranking arbitrators who on the list may have a history of deigning not to participate in a case, or of being “unavailable.”  It’s still not fair, but it would be an improvement on the current process.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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