Neutral Corner - December 2004


By Rose Schindler - Southeast Regional Director

This article describes NASD’s Code of Arbitration Procedure Rule 10335, otherwise known as the injunctive relief rule, and reminds arbitrators of their obligation to issue prompt rulings on requests for permanent injunctive relief.


In January 2002, the Securities and Exchange Commission (“SEC”) approved substantial modifications to NASD Rule 10335 (Temporary Injunctive Orders; Requests for Permanent Injunctive Relief). Under the revised rule, which applies to intra-industry disputes, temporary or preliminary injunctive relief is no longer available in this forum.  Rather, parties are required to seek temporary or preliminary injunctive relief in a court of competent jurisdiction. If granted by a court, parties are required to pursue a request for permanent injunctive relief in arbitration.

Rule 10335 provides for an expeditious arbitration hearing on the request for permanent relief – meaning that the hearing must begin within 15 calendar days from the date the court issues a temporary injunctive order.  In order to accomplish this, the rule provides for a shortened time period within which the parties may select arbitrators.

This rule also provides for subsequent hearings on the issue of damages or other relief sought. The arbitrators are not required to schedule such hearings if they can decide all claims based on the evidence presented at the expedited hearing on the request for permanent injunctive relief.  However, in some cases, the arbitrators may decide that, given the expedited nature of the hearing, additional time is necessary to allow the parties to gather and present all relevant evidence on any remaining issues. If the arbitrators decide that subsequent hearings are necessary, they will determine the time and place of such hearings. These additional hearings should be scheduled at the conclusion of the injunctive relief hearing while all parties are present.

Need for a Prompt Decision on the Request for Permanent Injunctive Relief

Rule 10335 applies only if a court of competent jurisdiction has issued a preliminary injunction (also referred to as a temporary restraining order or “TRO”). This rule addresses the party’s obligation to pursue any request for permanent injunctive relief in arbitration. Since the rule also requires a party’s request for permanent injunctive relief to be determined expeditiously, the arbitration panel should issue a prompt ruling after the hearing.   An “Order on a Request for Permanent Injunction” can be located on our Web site by reviewing the specific Arbitrator’s Reference Guide applicable to your region.

On occasion, arbitration panels delay issuance of an order on the request for permanent injunctive relief until after subsequent hearings are held. Such a delay defeats the purpose of Rule 10335 and may significantly impair the parties’ rights and expectations. For instance, a TRO issued by a court may have expired or is about to expire. Without a decision on the request for permanent injunctive relief, the formerly enjoined party is no longer bound by the court’s expired order. If the arbitrators delay in granting a permanent injunction, the party may have already engaged in the prohibited activity.  Alternatively, if the arbitrators determine not to enter a permanent injunction, a party may be harmed by an undue delay in establishing his/her right to engage in the formerly prohibited activity.

Messages from the Editor

Settlement Month

We are excited to announce the success of NASD Dispute Resolution's eighth annual Mediation Settlement Month held this past October. The event, which is held annually, offers parties an opportunity to receive mediation services at significantly reduced rates. NASD and its mediators provide this discounted pricing to reward prior NASD mediation participants, and to encourage new parties and counsel to participate in the mediation process.  This year, the department was pleased to have 200 parties from 38 cities agree to have their cases mediated.  This is more than twice the monthly average.

Settlement Day

For the fourth straight year, NASD Dispute Resolution also coordinated the annual Mediation Settlement Day, in conjunction with the Association of the Bar of the City of New York, the New York State Bar Association, the New York State Unified Court System, and alternative dispute resolution programs throughout the state.  This year's event, the most active to date, had more than 90 sponsoring organizations and took place in New York City on October 21, 2004.  Several law school securities arbitration clinics participated, including the University of San Francisco and the Northwestern Law School Clinic from Chicago.  Accompanying the rise in total participation was an increase in diversity, with bar associations such as the Asian American Bar Association and the Association of Black Women Attorneys among the new sponsors.  In addition, the event was expanded to include community organizations from outside New York State, as well as the ABA/USAID Mediation Mexico Project, the first international sponsor.

Government officials also joined in the enthusiasm for the event.  New York Governor George E. Pataki issued a first-ever Proclamation, and New York Mayor Michael R. Bloomberg sent a letter to Kenneth Andrichik, Senior Vice President and Director of Mediation and Business Strategies, in support of Mediation Settlement Day.

Award Winner

We are pleased to announce that Julie Crotty, Assistant Director of Mediation, won the Mediation Gold Medal Award for her 30-second public service announcement video entitled "Mediation — It Works!"  She wrote, produced, directed, and starred in the video entry for a competition sponsored by The Association for Dispute Resolution of Northern California.

New Web Look

NASD is proud to announce that our Web site has a new look as of November 1, 2004.  The new Web design makes navigating and searching for information even easier.

Dispute Resolution News

Case Filings

Arbitration case filings from January 1 through November 30, 2004 reflect an 8% decrease compared to case filings during the same time last year.  NASD Dispute Resolution experienced a decrease in case filings from 8,260 in 2003 to 7,575 in 2004. In a major effort to reduce caseload numbers and any backlog, NASD Dispute Resolution increased by 26% the number of cases closed between January 1 and November 30, 2004 compared to the same period last year.

Phone-In Workshop:"NASD Mediation: 11,000 Cases and Counting"

NASD is hosting a phone-in workshop for arbitrators and mediators on January 11, 2005 from 12:00 to 1:00 p.m., Eastern Time, to discuss the topic of mediation.  Kenneth Andrichik, Senior Vice President and Director of Mediation and Business Strategies, will conduct the Workshop. Other senior members of NASD Dispute Resolution's management team will be on hand, as well.  Topics on the agenda include: qualifications to become a mediator; an update on the revised Model Standards of Conduct for Mediators; disclosure requirements for mediators; tips on updating mediator's background disclosure statements; and, the intersections of arbitration and mediation.

You must register in advance for this Workshop.  To register, go to, but do not attempt to log in.  Click on "RSVP now" within the "Join Event" box on the right-hand side of the screen, which will take you to a screen requiring you to enter the Conference ID (4416912) and the password (MEDIATION).  Registrants will be prompted to leave their name and email address.  Please place your arbitrator/mediator ID number in the "comment" box.  Additional information about the call-in number for the day of the event will be provided upon successful registration in your confirmation.

We also encourage arbitrators and mediators to provide us with mediation-related questions in advance of the session by sending an e-mail.  We will consider your submitted questions for inclusion in the Workshop presentation.

Regional Updates

Northeast Regional Update

The Northeast Regional Office is pleased to announce that it opened a new hearing location in Providence, Rhode Island in December 2004, as part of NASD Dispute Resolution’s ongoing commitment to establish a hearing location in each of the fifty states. The Northeast Regional Office will administer the Providence location. If someone you know may be interested in serving as an arbitrator or mediator in Providence, please contact our Recruitment Supervisor, Neil McCoy, at (212) 858-4283.

As part of our continuing effort to reduce the time to issue awards, the Northeast Regional Office reminds arbitrators to deliberate and issue decisions as soon as possible after the conclusion of hearings.

Mid-Atlantic Regional Update

In the Mid-Atlantic Region, arbitrators may volunteer to serve in the following hearing locations: Charlotte and Raleigh, North Carolina, and Pittsburgh, Pennsylvania. However, arbitrators should keep in mind that, pursuant to NASD Dispute Resolution’s policy, arbitrators who volunteer to serve in hearing locations beyond their primary hearing location are not entitled to reimbursement of their travel and hotel expenses. Detailed information regarding the policy may be found in the Guidelines for Arbitrator Reimbursement.  Arbitrators should contact their Regional Office if they are uncertain whether they would be entitled to reimbursement of travel expenses upon appointment to any matter outside their primary hearing location.

The Mid-Atlantic Regional Office is pleased to announce that it opened its newest hearing location in Wilmington, Delaware in December 2004.  If someone you know may be interested in serving as an arbitrator or mediator in Wilmington, please contact our Recruitment Supervisor, Neil McCoy, at (212) 858-4283.

This past October, Professor Raphael Porrata-Doria, Jr. of Temple University Law School, who is also an NASD arbitrator, gave a presentation to the Mid-Atlantic Region’s staff about the key causes of action in customer cases. It was a great opportunity for the staff to learn more about the different types of causes of action and the damages associated with them.

Western Regional Update

The Western Regional Office is pleased to announce that it will be opening new hearing locations in Boise, Idaho; Helena, Montana; and, Cheyenne, Wyoming in March 2005.  If someone you know may be interested in serving as an arbitrator or mediator in Boise or Cheyenne, please contact our Recruitment Supervisor, Neil McCoy, at (212) 858-4283.

The Western Regional Office also took over administration of all new cases filed for hearing in Phoenix, Arizona effective October 15, 2004.

Southeast Regional Update

The Southeast Regional Office is pleased to announce the opening of a new hearing location in Birmingham, Alabama in September 2004.  If someone you know is interested in serving as an arbitrator or mediator in Birmingham, please contact our Recruitment Supervisor, Neil McCoy, at (212) 858-4283.

Midwest Regional Update

The Midwest Regional Office is pleased to announce that it opened new hearing locations in Des Moines, Iowa and Wichita, Kansas in September 2004.  If someone you know may be interested in serving as an arbitrator or mediator in Des Moines or Wichita, please contact our Recruitment Supervisor, Neil McCoy, at (212) 858-4283.

Ex Parte Communications

By Marya M. Santor – Staff Attorney

The Securities and Exchange Commission has approved new Rule 10334 of the NASD Code of Arbitration Procedure to permit direct communication among arbitrators and the parties to the arbitration (through their counsel) where all parties and arbitrators agree, and to establish guidelines for such direct communication.  The new rule went into effect on September 30, 2004.  The purpose of this article is to address the issue of ex parte communications not associated with the new voluntary direct communication rule.

Ex parte communications are generally prohibited in NASD Dispute Resolution arbitrations.  Some arbitrators may be under the impression that ex parte communications represent only those types of conversations involving the subject matter of the case.  However, NASD Dispute Resolution’s arbitrator training material defines such communications as follows: “[e]x parte communications include any discussion between an arbitrator and a party, a party representative, or a witness when the other parties are not present.  These communications include pleasantries exchanged in the elevator, hallway, or rest room.”  Examples of prohibited ex parte communications include the casual comments an arbitrator may say to a party about the weather, the hearing room accommodations, or last night’s sporting event.

Suppose, for example, that Party A and its counsel arrive first and begin arranging their materials in the room.  Counsel and one of the panel members begin to casually discuss the difficulty in finding the hotel room, as well as joke about the horrible morning traffic.  Party B then enters the hearing room filled with laughter being shared by Party A, its counsel, and the panel.  Although the exchange may have been perfectly innocent, Party B is now left with the impression that the panel may favor their adversary.  To avoid this situation, the panel should instruct parties and their counsel to remain outside the hearing room until all parties arrive or, alternatively, the panel should step out of the room.

To avoid ex parte communications, the parties should enter and exit the hearing room at the same time.  As stated in the Hearing Procedure Script, the panel should instruct the parties, the parties’ counsel, and any witnesses, that they must not communicate with the panel outside the hearing room or outside the presence of all parties.  If the panel notices that one of its members engages in an ex parte communication, the other members of the panel should remind him or her that such communications are prohibited.  If a panelist engages in an ex parte communication, that panelist should immediately disclose the details of the communication to all parties and put it on the hearing record.  The assigned NASD Dispute Resolution case administrator should also be informed.

In order to uphold the integrity of the process, arbitrators must maintain an appearance of impartiality and be free of bias.  An arbitrator who engages in ex parte communications not only risks becoming the subject of a motion to recuse, but may jeopardize the panel’s award by laying the groundwork for a motion to vacate. 

Latest in Arbitrator Training

Witnesses at the Hearing

The issue often arises whether the panel should permit a witness to remain in the hearing room during the proceeding.  Parties and a corporate representative are permitted to remain in the hearing room throughout an entire hearing.  Expert witnesses are also permitted to remain unless the panel determines that the witness should be excused.  All other witnesses are typically excused and called upon during the hearing at the appropriate time, unless the panel determines that a particular witness will remain.  Barring any countervailing reasons, expert witnesses who are assisting parties in the presentation of their cases should be permitted to attend all the hearings, as opposed to witnesses testifying to the facts pertinent to the case.

2005 NASD Arbitrator Training Programs and Schedules

Our arbitrator training schedules for 2005 are now posted on our Web site.

Question & Answer on Serving on Multiple Cases with the Same Party

Question: Should an arbitrator serve on multiple cases involving the same party?

Answer: NASD Dispute Resolution strongly discourages arbitrators from concurrently serving on multiple cases involving the same party.  While serving on one case, an arbitrator may gain knowledge about a party that could impact the arbitrator’s service on another case(s) involving the same party. Also, evidence presented in one case may influence an arbitrator’s impression of the same party in another case where this information or evidence may not have been offered. As a result, parties may reasonably infer that an arbitrator serving on multiple cases involving the same party may be biased or partial. In these situations, the arbitrator has a continuous duty under both the Code of Arbitration Procedure and the Code of Ethics for Arbitrators in Commercial Disputes to disclose this information to all concerned parties to allow them an opportunity to make an informed decision about the arbitrator’s continued service on the panels. Therefore, arbitrators should be mindful of the parties named in cases in which they are currently serving when they are considering serving on a new case.

For more information about disclosures, be sure to visit our training web page and sign up for the arbitrator online training on “Duty to Disclose.”

Update: Please note that since this Q&A was published, FINRA has issued additional guidance regarding arbitrator service on multiple cases with the same party. Please see the notice on FINRA’s website, “Guidance to Parties in Cases Involving Morgan Keegan and the RMK Bond Funds.”

Comments and Feedback

The Neutral Corner welcomes your comments, feedback, or questions on the material presented in this publication or on other arbitration and mediation issues. The Neutral Corner also invites readers to submit articles on important issues of law and procedure relating to mediation, arbitration, or other alternative dispute resolution processes.

Please send your article to Lisa Angelson, Editor, The Neutral Corner, Department of Neutral Management, NASD Dispute Resolution, One Liberty Plaza, 165 Broadway, 27th Floor, New York, New York 10006.


Linda D. Fienberg
NASD Dispute Resolution

George H. Friedman
Executive Vice President &
Director of Arbitration
NASD Dispute Resolution

Kenneth L. Andrichik
Senior Vice President &
Director of Mediation & Business

Jean I. Feeney
Vice President & Chief Counsel

Dorothy Popp
Vice President &
Director of Operations

Richard W. Berry
Associate Vice President &
Director of Case Administration

Barbara L. Brady
Associate Vice President &
Director of Neutral Management

Elizabeth R. Clancy
Vice President & Regional Director,
Northeast Region

Judith Hale Norris
Vice President & Regional Director,
Western Region

Rose Schindler
Associate Vice President &
Regional Director, Southeast Region

Shari Sturm
Regional Director,
Mid-Atlantic Region

Scott Carfello
Regional Director,
Midwest Region

Lisa Angelson
Associate Director of Neutral
Management and Editor of
The Neutral Corner

Editorial Board
Nicole Haynes
- Northeast Region
Heather Herbert - Mid-Atlantic Region
Elaine Kohn - Western Region
Mignon McLemore - Office of Chief Counsel
Kelly Sheehan - Southeast Region
Patrick Walsh - Midwest Region

NASD Dispute Resolution Offices

Northeast Region
One Liberty Plaza
165 Broadway
27th Floor
New York, NY 10006
Tele: (212) 858-4400
Fax: (212) 858-4429

Mid-Atlantic Region
1735 K Street, NW
Washington, DC 20006
Tele: (202) 728-8958
Fax: (202) 728-6952

Southeast Region
Boca Center Tower 1
5200 Town Center Circle
Second Floor
Boca Raton, FL 33486
Tele: (561) 416-0277
Fax: (561) 416-2267
Western Region
300 S. Grand Avenue
Suite 900
Los Angeles, CA 90071
Tele: (213) 613-2680
Fax: (213) 613-2677

Midwest Region
10 S. LaSalle Street
Suite 1110
Chicago, IL 60603-1002
Tele: (312) 899-4440
Fax: (312) 236-9239