Arbitration is a way to settle disputes out of court. A neutral third party acts as a judge, hearing from both sides before making a legally binding decision.
SUMMARY OF AB 51 Primarily, AB 51 restricts employers from unilaterally requiring their employees to arbitrate, mediate, or otherwise control the manner and forum of a dispute, as a condition of hire, continued employment, or the receipt of an employment-related benefit. Additionally, AB 51 prohibits an employer from threatening, retaliating, or discriminating against, or terminating any applicant for employment or any employee because of the employee’s refusal to consent to the waiver of any right, forum or procedure. However, the legislature did exempt certain employment-related agreements from AB 51’s broad scope. Post-dispute settlement agreements and negotiated severance agreements can still contain language requiring arbitration, mediation, or the like for disputes arising under these types of agreements. CONSEQUENCES OF VIOLATING AB 51 Most alarmingly, the legislature expressly makes it a misdemeanor for an employer to violate AB 51. Furthermore, violations of AB 51 are also subject to injunctive relief and statutory penalties defined elsewhere in the Labor Code. Thus, if an employee or former employee sues an employer under this law, all or some of these consequences can befall the employer. CONCLUSION Although AB 51 should be taken seriously, it is unclear how long this new law will remain in effect. Certain aspects of AB 51 are at odds with Federal law and may be struck down; however, this judicial process would likely take years to complete. In the meantime, California employers should consult with an attorney to correct their employment paperwork and ensure full compliance with AB 51. Too much is at stake.
What is governing law? Governing law refers to the set of rules applied to determine whether the contract is valid, and to interpret its wording and the parties’ rights and obligations. There are two “gold standards” for governing law in international business transactions: New York law and English law. This is largely due to the breadth and depth of case law in these jurisdictions: any given legal issue is much more likely to have been litigated in New York or England than to have been litigated in, say, Wyoming or the Marshall Islands. It’s usually a bad idea to choose the governing law of a non-English-speaking country unless you are extremely familiar with it. Most English-speaking countries operate based on common law inherited from England, and their laws of contracts tend to be very similar; most importantly, they tend to respect whatever is written in the contract. Most non-English-speaking countries operate based on a civil code of some kind, and civil codes often apply unexpected rules to contracts. For example, under Japanese law, it is often difficult to terminate a long-term contract with a party perceived to be in a position economically reliant upon the other, despite whatever termination provisions are written in the contract. What is jurisdiction? Jurisdiction refers to where the parties go in order to resolve disputes. This clause is sometimes called "venue" or "dispute resolution." There are three basic kinds of jurisdiction clauses. One is non-exclusive jurisdiction or submission to jurisdiction, which means that the parties agree that either party can be sued somewhere, but retain the option to bring a lawsuit elsewhere. This is useful for contracts like guarantees and non-disclosure agreements, which might need to be promptly enforced through different courts in different locations. The second is exclusive jurisdiction, which means that the parties agree to only bring disputes in a certain court. This makes the outcome of disputes more predictable, but also removes each party’s flexibility in choosing a venue. The third is alternative dispute resolution, which means that the parties agree to use an alternative method of resolving disputes outside of court. Arbitration, where the parties agree to a private third-party “referee” of some kind instead of going to court, is a popular option in international contracts, since it allows disputes to be resolved almost anywhere under almost any governing law and in almost any language, and there are a variety of arbitration institutions and rules to choose from. How do they line up? Governing law and jurisdiction clauses typically match (e.g. New York law and litigation in New York courts), but this is not a requirement. For example, you can have a contract governed by New York law, but have disputes settled by arbitration in Tokyo. That said, it’s often a bad idea to mix governing law in one state/country with exclusive jurisdiction in another state/country’s courts. If you choose arbitration in Tokyo, you can appoint arbitrators who are familiar with New York law and have the case tried by New York qualified lawyers. If you choose courts in Tokyo, you will be stuck with Japanese judges who may not even understand English that well, and who will have to rely upon opinions from New York lawyers in order to interpret New York law, which makes everything much less predictable. How do you choose the optimal combination? Approaches to governing law and jurisdiction clauses vary from lawyer to lawyer. Most lawyers simply insist upon whichever law and jurisdiction they personally understand (which is usually their home country law). My first concern is always how the contract can be enforced if there is a problem. If another party is in a country with a weak, slow or unpredictable court system, it’s often a good idea to avoid that court system by choosing arbitration. However, arbitration is not a “silver bullet,” and in some cases it makes more sense to have the option (or the obligation) to go to court. If court is the way to go for dispute resolution, then it typically makes sense to align the governing law with the court’s home law. Otherwise, it typically makes sense to choose a governing law that is internationally recognized and likely to be acceptable to all of the parties.
Obtaining an Arbitration Award Once arbitration has been ordered by a court or is dictated by a contract between the parties, you submit yourself to the jurisidiction of the arbitrator and agree to be bound by the arbitration award, whatever that may be. The arbitration process differs from court in that you have an opportunity to strike up to three arbitrators until you reach an agreement as to who will preside over the arbitration. Additionally, any conflicts, potential conflicts, and prior relationships between the parties, attorneys and arbitrator are disclosed to the parties before the arbitration commences. Once commenced, the arbitrator will schedule a scheduling conference via telephone with the lawyers and details about how the proceeding will continue are discussed. For example, discussions about whether depositions will be required are discussed and planned for as well as the full discovery period. Once discovery is fully complete, the parties appear with their witnesses and evidence at the final arbitration hearing and the arbitrator hears the entire case. Once heard, the arbitrator often asks for briefing from the lawyers post arbitration hearing to address any legal issues raised by the hearing. Shortly thereafter, the arbitrator renders a written opinion and award and submits the same to the parties. It is then that it becomes the prevailing parties responsibility to confirm the arbitration award with the presiding court or a court within the county the arbitration occurred. Confirming an Arbitration Award with a Presiding Court If a court ordered the parties to arbitrate, it remains the presiding court over the arbitration throughout the entire arbitration proceeding. Likewise, it is the only court that confirm the arbitration award for the prevailing party as it has jurisdiction over the arbitration proceeding. As such, the prevailing party must file the arbitration award with the presiding court and ask that it be confirmed. The opposing party may contest the arbitration award for, inter alia, fraud or some other bias if it believes the arbitration was unfair. If that happens, a hearing in the district court is had and the presiding judge is left to decide whether or not to confirm the arbitration award or remand the case back to the arbitrator for further proceedings.
Consider Hiring an Attorney The process of FINRA Arbitration is governed by FINRA Rule 12000 for Customer Disputes and Rule 13000 for Industry Disputes; each of which is dozens of pages in their infinite wisdom. FINRA Arbitration can be tough because the issues can be so narrow and if presented incorrectly, could cost you a pretty penny. An attorney familiar with the FINRA Arbitration rules and procedures could help you significantly. Determine Whether You Qualify for Arbitration The first thing to consider is whether you fall within the bounds of FINRA Arbitration under rule 12000 or 13000. Members, Associated Persons, and Customers must Arbitrate if there is a written arbitration agreement (usually when you open a new account), the dispute is between the Customer and a Member or Associated Person, and the dispute arises from a transaction in connection with related business activities. Before You Initiate Arbitration Before initiating an arbitration or responding to a claim, ensure that you address certain preliminary Issues: Is the claim Arbitrable? Certain claims, such as Class Actions or Shareholder Derivative Actions are not arbitrable under the Customer Code. Is the claim time-barred? All claims must be brought within six years after occurrence. Where is the evidence? Evidence should be gathered to build a viable case for presentment to the Arbitrator(s). It is always wise to ensure that the factual allegations in all pleadings are correct and are supported by proper documentation. Commence the Arbitration A claimant begins by filing a complaint with FINRA with three key items: submission agreement, statement of claim, and initial filing fee. After FINRA determines that the claims are sufficient, it sends each respondent a claim notification letter stating that the claimant has named the respondent as a party in the arbitration. Attend the Initial Pre-Hearing Conference After the panel is appointed, FINRA schedules an initial pre-hearing conference (IPHC) with the parties and arbitrator(s). The IPHC is usually held telephonically, on at least 20 days’ notice. File Your Motions Either party may file motions. The most common is the Motion to Dismiss, although the Customer Code discourages motions to dismiss a claim, in some instances a party move to dismiss before the case ends. Attend the Hearing A hearing must be held in any customer case unless: • The case is a simplified arbitration and the customer does not request a hearing • The case is a default proceeding • The case is settled, withdrawn or dismissed before the hearing • The parties agree otherwise Find Out the Results The panel strives to render the award within 30 business days from the date the record is closed. The award must be in writing and signed by a majority of the arbitrators or as required by applicable law. Unless the applicable law directs otherwise, an award rendered under the Customer Code is final and not subject to review or appeal.
Introduction The most notable statute that governs nonbinding arbitration in Florida is Fla. Stat. § 44.103. Depending upon the dispute presented, nonbinding arbitration may be either an optional or mandatory procedure. However, nonbinding arbitration procedure has one common thread in all disputes when utilized—it requires extreme caution for the uninformed. This blog post will discuss how arbitration works in Florida in the context of personal injury claims. Nonbinding arbitration and voluntary binding arbitration are addressed separately in the Florida Rules of Civil Procedure. The rules of procedure cover a variety of topics including the court’s authority to refer a case for arbitration, the appointment and disqualification of arbitrators, the procedure for conducting the arbitration hearing, and the method of enforcing agreements reached in arbitration. Binding arbitration differs from nonbinding arbitration in the respect that binding arbitration is a true alternative to the court system and not merely a method of promoting disposition by settlement. There are other differences as well. If the parties elect to engage in voluntary binding arbitration, they have more flexibility to define the procedures that will govern the arbitration. As explained in Rule 1.800, there are some cases in which arbitration is permitted, others in which it is required, and still others in which it is prohibited. Generally, the trial judge has discretion to order a civil action to arbitration on a finding that it could be of benefit to the litigants or the court. The trial judge does not have discretion to decline a request for referral if the parties have stipulated to arbitration. In that event the court must order the case to arbitration. However, there are some actions that cannot be arbitrated regardless of the agreement of the parties or the discretion of the court. Rule 1.800 provides that it is improper to refer any of the following kinds of cases to arbitration: -bond estreatures -habeas corpus and other extraordinary writs -bond validations\civil or criminal contempt proceedings -other matters excluded from arbitration by local administrative order. How Long Does Arbitration Take? The time limit for completion of arbitration is 30 days from the date of the first arbitration hearing. Rule 1.820(g) states that the time may be extended by an order of the court on the motion of the chief arbitrator or a party, but that the time may not be extended, in any event, for more than 60 days from the date of the first hearing. The arbitrator or arbitration panel must notify the parties of the decision in writing within 10 days of final adjournment of the arbitration hearing. If neither party has filed a timely motion for trial, the decision of the arbitrator or arbitration panel may be enforced in court. Rule 1.820(h) states that the presiding judge has authority to “enter such orders and judgments as may be required to carry out the terms of the decision as provided by section 44.103(5), Florida Statutes.” However, the court is not required to enforce the arbitrator’s decision, if it does not resolve all of the issues set out in the order referring the case for arbitration. In that event, the trial judge can simply refer the matter back to the arbitrator to decide all of the issues. How Does Arbitration Work? An arbitration is structured like a mini informal trial. After both sides make opening statements to the arbitrator on the facts and issues in the case, both parties can present their evidence. Additionally, the parties can provide testimony under oath to explain the specific circumstances that led to the accident and injuries. Both parties are allowed to cross-examine any witnesses called by the opposing side. The arbitrator may not decide the same day of the arbitration. case on the spot. Can You Appeal the Results? Generally, the arbitrator’s decision is final and may not be appealed. However, in nonbinding arbitration, any party may decline to accept a decision by filing a motion for trial de novo within 20 days of service of the decision. If a third-party claim is pending when a party files a motion for trial, any other party to the action then has an additional 10 days to file a motion for trial. Rule 1.830 outlines the procedures that apply to voluntary binding arbitration. As its name implies, voluntary binding arbitration is a form of arbitration in which the parties are obligated to accept the arbitrator’s decision. The parties could agree to voluntary binding arbitration after the dispute has arisen, but, more often, it comes about in connection with a contract in which the parties have agreed in advance that disputes will be arbitrated. As explained in Rule 1.830(c)(2), the decision may be appealed within 30 days on any ground specified in Fla. Stat. § 44.104(10), and if no appeal is filed within the time allowed, the decision is referred to the presiding judge who must then enter the appropriate order or judgment necessary to carry out the terms of the arbitrator’s decision.
What is Churning? Churning occurs in a discretionary trading account when a broker enters into transactions to generate commissions, and the broker unjustifiably gains from the transactions. Suitability claims often accompany churning claims. Churning can also occur in a non-discretionary account when the broker is in a position to determine the volume and frequency of the transactions where the customer is willing to follow the broker’s suggestions. How do I Detect Churning? To establish churning, the investor must prove a substantial disparity between the turnover in the account in question and the normal trading activity for similar accounts. This occurs where: 1. Excessive trading occurred in light of the investor’s investment objectives; 2. The broker exercised control over trading in the account; and, 3. The broker acted with the intent to defraud or with willful and reckless disregard for the investor’s interest. Each case is unique, and establishing churning is a factually intensive process. The trier of the facts will review the account trading patterns, turnover ratio, as well as the broker’s commissions and profits. Although churning is often difficult to prove, an experienced broker fraud specialist can assist you in performing a thorough account review. What is a Turnover Ratio? Turnover ratio, a vital aspect of every churning claim, is the measure of the number of times investments are replaced in an account during a given time. Churning requires the broker to trade in and out of securities, possibly even the same stock, numerous times over a short period. Consequently, a high turnover ratio usually indicates that the broker has engaged in churning. Churning occurs when this type of investment activity serves no purpose for the investor and occurred to generate excessive commissions. Although a high turnover ratio often supports an investor’s churning claim, the investment type affects the amount of permissible turnover. Less turnover is tolerated for debt investments, such as bonds and mortgages, as opposed to equity holdings. However, option investments allow for the highest turnover ratio. If you believe that your account has a high turnover ratio, contact an attorney today to discuss your rights. When Does a Broker Have Control Over a Non-Discretionary Account? An investor may still pursue a churning claim despite maintaining a non-discretionary investment account. To prove churning, the investor must show that his or her broker has control over the account. Although a broker must get authority from the client to execute a transaction, de facto control is established where an investor relies on a broker’s advice to such a degree that the investor did not independently evaluate the broker’s recommendations and did not exercise independent judgment. The trier of the fact is more likely to find that investors with little to no investment experience have ceded de facto control to their broker. What Can I Do If I Have Been the Victim of Churning? An investor who is the victim of churning can sue his or her broker and brokerage firm for damages. The firm is liable for its failure to detect churning. Firms must institute compliance systems to defect churning. When churning is detected, the firm must generate an exception report indicating the detection. The presence of a red flag imposes a duty to investigate the matter. Firms often fail to investigate and detect churning. What Am I Entitled to Recover in A Churning Suit? Typically, brokers who engaged in churning are liable for the loss in account value due to the excessive commissions, the commissions generated, and accrued interest. An increase in total portfolio value does not prevent an investor from bringing a churning claim.