The Neutral Corner - April 2005
Handling Motions Filed Before the IPHC
By Valerie Bailey Johnston
Associate Director of Case Administration, NASD Dispute Resolution
NASD Dispute Resolution implemented new procedures to handle motions that parties file before an Initial Pre-hearing Conference (IPHC) that require a panel's consideration. As part of these procedures, NASD Dispute Resolution revised its letters to notify parties what to expect in the pre-hearing process. These procedures, however, do not affect motions that are submitted as attachments to parties' answers. This article is designed to alert arbitrators about these new procedures and what they can expect from the parties.
Motions Filed before the IPHC
The revised letters advise parties that NASD Dispute Resolution will not solicit a response to a motion that a party files before the IPHC. Nevertheless, the opposing party may expedite this process by filing a response at least ten days before the IPHC. If the opposing party files a submission, staff members will transmit the motion and response(s) to the panel so that the panel may review them and render a decision at the IPHC.
If NASD Dispute Resolution does not receive a response to the motion at least 10 days before the IPHC, staff members may not be able to deliver the motion and response to the panel in time for the IPHC. The 10-day period is intended only as a guide to ensure that staff has sufficient time to transmit a motion and response(s) to the panel before the IPHC. Staff members will send all motions to the panel when they receive responses to these motions.
Opposing Party Responds to the Motion
If staff members receive any responses to a motion at least ten days before the IPHC, they will send the motion and response(s) to the arbitrators so that the panel may determine whether to address the motion at the IPHC. If a motion concerns discovery issues, staff members will send the motion and response(s) to the chairperson or other designated panelist. If a motion relates to any other issue, staff members will send the motion and response(s) to the entire panel. Staff members will also notify the parties that NASD Dispute Resolution sent the motion and response(s) to the chairperson or the panel.
Opposing Party Does Not Respond to the Motion
If the opposing party does not respond to the motion prior to the IPHC, staff members will not forward the motion to the chairperson or the panel. If the moving party inquires about the status of the motion, staff members will remind the party about the procedures outlined in the letters.
When the chairperson or panel receives a motion and response(s), the panel may take any number of the following steps:
1. Advise staff members to alert the parties that they should be prepared to argue the motion at the IPHC. In this case, the panel may decide to rule on the motion at the IPHC after hearing arguments or to issue a ruling after the conclusion of the IPHC as part of the IPHC Scheduling Order.
2. Advise the parties at the IPHC that the panel will schedule a pre-hearing conference to hear arguments on the motion. The panel should then include the date and time of the pre-hearing conference in the IPHC Scheduling Order.
3. Advise the parties at the IPHC that the panel will rule on the motion based solely upon the papers submitted by the parties.
The panel may also determine that it needs additional submissions from the parties before it can make a ruling. In this case, the panel should give the parties clear instructions concerning the additional submissions and include such instructions in the IPHC Scheduling Order.
Staff members will not submit a motion to the panel prior to the IPHC if they do not receive a response. In this situation, the moving party may raise the issue at the IPHC. The panel should be prepared to establish a schedule for responding to the motion and issuing a ruling.
NASD Dispute Resolution believes these new procedures will streamline the motion process for parties, arbitrators, and staff. As part of our ongoing commitment to improve the arbitration process, we will continue to alert arbitrators about any changes to our procedures.
Dispute Resolution News
Mark Your Calendars: Phone-In Workshop
NASD is hosting a phone-in workshop for arbitrators on June 28, 2005 from 12:00 p.m. to 1:00 p.m., Eastern Daylight Time. Linda Fienberg, President of NASD Dispute Resolution, will conduct the workshop. NASD will send announcements to arbitrators in advance of the workshop that will specify the topics and provide instructions on how to enroll for the call.
Arbitration case filings from January 1 through March 31, 2005 reflect a 25% decrease compared to cases filed during the same time in 2004. NASD Dispute Resolution experienced a decrease in case filings during this three-month period from 2,070 in 2004 to 1,560 in 2005. In a major effort to reduce the existing caseload, NASD Dispute Resolution increased by 11% the number of cases closed between January 1 through March 31, 2005 compared to the same period in 2004.
Expansion of Hearing Locations
NASD Dispute Resolution is pleased to announce that we now have arbitration and mediation hearing services available in all 50 states.
Recently, we opened 10 new hearing locations in: Montpelier, Vermont; Augusta, Maine; Manchester, New Hampshire; Charleston, West Virginia; Helena, Montana; Cheyenne, Wyoming; Boise, Idaho; Bismarck, North Dakota; Rapid City, South Dakota; and Jackson, Mississippi. In 2004, NASD added hearing locations in Wilmington, Delaware; Wichita, Kansas; Birmingham, Alabama; Columbia, South Carolina; Des Moines, Iowa; Providence, Rhode Island; and Hartford, Connecticut. At the end of 2003, we added Newark, New Jersey.
Parties now have access to NASD arbitration and mediation services in a total of 68 locations, including London and Puerto Rico. To achieve this goal, we established rosters of arbitrators and arranged for facilities to conduct hearings in these new hearing locations. For a complete list, see NASD Dispute Resolution's map of regional offices and hearing locations. This expansion enables our forum to provide investors with greater access to arbitration and mediation services nationwide.
We understand that an individual has been sending a series of unsolicited emails to many arbitrators on NASD's neutral roster. Several of you have asked about the origin of these emails, since the author purports to interpret and explain various NASD policies and the name "NASD Dispute Resolution" appears in the Subject line. These emails have not been sent or authorized by NASD Dispute Resolution. We have been unable to determine with certainty how this individual obtained so many email addresses, since he has refused our request for that information.
We want you to know that NASD Dispute Resolution does not give out your email addresses to any person or organization. We did not release your email addresses to this email writer; nor is he authorized to represent the views or to interpret the policies of NASD or NASD Dispute Resolution. If you would like to stop receiving this individual's emails, please contact the sender directly.
NASD Dispute Resolution communicates with its arbitrators in many ways, including The Neutral Corner, postings on NASD's Web site, arbitrator in-person and Web-based training, telephone workshops, regular mail, and by emails that are clearly identified as being sent by NASD.
If you have any questions about NASD Dispute Resolution rules or practices, please feel free to contact any of the staff members listed in this newsletter and on NASD's Web site.
Arbitrator Disclosure Tips
Although arbitrators are encouraged to make disclosures early in the process, arbitrators will occasionally make a disclosure at a pre-hearing conference or at a hearing. Often these disclosures require an update of the arbitrator's Disclosure Report. Unfortunately, arbitrators may erroneously believe that they have made an adequate disclosure to NASD since the disclosure was presented during a pre-hearing conference or a hearing.
Arbitrators should not assume that a disclosure presented during a pre-hearing conference or a hearing will be captured by NASD and recorded in the arbitrator's Disclosure Report. Accordingly, please make certain that your disclosure is repeated directly to NASD. You can accomplish this in one of three ways:
If you possess a professional license (i.e., JD, CPA, etc.), make sure that you update your Disclosure Report if any of your professional licenses expire, are suspended, or become inactive. For example, an arbitrator who is an attorney may choose a new career path and allow his/her law license to expire or to become inactive. While this would not prohibit an arbitrator from remaining on our roster, such information must be accurately noted on the arbitrator's Disclosure Report.
Northeast Regional Update
During the next three months, the Northeast Regional Office will be conducting in-person Basic Panel Member training programs in these cities on the following dates:
If you are interested in attending a Basic Panel Member Training program, please contact Cheree White at (212) 858-4063 or by email.
Mid-Atlantic Regional Update
The Mid-Atlantic Regional Office is pleased to announce the addition in March 2005 of a new hearing location in Charleston, West Virginia. If someone you know is interested in serving as an arbitrator or mediator in Charleston, please contact our Recruitment Supervisor, Neil McCoy, at (212) 858-4283.
During the next two months, the Mid-Atlantic Regional Office will be conducting in-person Basic Panel Member training programs in these cities on the following dates:
If you are interested in attending a Basic Panel Member training program, please contact Karen Carter at (202) 728-8327 or by email.
Western Regional Update
The Western Regional Office is pleased to announce the addition in March 2005 of three new hearing locations in Boise, Idaho; Cheyenne, Wyoming; and Helena, Montana. If someone you know is interested in serving as an arbitrator or mediator in these hearing locations, please contact our Recruitment Supervisor, Neil McCoy, at (212) 858-4283.
During the next three months, the Western Regional Office will be conducting in-person Basic Panel Member training programs in these cities on the following dates:
If you are interested in attending a Basic Panel Member training program, please contact Tiffany Hansmann by telephone at (213) 613-2684 or by email.
Midwest Regional Update
During the next three months, the Midwest Regional Office will be conducting in-person Basic Panel Member training programs in these cities on the following dates:
If you are interested in attending a Basic Panel Member training program, please contact Deborah Woods at (312) 899-4431 or by email.
Southeast Regional Update
During the next two months, the Southeast Regional Office will be conducting in-person Basic Panel Member training programs in these cities on the following dates:
If you are interested in attending a Basic Panel Member training program, please contact Lanette Cajigas at (561) 447-4911 or by email.
Mediators Serving as Arbitrators
On March 7, 2005, the Securities and Exchange Commission (SEC) approved SR-NASD-2005-007 (Interpretative Material on Mediators Serving as Arbitrators). The proposed rule change adopts new Interpretive Material (IM) 10308 of NASD's Code of Arbitration Procedure to clarify that (1) fees for service as a mediator are not included in determining whether an attorney, accountant, or other professional derives 10% of his or her annual revenue from industry-related parties; and (2) service as a mediator is not included in determining whether an attorney, accountant, or other professional devotes 20% or more of his or her professional work to securities industry clients. We will announce more details on the proposal in a Notice to Members.
Proposal to Compensate Arbitrators for Deciding Discovery-Related Motions Without a Hearing
During the past few years, NASD Dispute Resolution has conducted arbitrator focus groups across the country. One of the concerns consistently raised has been the amount of time and effort invested by chairpersons in reviewing and deciding various discovery motions, especially in situations in which the motions are decided on the papers. Dispute Resolution staff also has heard similar concerns from arbitrators on our roster. In addition, the Neutral Roster Subcommittee, a subcommittee of the National Arbitration and Mediation Committee, has reported that the current lack of compensation for deciding such motions has made it more difficult to recruit chairpersons.
On January 26, 2005, in an effort to address these concerns, the Board of Directors of NASD Dispute Resolution approved a proposal to provide additional honoraria to chairpersons for the time spent reviewing and deciding discovery-related motions on the papers. Subsequently, on April 14, 2005, NASD filed a proposed rule change with the Securities and Exchange Commission to amend Interpretive Material (IM) 10104 of the Code of Arbitration Procedure to provide payment to arbitrators for deciding discovery-related motions without a hearing.
NASD believes that the proposed rule change will encourage arbitrators to decide discovery-related motions on the papers without the need for a pre-hearing conference, thereby expediting the pace of arbitrations. This enhancement will benefit investors by reducing the time between the filing of an arbitration claim and the rendering of an award.
View more details on the proposed rule change.
Latest in Arbitrator Training
NASD Dispute Resolution's Arbitrator Training Programs and Schedules
You can view the arbitrator training programs and schedules for all of 2005 on our Web site.
Question and Answer: Understanding and Applying the Law in a Case
Question: What should an arbitrator do when additional information is needed to understand the law presented in a case?
Answer: Although most arbitration claims present questions of fact that the panel will be able to decide on the proffered evidence, some parties may rely on a specific law or statute. Generally, the party who raised a legal issue will offer the panel a brief that sets forth the law or statute along with an explanation of how it applies to the facts of the case. However, arbitrators may also encourage the party to present the issue orally. In addition, arbitrators may request that parties submit a brief on any issue if the arbitrators believe it would assist them in deciding the case. In any of these situations, the opposing party or parties should be allowed to respond.
Arbitrators are reminded that they are not to engage in any outside legal research, nor should they ask NASD staff to conduct legal research for the arbitrators. The panel must rely on the parties to provide the research in support of their respective positions.
Arbitrators are not bound by case precedent or statutory law. Rather, they are guided in their analysis by the underlying policies of the law, and are given wide latitude in their interpretation of legal concepts. If, however, an arbitrator manifestly disregards the law, a court may vacate an award. (See The Arbitrator's Manual).
Message from the Editor
In addition to comments, feedback, and questions regarding the material presented in this publication or other arbitration and mediation issues, The Neutral Corner invites readers to submit articles on important issues of law and procedure relating to mediation, arbitration, or other alternative dispute resolution processes. We, of course, reserve the right to determine which articles to publish.
Please send your article to Lisa Angelson, Editor, The Neutral Corner at NASD Dispute Resolution, One Liberty Plaza, 165 Broadway, 27th Floor, New York, New York 10006. You may also call the Editor at (212) 858-4392 for editorial guidelines.
Linda D. Fienberg
George H. Friedman
Kenneth L. Andrichik
Jean I. Feeney
Richard W. Berry
Barbara L. Brady
Elizabeth R. Clancy
Judith Hale Norris
Nicole Haynes - Northeast Region
Lisa Lasher - Southeast Region
NASD Dispute Resolution Offices
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