In February 2011, FINRA started allowing claimants to choose an all-public panel in securities arbitrations. I thought it was window-dressing. I did not think that the presence or absence of a non-public arbitrator would make a difference. In 2011, FINRA analyzed 30 cases that went to hearing after the arbitrator selection rule was instituted. Public customers were awarded a “win” 54% of the time with an all-public panel as opposed to 18% in a regular panel. Claimants’ lawyers started beating their chest about how this proved the system was previously rigged against public customers. I was unconvinced. In part this was due to the small sample.
In 2012, the percentage of “wins” in all-public panels had decreased by five percentage points, but the win percentage for mixed panels had increased from 18% to 33%. This was the first full year of analysis. I was still unimpressed. I still felt that cases that go to trial are the difficult ones anyway, so the run-of-the-mill case never sees the light of day. However, the sample was much larger, a total of 210 cases, so I simply had to rely on my gut to say that all-public panels were a sham to make people feel better.
The statistics for 2013 were just released here. Through the end of July 2013, 73 cases were decided by all-public panels and 68 by mixed panels. in the all-public cases, 42% were “wins” for Claimants, although there is no analysis of the size of the award. On the mixed side, 41% were “wins” for customers. Now this is a smaller data set, and it is only a partial year. But if this keeps up, how long will it be before someone from the Claimants’ bar starts complaining that arbitration in general is unfair?
I won’t be surprised to see the statistics remain fairly consistent through the end of the year. Then what do we do?
That’s the view of one lawyer from Jupiter, Palm Beach County, Florida. I’m Marc Dobin.