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March 2020

Arbitration Intoxication: Alternatives to Arbitrating Securities (and Other) Disputes

By: John S. Worden & Matthew P. Broccolo


            Arbitration has many advantages.  The purpose of this article is not to discourage participation in the arbitration process in general.  Indeed, one of the authors is the chair of the San Francisco Bar Association’s Arbitration Section, and both authors have arbitrated many cases in many different states, usually with success.  Nonetheless, in certain cases, arbitration can present more challenges and pitfalls than a jury trial, despite our clients’ belief otherwise.   

            Arbitration is perfect for some kinds of disputes.  It is a problematic process for others.  And, contrary to popular nomenclature before Congress, arbitration is not always plaintiff-hostile and defendant-friendly.  Although there are many instances where a corporate defendant would be well served by the arbitration process, often they would receive a faster, cheaper and more judicious resolution of their claims in the jury system.  Nonetheless, too often corporate clients refuse to consider the jury system even when it will be most advantageous for them to do so, and nowhere does this dichotomy exist more than in the FINRA/Securities Arbitration area.  The purpose of this article is to shed light on instances where our corporate clients’ interests are disserved by rigid adherence to a pro-arbitration mantra. 

The Evolution of Securities Arbitration

            The Supreme Court has consistently bolstered arbitration as a binding alternative to litigation. Two cases in the 1980s, Shearson/American Express Inc. v. McMahon[1] and Rodriguez de Quijas v. Shearson/American Express Inc.[2] ensured that courts would enforce agreements arising out of securities disputes.[3] Since then, brokerage firms have been all in on arbitration and almost universally included mandatory arbitration clauses in their customers’ contracts. The Financial Institution Regulatory Authority (FINRA) now operates the largest securities dispute resolution forum in the country.[4]

            In the late 1980s, requiring arbitration made sense for brokerage firms. The claims made were basic, and the amounts sought by claimants were small. That is no longer the case. What was once thought of as a streamlined process to resolve minor disputes has become a forum where seven, eight, or nine-figure disputes are also resolved with less predictability than in the courts. These high-value cases, which contain numerous, complex, and often-unsubstantiated claims, frequently languish for years. The amount in controversy can be as much as in a major commercial battle, with some claimants asserting seven, eight, and even nine-figure claims. And all of this is managed by a much-less-regulated system than the courts. 

            Yet, despite these challenges for businesses, arbitration is frequently cited as actually favoring businesses over consumers. Senator Sherrod Brown introduced the Arbitration Fairness for Consumers Act early in 2019, which would prohibit binding arbitration clauses in consumer contracts.[5] Congressman Hank Johnson introduced other legislation that targeted consumer arbitration, the Forced Arbitration Injustice Repeal (FAIR) Act earlier that year.[6] Publicly, plaintiffs’ bars such as the Public Investors Arbitration Bar Association (PIABA), the claimants’ bar for brokerage customer disputes, is supportive of these changes, noting that they are “supportive of investor choice.”[7] 

            With an election around the corner and the FAIR Act bill now through the House, arbitration clauses in consumer contracts, including with brokerage customers, may be a thing of the past. Yet, this may ultimately benefit brokerage firms and businesses generally. Representative Johnson’s “Fact Sheet” on the FAIR Act characterizes arbitration as a forum where arbitrators “apply different rules than a courtroom setting and render a secret, unappealable decision.”[8] He goes on to decry arbitration clauses as destructive to the 7th Amendment right to a trial by jury for consumers, preventative of class actions, requiring a setting that has different evidentiary and discovery standards than court, and giving businesses an unfair advantage in choice of arbitrator and forum.[9] Yet, it is far from clear that customers would benefit more than businesses from the option of going to court versus arbitration. More importantly, Representative Johnson unintentionally brings into focus a couple of the key problems with the consumer arbitration process that frustrate businesses.[10] The issues with the process that he outlines, which we explore in greater detail below, often create frustration for all parties involved.   


          An oft-cited reason for engaging in arbitration over trial is the streamlined discovery process.  The lack of depositions, contention interrogatories, and supposedly more-limited document discovery process are all supposed to make the parties’ and attorneys’ lives easier in resolving a dispute. While parties forfeit useful investigative tools like depositions, the streamlined process ostensibly moves everything toward resolution more efficiently. The FINRA arbitration rules even codify the lofty notion that parties must cooperate in discovery.[11] This all makes sense in the context of simpler disputes with low dollar amounts, a few documents, and straightforward claims. In those circumstances, the time and expense involved in depositions and multiple discovery conferences are gladly avoided. And sometimes even larger disputes are best resolved through arbitration. But sometimes, especially when the dollar amounts are large and the documents correspondingly voluminous, the arbitration process breaks down. 

            Despite the goal of streamlined discovery, arbitrations still take a long time to resolve.[12] Capital Forensics, Inc. (CFI)[13] has found that the average lifespan of FINRA customer arbitration cases since 2009 that do not settle (or are dismissed) is approximately 15 months. Additionally, cases that go to hearing more often than not last well beyond the one year mark between claim-filing and resolution. In fact, many last far longer than that. For example, of the customer cases with awards rendered that were filed in 2014, over 13% were closed after the two-year mark, with 4% being resolved after three years. Compared with courtroom litigation, this data is not supportive of arbitration. 

            Of all cases filed in the federal district courts, the median resolution time for all cases that go to trial has hovered right around 27 months for the past six years.[14] If all cases that settle or are otherwise disposed of are included, that number dwindles to between 8 and 11 months depending on the year between 2014 and 2019. Examining these numbers, the question becomes: What is taking so long if securities arbitrations do not usually involve things like depositions? While there are probably a number of answers to that question, document discovery in high-value cases is certainly one.

            Document discovery in arbitration can be just as time-consuming and resource-intensive as in a large commercial courtroom litigation. The authors have been involved in multiple customer arbitrations in which their clients were required to produce hundreds of thousands of pages of documents – a volume often not found in major commercial litigation. 

            Beyond production volume, parties must spend substantial time and resources obtaining proper disclosure from the opposition. Whereas courts have strict deadlines for documents discovery, frequent check-ins at status conferences, and other ways of keeping the parties in line, arbitrations generally allow the parties to create the discovery schedule and keep each other accountable. While this might sound nice in theory, it leaves the discovery process ripe for abuse and neglect. Parties must often file multiple motions to obtain the documents they need to prepare their cases. Additionally, the process informality frequently results in the parties engaging in last-minute, full-throttle discovery battles in the weeks leading up to the hearing.

            Third-party discovery is also extremely difficult to obtain in arbitration. Third-party document discovery often ends up being necessary for respondents because the opposing customer has produced little to no probative documents, often simply because the customer possesses very little. Yet, subpoenas are frowned upon in arbitration and difficult to enforce. For example, FINRA discourages the use of subpoenas on third parties unless absolutely necessary.[15] Sometimes, even when absolutely necessary, the panel will simply deny respondents permission to serve these subpoenas without sufficient explanation. Even when third-party document subpoenas are approved by the arbitration panels, they are largely unenforceable. Courts do not enforce document subpoenas in an arbitration unless they direct the recipient of the subpoena to appear at the arbitration hearing with the documents.[16] So, if a subpoena recipient refuses to cooperate, the only options for the propounding party are to give up or gamble that forcing the recipient’s appearance with the documents at the hearing will turn out well. Neither option is ideal.

            Given that the discovery process can be this frustrating, the loss of depositions and contention interrogatories seems almost too high a cost to choose arbitration for many high-value or otherwise complex cases. In a case moving to trial, the defense can focus the issues through contention interrogatories that force the plaintiff to substantiate their allegations with supporting evidence, which the defense can then obtain through discovery. Armed with that evidence, the defense is able to narrow its focus on the claims and evidence actually at issue in the case. In arbitrations, the lack of contention interrogatories allows the claimants to avoid providing this evidence and makes hearings less predictable. Similarly, the lack of depositions also makes respondents’ jobs harder and the witness examinations by both parties less focused. Depositions button down testimony and create a record that adverse witnesses at trial must stick to or face impeachment. At arbitration hearings, instead of conducting efficient examinations with the backdrop of prior sworn testimony, parties must spend time inefficiently wading through lines of questioning that may end up bearing no relevance to their case. 

Dispositive Motions

            Motions to dismiss and motions for summary judgment are a core pillar of the practice of law in state and federal court. They are essential to quickly disposing of meritless lawsuits and saving defense attorneys’ clients time and resources. For example, after their clients are served with a complaint, federal defense litigators frequently file motions to dismiss for failure to state a claim under which relief can be granted instead of answering.[17] In court, plaintiffs must file complaints containingmore than an unadorned, the-defendant-unlawfully-harmed-me accusation.”[18] Unlike in arbitration, “a formulaic recitation of the elements of a cause of action will not do.”[19] If defendants in a court case receive a complaint that fails this standard, they may file a motion to dismiss the complaint before discovery even begins. Likewise, if it becomes apparent after discovery that the case is meritless (or if it is clear that the plaintiff should prevail), either party can make a motion for summary judgment asking the judge to issue a final ruling based on the facts developed in the record. If granted, the judge disposes of the case at that stage and trial is avoided. 

            For low-dollar-value cases, it may be in neither party’s interest to expend time and resources on these motions and chance an unfavorable result. In those cases, parties may prefer the leaner discovery process and informal hearing structure in arbitrations to taking chances on such motions.

            However, for high-dollar-value cases, these motions can be vital tools of defendants. Both motions to dismiss and motions for summary judgment dispose of the case much quicker and less expensively than a trial. Motions to dismiss save the moving parties the enormous time and expense that the discovery process requires. Motions for summary judgment avoid the long billable hours spent briefing motions in limine, preparing witnesses, creating exhibits, and preparing for and executing all of the many facets of appearing in front of a jury. 

            Yet, the equivalents of motions to dismiss and motions for summary judgment in arbitration are almost never granted. Claimants often file threadbare statements of claim in arbitrations, yet arbitrators generally allow the case to proceed. The same is true when discovery is complete and shows a claimant’s case to be deficient; arbitrators are still loathe to dispose of the case without a hearing.  Indeed, many panels are likely uncomfortable dismissing a case before hearing evidence, given one of the few grounds for overturning an arbitration award is the denial of an opportunity to hear material evidence. In their view, the merits of a case will come forth during a hearing, so it is best to err on the side of caution and give both parties their “day in court.” Unfortunately for respondents, most of the time this means that the only viable way to get out of an arbitration is to settle or take it to an unappealable hearing.

Statutes of Limitations & Statutes of Repose

            Defendants lose another key weapon in battling meritless claims when they choose arbitration: proper enforcement of statutes of limitations and statutes of repose. Both are present in every court venue in the country, and they help prevent stale claims from wasting the courts’ resources and forcing defendants to battle ancient allegations. Besides enforcing the common-sense notion that claims with merit would have been brought well within the limitations period (with very few exceptions not relevant to most arbitrations), these statutes also safeguard against the enormous disadvantage at which stale claims put defendants. To defend against such claims, defendants must do the virtually impossible task of tracking down ancient documents and obtaining reliable testimony from witnesses about events they probably do not remember accurately. In court, defendants may make motions to dismiss the claims based on a statute-of-limitations defense right out of the gate if it is clear that all of the claims are stale. Or, if the record developed in discovery brings the stale nature of plaintiff’s claims to light, defendants can move for summary judgment at that point. In arbitration, these motions are almost never filed, because they are almost never granted.

            Often, the best that a respondent can hope for is that the panel addresses the issue at the hearing. Even then, panels have often allowed evidence related to stale claims to be brought in with a throw-away assurance that they will carefully consider the applicability of any statute of limitations or repose when making their ultimate determination. This fails to prevent the panel from hearing irrelevant and potentially prejudicial evidence of conduct that happened years ago. Most discouraging is that even where arbitration forums have codified their own statutes of limitation or repose, arbitration panels have not consistently applied them. FINRA Customer Arbitration Rule 12206(a) states “no claim shall be eligible for submission to arbitration under the code where six years have elapsed from the occurrence or event giving rise to the claim.” Despite this rule, claimants are frequently allowed to bring in evidence concerning events that happened seven or more years before the statement of claim was filed. With respect to state or federal statutes with much shorter limitations periods (e.g. three years for fraud or negligence, four years for breach of contract, etc.), panels almost never apply them. In practice, out-of-time claims almost always reach a ruling on the merits in arbitration.

            Thankfully, things may be changing (a little) with respect to respondents’ ability to bring these motions in FINRA arbitrations. CFI gathered data of awards rendered over the past decade, and the percentage of cases getting dismissed under the eligibility rule appears to be slowly crawling upwards. Additionally, recent Supreme Court precedent has given a boost to respondents defending against claims based on purchases or sales of securities prior to the limitations period. In CALPERS. v. ANZ Sec., Inc.,[20] the Supreme Court found that Section 11 of the Securities Act, a statute with very similar language to FINRA Rule 12206, was a “statute of repose,” meaning it runs “from the defendant’s last culpable act” and not from whenever the plaintiff discovered the actionable conduct. In other words, the Court held that this statute barred plaintiffs from making out-of-time claims simply because they did not discover the conduct in time. For FINRA respondents, this case theoretically means that claims against them based on purchases or sales of securities occurring more than six years prior to when the claim was filed should be dismissed.  However, it remains to be seen whether recent case law will finally turn the tide and motivate arbitrators to reliably dismiss out-of-time claims. Motions to dismiss, even based on eligibility concerns, are still rarely successful in the arbitration context.  

The Trial

            Large-value arbitration hearings can be lengthy affairs.  On the surface, one would think that a hearing with more relaxed rules of evidence and less discovery to wade through would make things run more efficiently. This is true when there are not many documents and the disputed issues are straightforward, but not so in complex, high-value cases. In fact, trying a securities arbitration can be just as inefficient, if not occasionally more inefficient, than trying cases in federal and state court.

            Arbitration hearings can be unwieldy from the start. Claimants in high-value arbitrations often throw the proverbial “kitchen sink” of claims at the respondent without having to substantiate any until the hearing, forcing the respondent’s counsel to prepare for a huge universe of claims, most of which will prove baseless. In fact, claimants sometimes succeed in bringing in claims absent from their pleadings until their attorney’s opening statement.  In state and federal jury trials, litigants can limit the amount of unsupportable claims and evidence introduced at trial through motion practice leading up to trial and throughout the matter.  As noted above, participants in arbitration cannot. Because of this, respondents must spend extensive time preparing for various eventualities in the claimants’ presentation of their case that they would have eliminated through motions were they in court. Failing to do so leaves respondents open to being blindsided with no recourse. And if something unexpected arises from that testimony, parties have to quickly and nimbly adapt their case strategy. Finally, all of this is done with the nagging worry in the back of the attorney’s mind that they will almost certainly be unable to appeal an adverse ruling. 

Evidence and Panelist Experience

          In court, the rules of evidence are geared toward jurors to prevent irrelevant and unreliable evidence from being admitted. Relevance, in particular, is codified in the Federal Rules of Evidence and by every state evidence code.[21] Further restrictions prevent the admission of even relevant evidence in a number of circumstances, including, for example, if it based upon hearsay[22] and speculation.[23] Furthermore, relevant evidence not deemed inadmissible by other restrictive rules will still not be admitted if “its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence.”[24]

          In contrast, the introduction of evidence in arbitration is virtually unregulated. For example, the ONLY rule governing the introduction of evidence at FINRA arbitration hearings is FINRA Customer Arbitration Rule 12604(a), which simply states, “The panel will decide what evidence to admit. The panel is not required to follow state or federal rules of evidence.” In other words, panels can choose whether to review, consider, and rely upon any evidence at all without respect to its relevance, speculative nature, or seriously prejudicial effect on the parties. Put simply, the admissibility of evidence is wide open at arbitration.

            Compounding this issue is the fact that arbitrators, who make complex evidentiary determinations throughout the hearing, are not required to have a background in law, much less have courtroom trial experience. This is a potential nightmare scenario for attorneys, as some arbitrators charged with conducting nuanced legal analysis have little to no training in evidence law. This is not just a one-in-a thousand occurrence, either. CFI discovered that out of 4,566 three-panelist customer arbitration awards for which they had data between 2009 and 2019, 6% of these panels had not one arbitrator with a law degree. And while that number may appear low, panels with no one possessing litigation or trial experience are significantly higher.

            Even if the parties select a fully qualified panel, they cannot prevent the arbitrators from being “tainted” by inadmissible evidence. In jury trials, jurors do not hear when pre-admission offers of proof are being argued and ruled upon by the judge. The reason for this is simple: The court does not expect jurors to ignore and forget persuasive information they see or hear simply because they are told.  Jurors cannot be counted on to prevent such information from impacting their judgment, consciously or otherwise. Yet, in arbitration, panelists act as both triers of fact and evidentiary gatekeepers. They hear and see all potential evidence that is being offered by a party before it is admitted. Thus, they are not insulated from clearly inadmissible and prejudicial evidence that taints their view of a witness or the case, whether consciously or subconsciously. When it comes time to render a final decision, arbitrators face the extraordinarily difficult challenge of separating out what they should be considering as triers of fact considering from what they heard or saw as evidentiary gatekeepers.

            Recently, certain attorneys have been taking advantage of the loose rules of evidence and dropping a “closing binder” into panelists’ laps during their closing argument. Closing argument is not the time to be offering additional evidence or legal authority. Yet frequently, the binder contains excerpted cases, rules, documents, and even press clippings that the offering party never provided to the opposition. Despite the fact that this would never fly in a courtroom, panels often allow this material to be presented after making statements to the effect of: “we will carefully consider what weight, if any, to give this material.” But by the time the closing argument has ended, the damage has likely been done. The offering attorney is able to refer to and twist whatever is in that binder, free of any objection from the other side. In fact, if the material is offered by the claimant, the respondent will likely be afforded no opportunity to orally rebut this evidence. In a strange quirk of the arbitration process in certain forums, claimants can “defer” all of their closing argument until after respondent has delivered theirs, depriving the respondent of the ability to rebut the argument. If claimants offered otherwise-inadmissible evidence into the record during their closing, respondent will likely have no recourse to object to it.

            It bears repeating that in cases with only a few documents and lower dollar amounts at issue, these concerns mostly disappear. There, the informality of the introduction of evidence in arbitration could be a blessing. It ensures that parties do not get bogged down in the unnecessary tedium of offers of proof, motions in limine, and objections in cases where the evidence and issues are straightforward. But with larger and more complex cases, this informality can present serious issues. In these cases, with thousands of documents and numerous complex issues, the admission of evidence can turn into an unpredictable free-for-all.

The Triers of Fact

            Runaway juries are frequently cited as the biggest concern for defendants going to trial. Juries have a reputation for being swayed by emotion, favoring the little guy over large businesses, ignoring key evidence, awarding unjustifiably large damages, and otherwise creating misery for defendants. Worst of all, they are characterized as wildly unpredictable, creating anxiety for anyone whose job relies upon projections of litigation results for corporate defendants. Many think that juries are the antithesis of predictability. 

            The same concerns ostensibly do not apply to arbitrators. They are viewed as educated, professional, reasonable, and experienced people who will objectively and diligently examine the evidence and correctly apply the law to their findings. Moreover, they may believe that most arbitrators on their panel will have substantial legal experience.

            In truth, the quality of an arbitration panel can vary wildly.  Sometimes, the attorney may get three diligent and reasonable arbitrators who are well-versed in the law and subject matter at issue in the case.  Other times, attorneys find themselves in front of arbitrators that have experience deficits, biases, short attention spans, and other issues that deeply impact the proceedings. In fact, on occasion you may find that an arbitrator is sleeping or (often) reading his or her phone during the presentation of your case.[25] And as was discussed earlier in this article, FINRA panels are not required to include a lawyer that can help guide them through thorny legal issues.

            The unique problem with a bad panel versus a bad jury is that arbitrators are not only the triers of fact, but, in the context of the arbitration, the judges as well. There is no one present to excuse the arbitrators during offers of proof or otherwise provide a check against their conduct. The buck starts and stops with the arbitration panel.

            Further, unlike jurors who are subjected to voir dire, arbitrators must only disclose certain information relating to bias that is required by the arbitration forum. In FINRA arbitrations, this information comes in the form of a yes and no questionnaire regarding the arbitrators’ affiliations and relationship to the parties with the occasional brief description where required. Attorneys cannot question arbitrators to illuminate their internal biases, which often remain unknown throughout the hearing. Further, arbitrators may accidentally omit key information from the questionnaire until the hearing. At that point, the handicapped party’s attorney has to decide whether to fight it or go forward with the hearing that their client has likely waited on for over a year.

            The parties are able to do some digging into the selection of arbitrators before the panel is constituted. FINRA provides a list of ten chairpersons, ten public arbitrators, and ten non-public arbitrators for each matter. Each party can strike four names from each of the first two lists and anyone from the non-public list. Additionally, each party may rank the arbitrators they did not strike from each list in order of preference. Diligent parties will look into the arbitrators’ professional background, their questionnaire, and their prior decisions with an eye towards spotting potential predispositions or biases when making these decisions. Yet, each party’s choices are often very limited and do not cure the serious problem of undisclosed biases and conflicts.

            Moreover, this process cannot address systemic issues with the FINRA arbitrator pool. For example, in October 2006, members of PIABA openly discussed their efforts to recruit public FINRA arbitrators at their annual meeting in Tucson.[26]

Appeals (or Lack Thereof)

            Appealing an arbitration award is an uphill, if not impossible, battle. Strangely, results produced by a less formal and revealing process than courtroom litigation are also exponentially harder to overturn. Within the vast majority of arbitration forums, appeals do not exist.[27] Instead, the only potential avenue to appeal an award is to file a motion to vacate the award under the Federal Arbitration Act in court. Those motions, which are rarely granted, can only be made under four limited circumstances: (1) where corruption, fraud, or undue means were used in obtaining the award; (2) where an arbitrator was partial or corrupted; (3) where there was misconduct by the panel in refusing to postpone the hearing, refusing to hear material evidence, or in any other form that prejudiced a party; or (4) where there was misuse of power by an arbitrator.[28] Certain courts also review awards that they deem “arbitrary and capricious” or “contrary to public policy.”[29] In practice, even where one of these unusual circumstances may have occurred, courts routinely deny motions to vacate, except in the most egregious of circumstances. In fact, arbitrators do not even need to get the law close to correct to avoid worrying about being overturned. Courts have held that an “erroneous application of the law” alone is not enough to overturn an arbitration award.[30]

            Complicating matters further, arbitrators are not required to tell parties why they decided the way they did. The FINRA rules only require that “the award may contain a rationale underlying the award” if the panel chooses. The parties may request an “explained decision,” but such a decision need only be “a fact-based award stating the general reason(s) for the arbitrators’ decision. Inclusion of legal authorities and damage calculations is not required.”[31] In other words, even when required to explain their decision under the rules, arbitrators need not provide what is usually the most crucial information in any appeal: how the panel applied the law. Aggrieved parties are left with the difficult task of appealing without any written record of the arbitrators’ legal reasoning in arriving at their decision. In the context of a minor dispute, the lack of an appellate process has a minimal impact. There, the parties would not likely spend the time or resources appealing an unfavorable result unless something truly egregious happened, in which case there are certain avenues to try and overturn the award. But in a major arbitration, this means that parties might get stuck with highly unfavorable, detrimental, and unfair results that will not be reviewed.[32]

The Award

            The final issue may be the most interesting to those on the respondents’ end of consumer arbitrations: damages. When firms first chose arbitration over the courts, they likely thought they were avoiding runaway juries who would award customers outlandish and baseless awards. Fears of massive punitive damage awards based on sympathy for the little guy drove firms towards what they thought would be a fairer process. With respect to high value cases, things have not worked out as planned.

            Generally, punitive damages are intended to be used as a deterrent and a punishment for outrageous conduct that occurs “because of the defendant’s evil motive or his reckless indifference to the rights of others.”[33] In California, for example, punitive damages cannot be awarded against employers who are only found liable on a theory of “respondeat superior,” which is often the only reason brokerage firms are roped into customer arbitrations.[34] Punitive damages will not be assessed unless the employer “had advance knowledge of the unfitness of the employee and employed him or her with a conscious disregard of the rights and safety of others or authorized or ratified the wrongful conduct for which the damages are awarded or was personally guilty of oppression, fraud or malice.”[35] In the context of securities arbitrations at least, this is a very high bar to meet. If this standard were properly applied in the securities arbitration context, punitive damages would be very rare.

            Yet, arbitration panels award punitive damages with unsettling frequency. For example, in 2018, 5% of all cases that made it to the award stage were awarded punitive damages.[36]  To be clear, that is not the percentage of cases where claimants succeeded – it is 5% of all cases that went through to an award, including the 60% that resulted in the denial of all of claimants’ claims.[37]  That means that if a respondent went the distance and was provided a decision in 2018, there was a one-in-twenty chance that the Panel awarded punitive damages.  According to FINRA’s statistics, claimants were awarded damages in 40% of the cases that were decided in 2018.  Taken together with CFI’s findings, that means that claimants who were awarded damages had a nearly 12% chance of obtaining punitive damages in 2018.  By contrast, a 2005 study of all state civil trials across the country found that punitive damages were awarded in only 5% of cases where plaintiffs prevailed.[38] While current data on punitive damages is lacking, these statistics nonetheless should give one pause. Brokerage firms should seriously question the notion that arbitrations avoid irrational awards more than trials. The numbers are even more discouraging when one considers that these inexplicable awards would be appealable after trial, but rarely at arbitration. 


          If we have seemed overly critical of arbitration, that was not our intent. We end this article where we started, by confirming our belief that in many cases arbitration is faster, cheaper, more predictable and thus preferable to the jury system. However, as discussed above, there are many circumstances where this would not be the case. For example, a defendant in a dispute over claims that are time-barred or legally unsound would be far better off in the court system where motions to dismiss and motions for summary judgment are often granted to eliminate such claims from going forward, to name just a couple of examples.  

            Because brokerage customer disputes invariably are litigated in FINRA Dispute Resolution, we have no countervailing examples of what would happen were they to be litigated in court today. That imbalance of information may unfairly taint arbitration when litigation would no doubt present its own challenges. Arbitration does have its merits, and can yield fair and favorable results. The vast majority of the arbitrations in which the authors have been involved resulted in favorable outcomes for our clients. Nevertheless, it is clear that arbitration has fallen miles short of its lofty promises of speedy results, cost-efficiency, and fair results, especially in the context of complex and high-value cases.

            The purposes for which arbitration was designed have simply not been achieved in that context. Arbitration discovery omits depositions and contention interrogatories for the sake of expediency, but discovery often ends up eating up just as much time and money as a court case. The record is then left less clear than it would be had the process involved depositions, contention interrogatories, and court conferences. At the hearing, respondents are forced to prepare to defend against every possible claim, and do so even if the claims are meritless. And whether prejudicial or not, evidence will likely come into the record at the hearing due to a lack of evidentiary standards.

            The panel itself might be experienced and diligent, or they may be biased and inattentive. Regardless of their diligence or objectivity, there is no guarantee that any arbitrator on the panel will have legal experience. When damages are awarded, respondents are at risk for runaway awards just as they would be in front of juries. And if they get an irrational result, respondents are essentially without recourse to appeal it. 


            John Worden is a partner in Schiff Hardin’s San Francisco office and chair of the San Francisco Bar Association’s ADR/Arbitration Section. Matt Broccolo is a senior associate in Schiff Hardin’s New York office. Both authors have arbitrated many cases in many different states, usually with success.

[1] Shearson/Am. Exp., Inc. v. McMahon, 482 U.S. 220 (U.S. 1987).

[2] Rodriguez de Quijas v. Shearson/Am. Exp., Inc., 490 U.S. 477 (U.S. 1989).

[3] McMahon provided that agreements to arbitrate under the Securities Exchange Act of 1934 were enforceable while Rodriguez provided that agreements to arbitrate under the Securities Act of 1933 securities act were enforceable.  See McMahon, 482 U.S. at 238; Rodriguez, 490 U.S. at 485–86.

[4] Jill I. Gross, The End of Mandatory Securities Arbitration, 30 Pace L. Rev. 1174, 1177 (2010).

[5] Mark Schoeff Jr., Bills would end mandatory arbitration in adviser, broker contracts, Investment News (May 4, 2019, 2:01 pm)

[6] See Id. One bill was introduced by Senator Blumenthal in the Senate, the other by Representative Johnson in the House. See H.R. 1423, 116th Cong. (as introduced in House, February 28, 2019); see also S. 610, 116th Cong. (2019).

[7] Schoeff, supra note 5.

[8] Press Release, FAIR Act: The Forced Arbitration Injustice Repeal Act, Hank Johnson Media Center (Sept. 20, 2019).

[9] Id.

[10] While prior bills calling for an end to mandatory arbitration in brokerage customer disputes seem to languish and die, Representative Johnson’s FAIR Act bill has gained some momentum.  It passed the Democratic-majority House on September 20, 2019, and is now in the Senate just over a year before the 2020 election. See H.R. 1423, 116th Cong. (as passed by House September 20, 2019).  Should the Senate and Presidency swing to the Democrats in 2020, arbitration clauses in consumer contracts may become a thing of the past.

[11] FINRA Customer Arbitration Rule 12505 (“The parties must cooperate to the fullest extent practicable in the exchange of documents and information to expedite the arbitration.”).

[12] We have examined securities arbitrations here because there is data available to analyze, unlike in other types of arbitrations.

[13] CFI is an entity specializing in arbitration data analytics (among other things).

[14] United States District Courts – National Judicial Caseload Profile (June 30, 2019)

[15] See FINRA Customer Arbitration Rule 12512 (“Unless circumstances dictate the need for a subpoena, arbitrators shall not issue subpoenas to non-party FINRA members and/or employees or associated persons of non-party FINRA members at the request of FINRA members and/or employees or associated persons of FINRA members.”).

[16] See, e.g., Hay Grp., Inc. v. E.B.S. Acquisition Corp., 360 F.3d 404, 407 (3d Cir. 2004) (noting that “the only power conferred on arbitrators with respect to the production of documents by a non-party is the power to summon a non-party ‘to attend before them or any of them as a witness and in a proper case to bring with him or them any book, record, document or paper which may be deemed material as evidence in the case’”) (citation omitted).

[17] See, e.g., Fed. R. Civ. P. 12(b)(6); Cal. Civ. Proc. § 430.10(e).

[18] Ashcroft v. Iqbal, 556 U.S. 662, 678 (U.S. 2009), citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (U.S. 2007). 

[19] Twombly, 550 U.S. at 555.

[20] 137 S. Ct. 2042, 2049 (U.S. 2017).

[21] FED. R. EVID. 402 (“Irrelevant evidence is not admissible.”); See, e.g., Cal. Evid. Code § 350 (“No evidence is admissible except relevant evidence.”).

[22] FED. R. EVID. 802. (“Hearsay is not admissible unless any of the following provides otherwise: a federal statute; these rules; or other rules prescribed by the Supreme Court.”).

[23] FED. R. EVID. 602 (“A witness may testify to a matter only if evidence is introduced sufficient to support a finding that the witness has personal knowledge of the matter.”).

[24] FED. R. EVID. 403.

[25] We are not joking.

[26] Karen Donovan, Fix Arbitration Now, Wealth Management, (Jan 1, 2007).

[27] See, e.g., FINRA Customer Arbitration Rule 12904(b) (“Unless applicable law directs otherwise, all awards rendered under the Code are final and are not subject to review or appeal.”); but see Rule 34 of JAMS Comprehensive Arbitration Rules & Procedures (“The Parties may agree at any time to the JAMS Optional Arbitration Appeal Procedure.”).

[28] 9 U.S.C. § 10 (2002).

[29] See, e.g., Brown v. Rauscher Pierce Refsnes, Inc., 994 F.2d 775, 779 (11th Cir. 1993).

[30] See, e.g., Local 863 Int'l Bhd. of Teamsters, Chauffeurs, Warehousemen & Helpers of Am. v. Jersey Coast Egg Producers, Inc., 773 F.2d 530, 533 (3d Cir. 1985) (stating that “a court [may not] disturb an arbitrator's award because it finds an error of law,” instead requiring a finding that the “arbitrator’s decision evidences manifest disregard for the law rather than erroneous interpretation of the law”).

[31] FINRA Customer Arbitration Rule 12904(g).

[32] Parties may sometimes agree to an appeal process laid out by the arbitration clause in their contract.  This adds a layer of protection against unfair or unreasonable awards that would otherwise not be appealable.  However, this is available as an option in every forum.  Notably, FINRA provides no right of appeal or ability to provide for an appeal mechanism in contracts.

[33] Restatement (Second) of Torts § 908 (1979).

[34] Cal. Civ. Code § 3294(b) (1992).

[35] See id. Additionally, the statute provides that the behavior triggering punitive damages on the part of a corporate employer must be on the part of an officer, director, or managing agent of the corporation.

[36] These statistics were taken from data collected by CFI. 

[37] Dispute Resolution Statistics, FINRA, (September 2019)

[38] Thomas H. Cohen & Kyle Harbeck, Punitive Damage Awards in State Courts, 2005, U.S. Department of Justice Office of Justice Programs, Bureau of Justice Statistics (March 2011),

January 2020


Happy New Year to everyone in FDCC and a special welcome to our newest Federation members.

If you’re wondering who the commercial litigators are or how this area of practice is defined, one of our new FDCC members, Bailey King, gave a nice description:  “a commercial litigation practice means using the law to accomplish your clients’ business objectives in its dealings with other companies.  This means that the substantive area of law (contract, intellectual property, securities, etc.) is not as important as understanding where our clients face risk and where they may have leverage.  The substantive area of law is just a tool we as commercial litigators can use to help our clients accomplish their business goals.”  If this fits with your daily work objectives, you should consider filling a spot in our Committee. 


Everyone should make plans to attend the Winter Meeting March 4-8 in Scottsdale, AZ.  This is a great venue, especially as Old Man Winter plagues most of the country.  The Commercial Litigation section will pair up with the Toxic Torts and Environmental Law Committee to discuss effective tactics and techniques for mediation and negotiations.  This CLE program is Friday at 9:00 am and includes mediators and a practicing attorney, so please make plans to join.  Efforts are also underway for the Commercial Litigation Committee to gather for a social hour late Friday afternoon, so stay tuned for details.  This will be a great meeting so get registered now!


Next up will be the Summer meeting in Bermuda.  Commercial Litigation will co-present with the Energy Utility Committee for another great CLE program. 


Finally, the Committee is working on a couple of webinars this year that focus on commercial issues.  These one-hour spots will be available to all FDCC members so keep watch in the upcoming newsletters and updates. 


If you are interested in what we are doing or joining this Committee, please contact us:


Vicki Smith, Chair,

Sean Griffin, Vice-Chair,

Mike Pipkin, Vice-Chair,

Jeff Puryear, Vice-Chair,


September 2019


You've got a friend in me
You've got a friend in me
When the road looks rough ahead
And you're miles and miles

From your nice warm bed
You just remember what your old pal said
Boy, you've got a friend in me
Yeah, you've got a friend in me”


Hello Commercial Litigation Section,

Doesn’t that song express exactly what FDCC is all about?  I love going to FDCC events and seeing my friends who live in other parts of the country or calling them when questions arise in my cases from their jurisdiction. 

I’m very excited to chair the Commercial Litigation Section this year, and my hope is to build more connections and friendships among our Section members.  We have speaking and publication opportunities and section meetings to look forward to.  If you want to be involved in the section, please reach out to me or any Section Vice Chair: Charles Griffin, Sean Griffin, Paul Kessimian, Mike Pipkin, Jeffrey Puryear and Robert Sumner.  We’ll get you involved.

Look for more communications from us with news about the Section.  In the meantime, I’ll leave you with one task.  “Commercial litigation” is a broad description of our practices.  I’d like to clarify and give examples of what our section members do.  If you have time, send me a short (1-2 sentence) description or what “commercial litigation” means to you and your practice.  Make sure you’re comfortable with what you send because you will likely see your description and name in a newsletter or elsewhere.

I look forward to working with you and making many new friends this year.  Have a great weekend,



*For those of you who don’t recognize the song, it’s from Toy Story. 



June 2019


            The Winter Meeting in Austin was a great success.  The Commercial Litigation Section drew a good audience to our program, entitled: “Keeping Your Business Clients Happy in Turbulent Times.”  Many thanks to our Section Vice-Chair Sean Griffin who did a tremendous job of leading a wonderful panel, which consisted of Jeff Guillory, Chris Holecek and Dan McGrath. 

            And now, we turn our attention to the Summer Meeting, in Sun Valley.  Once again we’ve lined up an excellent panel for our Section Meeting.  The topic will be:  “Real World Litigation Strategies.”  Our panelists are: Dart Meadows, Eric Riegner, Joseph Guillot and Richard Coyne.  We will cover the evolving practice of “discovery on discovery” from corporate document witnesses and discuss how to best explain litigation to business clients.  We’ll also discuss  consequential damages on vendor contracts and the interplay between contractual indemnity provisions and workers compensation, plus much more.  Mark the date: Wednesday, July 31, 2019, at 8 am, because you won’t want to miss this.

            Sun Valley is one of the most beautiful destinations that the FDCC visits. Golf, horseback riding, white water rafting, skeet shooting and hiking are just some of the ways to enjoy this wonderful venue.  There will be plenty to do for both members and their families.  Plan your trip right now!

            The Federation has embarked in a program to “Replace Yourself.”  This means that we ask each member to look around and identify qualified people who would be a good fit for membership in the FDCC.  If you are member of the Commercial Litigation Section and have such a person in mind, please contact us and we will help streamline the process for you and your potential nominee.  It is easy and it is worthwhile.  We all want and need the Federation to continue as a vibrant organization in the future, this is how you can help.

            If you would like to write or speak on a commercial litigation topic, please let us know.  In particular, we are looking for an article for Insights.  If you would like to have an article published, now is your chance. 

            See you soon in beautiful Sun Valley!




Chair, William Vita


Vice-Chair, Vicki Smith –

Vice-Chair, Sean C. Griffin –

Vice-Chair, Sonia J. Bjorkquist –


March 2019





            Our Winter Meeting is almost upon us.  If you haven’t registered already, please do so immediately. 


            The Commercial Litigation Section is presenting a tremendous CLE program.  You won’t want to miss this presentation.


            Our program is:  “Keeping Your Business Clients Happy in Turbulent Times.”  Topics will include: helping clients respond to third-party subpoenas; advice to businesses on maintaining confidential information; and the changing legal landscape for non-compete agreements.  The panel will finish up with “Ten Tips to Keep Your Clients Happy.”  Who doesn’t want to hear such tips?  Section Vice-Chair Sean Griffin will moderate this stellar panel of Jeff Guillory, Chris Holecek and Dan McGrath. 


           We are also in the midst of planning for our presentation at the Summer Meeting.  In Sun Valley, the topic will be:  “Real World Litigation Strategies.”  Ashley Campbell will moderate the panel consisting of Dart Meadows, Eric Riegner, Joseph Guillot and Richard Coyne.  We will cover the evolving practice of “discovery on discovery” from corporate document witnesses and discuss how to best explain litigation to business clients, plus much more.  You won’t want to miss this.


            As some of you may recall.  Sun Valley is one of the most beautiful destinations that the FDCC visits. Golf, horseback riding, white water rafting and hiking are just some of the ways to enjoy this wonderful venue.  There will be plenty to do for both members and their families.  Start planning your trip now!

            The Federation has embarked in a program to “Replace Yourself.”  This means that we ask each and everyone of you to look around and identify qualified people who would be a good fit for membership in the FDCC.  If you are member of the Commercial Litigation Section and have such a person in mind, please contact us and we will help you and your potential nominee to get started.  It is easy and it is worthwhile.  We all want and need the Federation to continue as a vibrant organization in the future.

            If you would like to write or speak on a commercial litigation topic, please let us know.  We are always looking for fresh ideas.




Chair, William Vita


Vice-Chair, Vicki Smith –

Vice-Chair, Sean C. Griffin –

Vice-Chair, Sonia J. Bjorkquist –


December 2018




            Dust off your Ten Gallon Hat and get your cowboy boots out of the closet, because we are heading for Austin in March.


            This year our Winter Meeting begins on Sunday, March 24, 2019.  It runs through March 28, 2019.  The setting is the JW Marriot right in the heart of Austin, where you can enjoy all of the food, the music and the craziness that the City has to offer. 


            But don’t get too crazy at night, because you will want to attend the Commercial Litigation Sections’ outstanding CLE presentation.  Section Vice-Chair, Sean Griffin will moderate a panel discussion about topics that you will put right away to work in your busy practice.  The panel includes Jeff Guillory of Shelter Insurance Company, Chris Holecek of Wegman Hessler and Vanderburg and Daniel McGrath of Hinshaw and Culbertson.  The topic is:  “Keeping Your Business Clients Happy in Turbulent times.”  We will discuss emerging trends in restrictive covenants, drafting enforceable non-competition agreements, responding to third-party subpoenas, and maintaining the confidentiality of business information.  We will close out the session with “Ten Tips to Keep Your Clients Happy.”


            In an era when privacy seems to be a vanishing concept, you will want to attend this discussion.


            We are also planning now for the Summer Meeting, so please let me know if you have a topic that you would like to discuss at that meeting.  We are also always looking for written submissions, so please provide those as well. 


            Finally, and perhaps most importantly, please contact our committee leaders if you have someone in mind that you would like to invite to join the Federation.  We are also looking for great new members and we will be more than happy to shepherd any Nominees through the process.  New members are the life blood of the Federation and we are dedicated to providing the necessary resources to attract new members.




Chair, William Vita


Vice-Chair, Vicki Smith –

Vice-Chair, Sean C. Griffin –

Vice-Chair, Sonia J. Bjorkquist – 


September 2018


The Commercial Litigation Section’s Vice-Chair, Vicki Smith, did a tremendous job of assembling and organizing a stellar panel for our break-out session on Maui. Extra seats had to be brought into the room to accommodate the standing-room only attendees.  Vicki not only organized the panel but also was one of the speakers.  She was joined by Vice-Chair Sean Griffin, Margaret Ward, Howard Merten, David Thorne and Dan McGrath.  The format, which challenged each speaker to cover their topic in only six minutes, energized both the speakers and the audience and was lots of fun. 


We are now finalizing plans for our section presentation in Austin, Texas.  Dan McGrath will join Jeff Guillory and Chris Holecek to cover a wide range of business related topics, including: Non-Compete Agreements; Third-Party Subpoenas; and Privacy and Confidential Information in the Age of Social Media.  It will be both entertaining and enlightening.


If you have ideas for topics for the 2019 Summer Meeting, in Sun Valley or the 2020 Winter Meeting, in Scottsdale, please let us know.  We’d love to have you speak. 


Finally, we are always looking for legal articles, whether short or long.  Short articles we can attach to our quarterly newsletter and longer articles can be submitted for more formal publication.


Thank you for supporting the Commercial Litigation Section and please let us know how you are doing and what you would like us to focus on. 



Chair, William Vita


Vice-Chair, Vicki Smith –

Vice-Chair, Sean C. Griffin –



July 2018


The Summer Meeting is this month!  If you haven’t registered yet, wait no longer!  Start packing your flip flops and Hawaiian shirts – you’re going to need them!  Leave your jackets and ties at home. This is Maui, after all and the meeting will feature casual clothes, tropical breezes and wonderful island experiences.  Do you like to snorkel or fish? Maui has some of the best waters in the world to enjoy. Want to surf like a native? You can learn. Do you like history? You can see Pearl Harbor.  What more is there to say?


You’ll also love the CLE.  The Commercial Litigation Section will present its panel discussion on Wednesday, August 1, at 7:00 a.m.  The topics are wide ranging but useful for all attorneys and claims professionals. Each panelist will have seven minutes to cover a topic that is “bugging them lately.”  Dan McGrath has now joined our other panelists, with a secret topic to be unveiled in Hawaii. Margaret Ward will speak on persuading jurors to care about corporate monetary claims; Sean Griffin will cover the intersection of fraud and contract law; Vicki Smith will review arbitration issues; Howard Merten will look at the concept of proportionality in discovery under the new Federal Rules and David Thorne will provide tips for preparing corporate witnesses for depositions.  


Would you like to write an article for the FDCC’s Insights series?  We need them, so please contact us and we’ll help you get in print



Chair, William Vita

Vice-Chair, Vicki Smith –

Vice-Chair, Sean C. Griffin –



May 2018

Submitted by: William E. Vita


Have you registered for the Summer Meeting and booked your flights?  If not, wait no longer!  Register now for the fellowship and fun.  An entire day has been reserved in the schedule for once-in-a-lifetime activities such as: a visit to Pearl Harbor, snorkeling with turtles, deep sea fishing, and many more memorable excursions.  There is no better way to take a break from your busy law practice and recharge your batteries.  In addition to the fellowship, you’ll love the CLE. 


The Commercial Litigation Section will present its panel discussion on Wednesday, August 1, at 7:00 a.m.  The concept is novel and exciting.  We’ll put some of the best attorneys in the Federation on the clock and have them explain, in seven minutes or less, issues that are “bugging them lately.”  For example, Margaret Ward will provide tips on convincing jurors to care about monetary claims between corporate entities.  Sean Griffin will speak on fraud in contract law.  Vicki Smith will speak about arbitration issues.  Howard Merten will discuss the concept of proportionality under the new Federal Rules and David Thorne will cover the preparation of corporate witnesses for depositions.  It will be lively, it will be highly informative and it will be fun, as a referee will blow a whistle on anyone who goes over their allotted time. 


We are constantly looking for new FDCC Members who meet the high criteria established by our organization.  If you have someone in mind, please let us know and we will help you and your candidate start the membership process.



Chair, William Vita

Vice-Chair, Vicki Smith –

Vice-Chair, Sean C. Griffin –




 April 2018

Submitted by: William E. Vita


The Winter Meeting in Amelia Island was a smashing success.  Good weather and a very large turnout helped make it easy to enjoy the company of old and new friends. 


Now on to Maui!  Book your flights now.  The Summer Meeting starts on July 29 and ends on August 4.  The setting is the spectacular Wailea Marriott Beach Resort.  The theme is: “Strive To The Summit.”  Need we say more?  Block out the dates and go.   


The Commercial Litigation Section is preparing a dynamite presentation, led by our Vice-Chair, Vicki Smith.  The topic is: “Lightning Round: Issues That Are Bugging Me Lately.”  The Lightning Round concept is guaranteed to make this a lively and highly informative event.  Each panelist will have only eight minutes to present their ideas on a certain topic.  The limits will be rigidly enforced by a referee with a whistle.  This will keep you awake!  Our panelists will include Margaret Ward; Sean Griffin; Vicki Smith; Howard Merten; David Thorne; and Dart Meadows


As always, if you know someone who would be a great FDCC Member, please let us know and we will work with you to get the application submitted.  The Federation is a wonderful group, let’s keep it strong by keeping membership high. 


Chair, William Vita -


Vice-Chair, Vicki


Vice-Chair, Sean C.



January 2018

Submitted by: William E. Vita, Vicki M. Smith, Sean C. Griffin

We need your help!

As we mentioned in December’s newsletter, the Federation is in the formative stages of a project to raise the visibility of both our organization and our individual attorneys.  The F.D.C.C will contact national business associations about presenting panel discussions on legal topics to these groups at their conferences and meetings.

Here’s what we need from you: 

1.     The names of appropriate business groups to partner with;

2.     Suggested topics;

3.     Volunteers willing to join the panel discussions.


 This is easy.  All you have to do is tell us that you’re interested and we’ll get you involved.

Participants will get an unparalleled networking opportunity to meet business people who need legal expertise and assistance – and you will get their attention by sharing your legal knowledge with them.
 Topics might include: how to avoid contract disputes; what business people need to know about non-compete agreements; how litigation works and what business folks should do when they are sued, including an explanation of litigation holds for lay people.   But that is just a few ideas to prime the pump.  Let’s hear from you!

We need your input immediately. Please let us know if you want to get in on the ground floor of what is sure to be another Federation success story.  Contact the Section Chair or Vice Chairs listed below and you’ll be in on the planning. 

Who do you know that would be a great FDCC Member?  The Federation is a wonderful group, let’s keep it strong by keeping membership high.  If you know someone who fits the bill, please let us know and we will work to get the application submitted. 


Time’s running out.  Register for Amelia now. Don’t procrastinate.  Book your flights and head to Florida.



December 2017

Submitted by: William E. Vita


The Federation is starting a project to reach out to national business organizations and the Commercial Litigation Section will be in the vanguard.  Thanks go to Ned Currie for conceiving of this idea.  The FDCC will offer to organize and present panel discussions on legal topics to the business groups at their conferences and meetings.  It will be an innovative way to interact with large groups of business executives and leaders.  Topics will be arranged to explain legal developments to the executives.  Topics might include: how to avoid contract disputes; what business people need to know about non-compete agreements or partnership agreements; how litigation works and what to do if you are sued; and litigation hold information for lay people.  Those are just a few ideas and we’re very much open to topic ideas.


This will be a great way to provide insight and valuable information to the business community while displaying the mastery of legal issues that Federation members are known for.  The networking possibilities are boundless.  Please let us know if you have an interest in joining this project and if you know of business organizations that would be a good fit for this type of collaboration.  Contact the Section Chair or Vice Chairs listed below and you’ll be in on the ground floor as we launch this worthy program.


Who do you know that would be a great FDCC Member?  The Federation is a wonderful group, let’s keep it strong by keeping membership high.  If you know someone who fits the bill, please let us know and we will work to get the application submitted. 


As I’m writing this, we’re supposed to get about 5 inches of snow in New York tomorrow.  We’ll see what happens.  But there is one place where this is no snow: Amelia Island!  The registration is open for the Winter Meeting.  Sign up early and make sure that you are not shut out of any of the great events.  Just go to the Federation’s website and you’ll be heading to Florida before you know it. And remember, the Federation is offering free registration to corporate counsel and risk professionals for the Winter Meeting.  So by all means, bring a client.


Chair, William E. Vita -

Vice-Chair, Vicki

Vice-Chair, Sean C.





November 2017

Submitted by: William E. Vita


Who do you know that would be a great FDCC Member?  Someone you went to college or law school with?  Someone who has acted as co-counsel with you on a big case?  The Federation is such a great organization, why not introduce a colleague to it and to us.


If you know someone who fits the bill, please let us know and we will work to get the application submitted.  The Federation is always looking for great new members, as they are the lifeblood of our wonderful organization.  Please contact us and we will make the process smooth and easy. 


Remember, the Federation is offering free registration to corporate counsel and risk professionals for the Winter Meeting in Amelia Island, Florida.  The meeting will begin on February 24 and finish on February 28, 2017.  So what are you waiting for?  Invite your clients for fun, sun, golf and great fellowship!  Plus excellent CLE!  Your clients will thank you, it’s a no-brainer.





October 2017


The Corporate Counsel Symposium was a smashing success in Philadelphia this year.  All section members should consider attending the Symposium next year.  The event will return to Philadelphia.  Every year there are more in-house corporate counsel in attendance than there are outside attorneys, so it is a great way to network and meet new folks.  Look for the details regarding next year’s Symposium on the Federation website. 


Also coming up is the Federation’s Insurance Industry Institute, which will be held in New York City on November 9th and 10th, 2017.  As with the CCS, the I3 will have more in-house insurance industry participants than outside counsel.  It is a great chance to learn what the insurance executives are thinking about and offer advice.


Keep yours out for eight free Federation Webinars spread over the next year.  Please encourage others in your firms and companies to participate in these webinars, as it is free for all participants, as long as one person in the firm or company is a Federation member.  This is one of the many ways that membership of the Federation adds value to your firm or company. 


If you have ever thought of taking one of your clients to a Federation meeting, as a way of introducing them to the Federation, now is the time to do so.  The Federation is offering free registration to corporate counsel and risk professionals for the Winter Meeting in Amelia Island, Florida.  The meeting will begin on February 24 and finish on February 28, 2017.  Why not bring your client for fun, sun, golf and great fellowship?


On that note, please let our section chairs know if you have someone in mind for membership in the Federation.  We will be happy to help guide you through the application process.  The Federation is always looking for great new members, as they are the lifeblood of our wonderful organization. 


We are happy to forward all articles submitted, so please keep them coming. 


If you have any questions or would like to get more involved with the Commercial Section, please contact us.



The Commercial Litigation Section is looking forward to the Winter Meeting, February 24-28, 2018, on Amelia Island.  Start making your plans now for what will be a tremendous CLE program at a wonderful destination.

Our Section is joining the Corporate Counsel Committee and the ADR Committee at Amelia to examine the “Role of In-House Counsel in Alternative Dispute Resolution.” The panelists will include folks from both industry and law firms and they will provide detailed and tested advice on how to succeed in mediations by obtaining the best possible result for your client.  You’ll enjoy this one.

Plans are also underway for the Summer Meeting in Hawaii.  If you have ideas for topics at that meeting, please let us know. 

Do you know someone who would be a good candidate to join the Federation?  You know how much the FDCC means to you, why not suggest to a friend that they submit an application?  New members mean new ideas and new perspectives for our dynamic organization.  Let us know if you have a name in mind and we’ll help shepherd the candidate through the process. 

This month, we are very fortunate to have an excellent and insightful article prepared by one of our Vice Chairs, Vicki Smith.  Vicki is a partner with the Bodyfelt Mount law firm in Portland, Oregon.  She has broad experience on many issues, including breach of contract, insurance coverage, professional liability, product liability and construction defects.  Her article discusses a recent 9th Circuit Case that is of interest to everyone. 

Please contact us with ideas or if you would like to submit a quick article of interest. 

Chair: William Vita

Vice Chairs: Sonia Bjorkquist, Vicki Smith and Sean C. Griffin.



Beware the Arbitration Provision Not in Your Client’s Contract

Authored By: Vicki M. Smith, Bodyfelt Mount, Portland, OR

The 9th Circuit recently confirmed the arbitrator’s authority to decide issues of arbitrability under the parties’ agreed upon arbitration rules.  In Portland GE v. Liberty Mut. Ins. Co., 2017 U.S. App. LEXIS 16409 (9th Cir. July 10, 2017 amended Aug. 29, 2017), the court determined that parties which incorporate the rules of the International Chamber of Commerce (“ICC”) into an arbitration agreement adequately delegate gateway issues of arbitrability to the arbitrator.  In an unusual twist, the arbitrator’s authority was extended to claims by a party who was not included in the contract containing the arbitration clause, even when the two parties involved in the claims had not agreed to arbitrate their dispute. 

Portland General Electric (“PGE”) entered into a construction contract with a contractor to build an Oregon power plant.  The contract required the contractor to obtain a performance bond and a guaranty of performance from a parent company, Abengoa.  Both the guaranty and performance bond were issued to PGE.   As a result, there were three contracts: 1) the construction contract between PGE and the contractor that contained no arbitration clause; 2) the guaranty contract between PGE and Abengoa that called for arbitration under the ICC rules; and 3) the performance bond that contained no arbitration provision. 

A dispute arose, and PGE terminated the construction contract.  Abengoa filed for arbitration against PGE under the guaranty, asserting PGE’s termination of the construction contract was wrongful and Abengoa owed nothing under the guaranty.  Per the guaranty and ICC rules, Abengoa sought to implead the sureties that issued the performance bond into the arbitration.  The sureties consented to the arbitration and sought similar relief against PGE.  PGE objected to the sureties being involved in the arbitration as the bond did not contain an arbitration clause.  PGE filed suit seeking a preliminary injunction prohibiting the sureties from arbitrating their claims against PGE.  The district court granted the injunction.

“Gateway” questions of arbitrability are presumptively reserved for the court’s decision, such as which parties are bound by an arbitration provision and whether an arbitration provision applies to a specific issue.   Parties may delegate those gateway questions to the arbitrator if the parties “clearly and unmistakably” agree to do so.  The 9th Circuit previously held that contracts incorporating the American Arbitration Association rules constitute “clear and unmistakable” evidence that the parties delegated gateway arbitrability issues to the arbitrator.  With the PGE decision, the 9th Circuit joins the 1st and 2nd Circuits in holding that contracts incorporating the ICC rules into an arbitration agreement also adequately delegate gateway issues to the arbitrator.  In this case, that delegation extends not only to the two parties to the arbitration agreement but also to the impleaded parties’ claims against a party to the arbitration agreement. The 9th Circuit vacated the district court’s grant of a preliminary injunction and allowed the arbitrator to determine whether the sureties’ claims against PGE should be included in the arbitration.  

Despite PGE not agreeing to arbitrate issues involving the sureties, it could very well find itself doing just that because of another contract it entered with another party. Before entering a contract, parties should review other arguably related contracts and determine whether those other contracts contain arbitration provisions. 




The Commercial Litigation Section teamed up with the Appellate Litigation Section in Montreux to present a thought-provoking panel discussion comparing litigation in Europe and North America.  The stellar panel consisted of Jorge Angell, from Madrid, Stephen Brake, from Boston, Stephen Carter, from London and Charlie Frazier from Dallas.  It was moderated by William Vita, from New York.  Thank you to our speakers, it was truly an interesting, lively and interactive panel.


 We are now looking forward to the Winter Meeting in Amelia Island.  The beaches are beautiful and you’ll enjoy sitting under the palm trees, away from the cares of winter, so make your plans now!  The Winter Meeting will run from February 24 through February 28, 2018. 

Two section members, Rachel Reynolds and Olga Viera, have agreed to plan our Amelia presentation.  We will be joining with the Corporate Counsel Committee.  The presentation will explore the role of in-house counsel in alternative dispute resolution.  If you are interested in joining the planning group, please let us know. 

Huge thanks go out to Stephen Feldman for his tremendous leadership of our section during the last two years.  His tireless efforts resulted in excellent presentations and increased involvement by committee members.  Going forward, the Committee will be chaired by William Vita.  The Vice Chairs are Sonia Bjorkquist, Vicki Smith and Sean C. Griffin.  We are looking forward to an exciting and productive year.


Please contact us and get involved with the committee.  We need your help and ideas.

MAY 2017

Montreaux preview – a Comparison of Commercial Litigation in Europe and North America

The Appellate, Commercial Litigation, and International Sections have teamed up this summer for a program on how commercial litigation differs on both sides of the pond.  An international panel will focus on what American attorneys should know when advising their clients about business dealings in Europe—and vice versa.  From enforcement of contracts to Brexit, this discussion will be up-to-the-minute and informative for all.  Bill Vita will moderate the panel, and he will be joined by Jorge Angell (from Madrid), Stephen Carter (from London), and U.S. lawyers Steve Brake and Charlie Frazier.

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