It has been said: “because bias is so subtle, it's extremely effective.” So it should come as no surprise that one of the cornerstones of the rules of judicial ethics is
that bias is to be avoided or ferreted out. Bias should be no more acceptable
in an arbitration forum than it would be in a federal court. But it seems to be just that, as a confluence
of procedures in our private arbitration forums produce an "extremely effective" systemic bias.
These facts are known to any reasonably informed arbitrator:
1)
The FINRA Member, or private party that inserted
AAA or JAMS in to its commercial contract, has a procedural right to strike and
rank potential arbitrators, without cause or explanation.
2)
The FINRA Member or private party will have
access to the details and magnitude of the arbitrator's prior compensatory,
punitive, cost and fee awards.
3)
A federal court has never vacated an arbitration
award on the grounds that the compensatory award to the investor or broker
wasn't big enough, or because the panel failed to award punitive damages, costs, or fees.
4)
JAMS, FINRA, and AAA can, and have, removed an
arbitrator from their roster without explanation after the arbitrator chaired
over the issuance of a substantive award.
In order to combat this bias, arbitrators must first be able
to identify and somehow neutralize
the bias these indisputable facts generate.
But since they are subconsciously biased, neutralizing this bias is a very tall order. It is certainly an
unrealistic expectation. FINRA, JAMS, and AAA arbitrators are human. And even
though most, no doubt, are individuals of high integrity and intelligence, they
want to serve as arbitrators, and
they are compensated to do so. Many of
them are full-time arbitrators, at least partially dependent upon that
compensation.
In order to eradicate the insidious bias created by the
system in favor of (statistically undeniable) depressed compensatory awards and
rejected punitive, cost and fee claims, the system must be changed. Until it is, the federal courts' rather
convenient strict adherence to a purported congressional policy (lobby) in
favor of arbitration will be perverted by a money-bias--the same bias the
judiciary espouses to be intolerable and inconsistent within its own
jurisprudence.
How do you remove this “extremely effective” bias pressing
upon compensated private arbitrators?
The solution is “simple, but not easy:”
1)
Drastically reduce or eliminate arbitrator
compensation, and/or
2)
Eliminate the granting of strikes and rankings
to FINRA Members and to volume-consumers of other private arbitration services
(e.g. Fisher Investments).
Until arbitrators are wholly ambivalent to what FINRA Members
and arbitration consumers[1]
with strikes think about their past Awards, arbitrators will suffer from a
subtle but highly potent bias against claimants.
[1]FINRA itself as well as the owners of for-profit
arbitration services like JAMS and AAA could still, however, influence
arbitrators. For example, an arbitrator chairman that issued a multi-million dollar award to one of my clients
was subsequently relieved of his duties by FINRA.
Probably just a coincidence, but... Do we need lifetime appointments for
arbitrators? Or minimum terms?
