Nov 8 Hurricane Sandy wreaked havoc on the
Northeast - including the Financial Industry Regulatory
Authority's arbitration unit in New York.
FINRA, Wall Street's industry-funded regulator, said on
Monday that it was postponing arbitration hearings scheduled for
this week at its offices in lower Manhattan. The area was hit
hard last week by power outages, including at FINRA's office.
In all, about 22 hearings in the Northeast were postponed
because of the storm, according to a spokeswoman for FINRA,
which runs the arbitration forum where brokerages, brokers and
investors must typically resolve their legal disputes.
Lawyers in a few of those cases agreed to hold their
arbitrations at non-FINRA locations in Midtown, the spokeswoman
said. But other securities brokerages and investors will just
have to wait a little longer.
The Sandy-related postponements shine a spotlight on a
broader issue. While the securities industry promotes
arbitration as a faster and more cost-efficient means of
resolving legal disputes, rescheduling long-awaited hearings may
mean delays of more than a year because busy lawyers,
arbitrators and witnesses involved in a case must try to find a
slot when they are all available, often for several days or even
Arbitrators often set hearing dates nine months in advance.
Careful research by both parties goes into selecting the panel
of three securities arbitrators who typically hear certain
cases, so parties cannot easily substitute one when a hearing
must be rescheduled.
Lawyers for investors worry that brokerages may try to use
the Sandy-related delays to drag out the process and push
investors into settling or abandoning their claims.
"Rescheduling is always a nightmare," said Seth Lipner, a
securities arbitration lawyer and law professor at Baruch
College in New York.
It would be up to the chairman of the arbitration panel to
insist on an earlier date if a brokerage, say, said its lawyers
were not available for a year or more, Lipner said.
But brokerage industry lawyers say investors' lawyers can
also be difficult to nail down when hearings are postponed, no
matter the reason.
"The first thing they say is their schedules are booked for
the next 15 to 18 months," said Terry Weiss, a lawyer for
Greenberg Traurig LLP in Atlanta who represents brokerages.
"They're stretched too thin and can't be three places at once."
Brokerages have a financial interest in holding the hearing
sooner, rather than later, industry lawyers say. Some
brokerages, for example, prefer to wrap up pending cases by the
end of a calendar year, according to Weiss. Many brokerages
operate their books and accounting on that schedule.
Finishing up sooner also saves interest a firm may owe to
investors - sometimes as high as 12 percent annually from when
the case was filed - said Larry Polk, a lawyer for Sutherland,
Asbill & Brennan LLP in Atlanta.
"More often than not, we want to get these things resolved,"
But sometimes, neither weather nor one of the parties is to
Weiss recalls one hearing that was postponed after the first
day because the panel chairman was pulled over for speeding that
night and then arrested. Police realized the arbitrator was
wanted in a nearby county for a weapons-related offense and
failing to appear in court for allegedly driving while
The roughly 22 Sandy-related arbitration postponements in
the Northeast do not account for an unknown number of hearings
in other parts of the United States that may have been pushed
off due to travel difficulties or other storm-related problems.
Montgomery Griffin, a lawyer in Newport Beach, California,
received a call from a New Jersey-based lawyer for a unit of
Credit Suisse Group AG on Oct. 31 requesting to
postpone a hearing in Los Angeles scheduled for Nov. 12, he
"What was I to do?" Griffin said. "Say 'Sorry, tough luck,
you had a hurricane that damaged your office and your house'?"
Lipner, the New York-based securities lawyer, said one of
his clients had already traveled from Italy to New York City for
an arbitration hearing, before the parties agreed to postpone it
because of the storm.
"It'll be a little disruptive," Lipner said. "But at least
he has some grandchildren here to visit. I'm sure he won't mind
staying a while."