October 8, 2014
The FINRA arbitration process, once trumpeted as an "affordable" and "expeditious" alternative to the courts, has become anything but affordable or expeditious. Unfortunately, once you've decided to sue as a claimant or have been named as a respondent, you either need to come up with the bucks to pursue your interests, find a lawyer to take your case on a "contingency" (good luck with that if you're a respondent), or, as is becoming the more frequent option, represent yourself as a "pro se" litigant.
Among the somewhat hidden costs of representing yourself is the time you will need to expend away from work and the costs you may incur in travelling to various hearing sites. A lawyer will typically bill the client for time and travel, and, accordingly, the concerns related to those factors are not necessarily pressing for the lawyer. On the other hand, if you have limited funds to begin with and couldn't afford a lawyer, the impact of time and travel are often substantial. What can you do if you opt to go it on your own and feel overwhelmed by the costs attendant to representing yourself? Consider this recent FINRA arbitration.
Case In Point
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in October 2013, Claimant Barclays Capital, Inc. asserted breach of contract against its former employee Respondent Burton in connection with his alleged failure to repay a promissory note dated May 21, 2010. Claimant Barclays sought the balance due on the Note of $257,142.86 plus interest, costs and attorneys' fees. In the Matter of the FINRA Arbitration Between Barclays Capital, Inc., Claimant, vs. Matthew Lee Burton, Respondent (FINRA Arbitration 13-02884, September 26, 2014).
Respondent Burton, representing himself pro se, generally denied the allegations and asserted various affirmative defenses.
The sole FINRA Arbitrator hearing this matter found Respondent Burton liable and ordered him to pay to Claimant Barclays:
- $257,142.86 in compensatory damages
- $5,060.59 in pre-judgment interest, and 2.87% annual post-judgment interest until the award is fully paid; and
- $57,000 in attorneys fees.
Frankly, the outcome of this fairly typical promissory note case is not unusual; and when you take into account that Respondent represented himself, it was pretty much a foregone conclusion.
Bill Singer's Comment
Why then did I report about this run-of-the-mill collections case -- particularly puzzling since the pro se respondent got his clocked cleaned. The answer is that this arbitration presented a bit of procedural maneuvering that I found interesting and instructive. As set forth in the FINRA Arbitration Decision:
Respondent filed a Motion to Appear by Video or Telephonically in which he asserted that traveling to Florida, arranging for accommodations and losing time at work presents a financial hardship for him. Respondent also requested that his witnesses be allowed to appear by video. In its Response, Claimant asserted that, among other things, video-conferencing will make it extremely difficult, if not impossible, for Claimant to present Respondent with exhibits and other documents for use during Respondent's testimony. In his Reply, Respondent reasserted his financial hardship but stated, among other things, that if the Arbitrator mandated his appearance, he would attend the hearing. In its Sur-Reply, Claimant asserted that, while sympathetic to Respondent's financial situation, it would be a logistical nightmare to have all of Respondent's 25 expected witnesses to appear by video or telephone, and would be severely prejudicial to Claimant. On or about August 29, 2014, the Arbitrator issued an Order that among other things, granted Respondent's Motion allowing Respondent to appear either by video and/or telephonically. Additionally, during the evidentiary hearing, the Arbitrator considered on a case by case basis the need for testimony by Respondent's witnesses and allowed several to appear either by video and/or telephonically.
As illustrated in Barclays v. Burton, arbitrators may be asked to consider the "financial hardship" caused by travel or other expenses. To Respondent Burton's credit, he not only raised that issue in terms of compelled travel to a Florida arbitration venue but successfully advanced his grievance by winning a significant concession from the arbitrator that allowed him personally to appear via video or telephone -- and, even more impressive, the arbitrator agreed to allow some of Burton's witnesses to testify by video and/or telephone.
If witnesses are required to travel at their own expense to testify on your behalf, or you are obligated to pay their travel expenses, you may find yourself in an impossible financial bind. Keep in mind that you may believe prior to the commencement of hearings that you would need to call, for example, five witnesses. From a strictly mechanical perspective, you are required to give your adversary prior notice of those you intend to call -- which may put you in the position of having to make a financial commitment to fly such folks to the arbitration venue and even put them up overnight. As the case develops and testimony unfolds, you may realize that two of your proposed witnesses are not necessary and one has been rejected by the arbitrator. Consequently, you have incurred the travel costs of three individuals that you either did not opt to call or were rejected by the arbitrator. That's why Respondent Burton's motion to the arbitrator was critical, notwithstanding that he lost his defense.
As with many things in life, there is a flip-side to video/telephonic testimony. Quite often, it's just not the greatest of alternatives. If you have a wonderful witness, not having that person in the flesh before a panel of arbitrators but, instead, diluted and filtered through video or, worse, disembodied over a telephone, is not necessarily in your best interests. Similarly, if a lousy witness is presented against you, the withering cross-examination may not carry the same oomph when it's done against a video image or disembodied voice. Finally, do I really need to warn you about how videoconferencing is often a combination of art and science that frequently proves beyond the competency of many human beings -- and let's not even get into how frequently teleconference calls are dropped because of lousy connections or you can barely understand the tinny voice emanating through a ten-year-old speakerphone.