Discovery Arbitrator Pilot

Non-Public Arbitrators to Serve on Intra-Industry Cases

Overview

FINRA Dispute Resolution has expanded its voluntary discovery arbitrator pilot, which it first launched in its Southeast and Western Regional hearing locations. FINRA has also added non-public arbitrators to the pilot for certain intra-industry cases.

FINRA initiated the pilot on August 1, 2005 to address concerns about discovery in arbitration. Under the pilot, the Director of Arbitration appoints a single discovery arbitrator to resolve all discovery disputes before the hearing. The discovery arbitrators do not serve on the panels that decide the cases; they only decide the parties' discovery disputes. Parties participating in the pilot have described it as cost effective with arbitrators providing consistent decisions on discovery issues.

If parties wish to participate in the pilot, they must sign a stipulation and be represented by counsel.

The Discovery Arbitrators

The discovery arbitrators are pre-selected arbitrators on FINRA's roster who are lawyers experienced in deciding discovery disputes. After the parties stipulate to participate in the pilot, the Director of Arbitration will appoint an arbitrator from the list of discovery arbitrators. The parties may agree to select their own discovery arbitrator from a list of discovery arbitrators available in each FINRA Dispute Resolution Regional Office. Once the Director of Arbitration appoints the discovery arbitrator, the parties may only file a Challenge for Cause or a Director's Authority to Remove to challenge the arbitrator's appointment.

Discovery Arbitrator's Authority

The discovery arbitrator has the authority to issue monetary and evidentiary sanctions against any party for failing to comply with discovery rulings, or conducting discovery in an abusive manner. However, the discovery arbitrator does not have an arbitrator's powers under Rule 12212(c)/13212(c) of the NASD Codes of Arbitration; thus, the discovery arbitrator may not dismiss a claim, defense, or proceeding.

Once the hearing begins, the discovery arbitrator's authority ends. Then, the panel appointed to decide the merits of the case will decide any new discovery issues.

Parties who are interested in the pilot should contact the FINRA staff member assigned to their case. FINRA has extended the pilot to December 31, 2009; at that time, FINRA will decide whether to make it a permanent program.