Do Attorney-Arbitrators Hand Out Less Money Than Nonattorney-Arbitrators? Do Democrats Award More Than Republicans? Empirical Study of Lawyers, Arbitrators, and Panel Dynamics

Posted by Alan Childress

Stephen Choi (NYU Law), Jill Fisch (U. Penn.), and Adam C. Pritchard (U. Mich. Law) have posted to bepress their new paper, "Attorneys as Arbitrators."  It looks interesting for the empirical fans among us (like Jeff's recent post on lawyer stereotypes, hypothesis, and testing) and the hardcore ELS types (like Bill). I like the fact that the authors used political contribution as one variable and found its party affiliation to be significant.  Keep in mind, though, that plenty of attorneys (and others) give for pragmatic and nonpolitical-leaning reasons, and often give to both sides.

And, as icing, it can be downloaded without going through SSRN!  Here is their abstract:

We study the role of attorneys as arbitrators in securities arbitration conducted by the National Association of Securities Dealers (NASD, n/k/a FINRA), using a dataset of 422 randomly selected arbitrators and their 6724 arbitration awards from 1992 to 2006. We find that arbitrators who also represent brokerage firms or brokers in other arbitrations award significantly less compensation to investor-claimants than other arbitrators. We find no significant effect for attorney-arbitrators who represent investors or both investors and brokerage firms. The relation between representing brokerage firms and arbitration awards remains significant even when we control for political outlook. We report that ideology correlates significantly with arbitration awards - arbitrators who donate money to Democratic political candidates award greater compensation than arbitrators who donate to Republican candidates.

Because the arbitration award is the product of the panel, not a single arbitrator, we also study the dynamics of panel interaction. We find that the position of chair is an important factor in assessing the arbitrator's influence, although the financial relationships of other arbitrators may also affect arbitration awards. Coalitions with the other arbitrators are also important. If the chair and another panelist possess a common attribute, the effect on the arbitration award increases.

Finally, we provide evidence that the 1998 reforms to the arbitration process - which introduced party control over the composition of panels - ameliorated, but did not eliminate, the effect that attorneys who represent brokers have on outcomes. We find no significant effect from the NASD's 2004 reforms.

Adam Pritchard also posted a piece questioning the common stereotype that Delaware law and courts create a 'race to the bottom' that entrenches and lowers quality of management.  More on that below the fold.  Oh, the new TypePad does not have a fold?  Sorry, then here is the link to Murali Jagannathan and Adam Pritchard, "Does Delaware Entrench Management?" Exciting bedtime reading for Jeff.