What Happens Next?

If we are able to help you and accept your case, you are most likely to become involved in an arbitration rather than a court room trial.

WHAT IS AN ARBITRATION?

An arbitration is like a trial. The "trial" is called a hearing. The "courtroom" is a conference room, usually at an office. The judges are a panel of three people, usually two lawyers and one broker, who collectively decide everything during the hearing. The Plaintiff (or injured party) is called a "Claimant." The Defendants are called "Respondents."

WHY ARBITRATE?

Generally, we arbitrate cases instead of brining the claims in a regular court because Claimants have no choice. In order to open a securities account, a customer signs a customer agreement of one type or another. Hidden in the agreement is a promise to arbitrate all disputes. The United States Supreme Court has ruled these promises to arbitrate are binding and enforceable. There are almost no exceptions to this rule. The exceptions to the rule are not worth discussing. Sometimes, even though there is no promise to arbitrate, we arbitrate cases voluntarily. It can be cheaper and quicker than a court proceeding.

WHO ARE THE JUDGES?

Normally, the three judges or arbitrators consist of two lawyers and a securities broker. The NASD (National Association of Securities Dealers) Rules require two "public" arbitrators, people who are not members of the securities industry - these are usually lawyers. The rules require one industry arbitrator - this is usually a broker, office manager, or other individual who works or has a background in the securities business. The hope is that by dividing the Panel in this way, there will be fairness and balance at the hearings. Also, the presence of a broker on the Panel adds expertise to the proceedings.

Arbitrators need not be lawyers and brokers even though they normally are. In the Detroit area, we have people from many professions and areas of business who regularly sit as arbitrators. All arbitrators are paid volunteers. A person cannot be forced to sit on a Panel the way members of juries are forced to sit in court cases. Although they are paid, arbitrators are not paid well. They are not in it for the money. Rather, they see it as interesting or as fulfillment of a responsibility for public service.

HOW LONG DOES ARBIRATION TAKE?

From start to finish a normal case takes from six (6) to eighteen (18) months. The exact time varies depending on:

• • • • • - out-of- pocket losses;
          - benefit of the bargain losses;
          - punitive damages;
          - exemplary damages;
          - rescission damages;
          - arbitration costs;
          - arbitration attorney fees; and
          - interest.

          HOW DOES THE PANEL DECIDE THE CASE?

          After the hearing, the Panel will privately decide the case and issue a written Award. The written Award is sent to the attorneys within about 30 days - sometimes longer. The Panel can defer a decision after the hearing is over to give the attorneys time to file more information or to supplement the record with documentation which was not available at the time of the hearing. The Award does not usually state why the Panel decided the case the way it did. The Panel is not obligated to explain anything in the Award.

          CAN ANYONE APPEAL THE ARBITRATION AWARD?

          No. An appeal is possible only under the most limited of circumstances which almost never occur.

          HOW IS AN AWARD PAID?

          The Award is normally paid on a voluntary basis within 20 to 60 days after the Award is received by the parties' attorneys. If it is not paid, the Claimant may notify regulatory agencies to obtain their assistance and have the Award "confirmed" by a state or federal court. A confirmed award is the same as a judgment by the court and is collected in the same way, by garnishment and execution. Most awards, however, are paid voluntarily.

        - the amount of money deposited and withdrawn from the account;
        - the date and details of all trades;
        - profits and losses on all trades;
        - the income earned in the account;
        - the margin interest charged to the account;
        - the commissions charged; and
        - the monthly and average annual equity in the account.

        Damages are expressed in the following ways:

    - account opening documents
    - confirmation slips
    - order tickets
    - monthly statements
    - margin call notices and summaries
    - deposit and withdrawal information
    - profit and loss summaries
    - transaction summaries
    - letters
    - holding pages kept by the broker
    - notes kept by the customer
    - customer tax returns and financial statements
    - evidence of other complaints against the broker
    - evidence of other securities accounts owned by the customer
    - telephone records
    - broker research on stocks
    - prospectuses
    - research reports on stocks

    WHAT KIND OF DAMAGES MAY BE AWARDED?

    The customer always calculates his or her damages to the highest possible believable number. The Respondents do just the opposite. There are often several different ways to calculate damages. As a result, the Panel will want the attorneys for the parties to agree on the accounting number for the account and argue damages based upon these agree upon numbers. This type of accounting will include:

  - the account owner and members of the family
  - the broker
  - the broker's office manager
  - experts who can give opinions about how the account was handled or about specific transactions or documents.

  Because of the informality of the hearing, it is possible to eliminate the testimony of many witnesses who might be called in a court case. Witnesses can testify by letter, affidavit and telephone in lieu of appearing in person. Experts are used when they have special knowledge about issues important to the case. Many cases do not require experts.

  WHAT KINDS OF DOCUMENTS ARE USED?

  The attorneys may utilize any documents which they think may prove an important point. Common examples:

  - Introductions are made.
  - Each party is asked to reconfirm that they want to proceed with the arbitration.
  - All final housekeeping matters are discussed.
  - All witnesses are sworn to tell the truth.
  - Claimant's attorney makes an opening statement.
  - Respondent's attorney makes an opening statement.
  - Witnesses are called by a party's attorney. As they testify, each witness is cross-examined by the other party's attorney. Arbitrators frequently also ask questions.
  - Claimant's attorney summarizes the case.
  - Respondent's attorney summarizes the case.
  - The hearing is closed.
  - The parties leave the hearing room together.
  - The Panel stays behind and decides the case.

  Many hearings are completed in one day although it is common for them to run two or three days. Rarely do they take less than at least one full day.

  HOW SHOULD A PARTY ACT AT A HEARING?

  Your true personality will come out. It is hard for most people to play a part for more than a few minutes and the Panel will hold it against you if you try to fake something.

  Tell the truth. Use notes if you need them. Show respect to the people in the room. Show your true feelings about the people you have made a claim against.

  During the hearing, the attorneys may joke about things. Don't participate. You are there on serious business. Speak only when spoken to. Do not become friendly with the attorney for the Respondents you are suing. He is your mortal enemy. If you give him the chance, he will cut your heart out and take it home for dinner. Loose lips sink ships, etc.

  There will be plenty of opportunities to talk with your attorney so try not to interrupt him or her during the proceeding. Take notes of your questions and comments. If you want your attorney to do something or to ask a question, write a note on a piece of paper and give it to him or her.

  Attire

  Dress in your normal attire, dressing up or down as you please. Feel comfortable with your clothes. Don't try to put on airs or look less intelligent than you are.

  WHO ARE THE WITNESSES?

  Anyone who has knowledge about the case can be a witness. Examples:

  - how many cases are filed ahead of your case;
  - which arbitration agency you file your case with;
  - how complicated your case is;
  - how cooperative the lawyers for the Claimants and Respondents are;
  - how many days your case takes to try; or
  - how many times the case is adjourned.

  As you can see, there are many variables that make a prediction on any particular case almost impossible. Usually, an Arbitration will be finished faster than a court case, but this is not always true.

  IS ARBITRATION EXPENSIVE?

  Usually, arbitration is less expensive than a court case. However, arbitration is not a bargain. Remember, arbitration agencies are not funded by your state or federal government. They are private organizations.

  Filing Fees

  Filing fees in arbitration can be from $500 to $2,000 on up depending on which agency you file with and depending on the dollar value of your claim. The bigger your claim, the larger your filing fee. If the case is settled before an arbitration hearing, some or all of theses fees will be refunded. The portion refunded depends on exactly when you settle.

  Event Fees

  During the course of an arbitration, disputes can arise which require resolution by an Arbitration Panel. If the Panel is required to do something before the hearing, they generally charge for it. The cost may be as much as a filing fee. The Rules sometimes say which party pays this fee, but sometimes the Panel decides who must pay.

  Hearing Fees

  Arbitration agencies will almost always assess fees against one or all parties if the case actually results in a hearing. This charge is usually based upon the number of days spent hearing the case. The charge can be several hundred dollars for each hearing day. These fees are normally assessed against the party who loses the case. However, sometimes the party who wins must pay some or all of these fees. It is up to the Panel that hears the case.

  WHAT HAPPENS AFTER AN ARBITRATION IS FILED?

  A case is started by sending out a Statement of Claim along with the filing fee. This is a summary of the facts and law which applies to your claim. It should be as accurate as possible. Your attorneys will interview you thoroughly before writing your Claim.

  After a few weeks, the Respondents file an Answer, or response, to your Claim and try to present the facts and law in a way that favors them. How long it takes to get the response and how detailed it is depends on the style of the Respondents and their attorneys.

  Next, all parties investigate the case. Each party is permitted to ask the other party to answer questions in writing and to have documents produced. If a party refuses, the arbitrators may force cooperation. Each party may issue subpoenas to independent witnesses (such as banks and other securities firms) and force them to produce documents or to appear at the hearing. Depositions may occur, but they are rare.

  The dates of the hearing are arranged cooperatively between the arbitration agency and the attorneys for each party. The date is established several weeks or months in advance of the hearing itself.

  WHAT IS AN ARBITRATION HEARING LIKE?

  An arbitration hearing is like a trial - only more relaxed. Many of the formal rules and most of the formality in a courtroom is disposed of in a hearing. However, each party is represented by a lawyer and at least one of the Panel members will be a lawyer. It is hard to teach these old dogs new tricks and they tend to act like they are in a courtroom, but they are not. Also, some rules of procedure are necessary just to keep things orderly. The Panel will have a chairman who sort of runs things, but he or she is really just the spokesperson for the Panel. The arbitration agency may also have a representative present. Sometimes there is no record kept of what is said, and other times a tape recorder or court stenographer is used. The hearing normally proceeds in this way:

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