Monday, September 1, 2014
Sunday's New York Times has a story by Gretchen Morgenson on the front page of its Business Section that illustrates an additional problem with binding arbitration. Arbitral panels can make arbitrary decisions to exclude evidence that could be outcome determinative. Courts do that as well, but while a court's rulings on evidentiary matters are reviewed for reversible error, it is not clear that courts have jurisdiction to review an arbitral body's evidentiary decisions.
Although Morgenson, a Pulitzer Prize winner, did her best to report all sides of the case, only the plaintiff and his attorney would speak with her. So we can't pretend we have all the facts. But here is what Morgenson reports:
Sean Martin, who works at Deutsche Bank, noticed five years ago that the firm was letting hedge fund clients listen in as analysts shared information about the markets before that information was shared with other investors. Martin reported the conduct at the time and was rewarded with his first ever negative performance review. He was moved out his work group and suffered a pay cut. In August 2012, he decided to pursue an arbitration, claiming retaliation and seeking recovery of lost wages. Under his employment agreement, disputes must be heard by arbitrators associated with the Financial Industry Regulatory Authority (Finra).
Streamlined discovery is supposed to be one of the advantages of arbitration. The purposes of the streamlining is supposed to be efficient resolution of claims. That is not happening in this case. The first hearings took place in March of this year, and at those hearings, the arbitral panel decided to exclude a number of crucial pieces of evidence that Martin sought to introduce. In addition, the Bank has asked that hearings for the case go on into 2105, six years after the alleged conduct took place and well over two years after Martin sought arbitration.
Martin was so dissatisfied with the panel's discovery decisions that he asked all three aribtrators to withdraw. They refused to do so. Martin then brought an action in the New York State Supreme Court (pictured above), seeking a stay of the arbitration proceedings and the removal of the panel. Mr. Martin's lawyer has done arbitrations before Finra before. It's not as if he is hostile to arbitration in principle. But this panel has gone "off the rails," he claims.
We'll see if the legal system can provide a remedy.