Simplified Arbitration Part Three – Potential Drawbacks

By Geoff Hafer, Spring 2016 Student Intern

So in part three of the Simplified Arbitration Series, we are looking at potential drawbacks of Simplified Arbitration.

As outlined in FINRA Rule 12800(e), if any pleading increases the amount in dispute to more than $50,000, the arbitration will no longer be administered under Simplified Arbitration, and the regular provisions of the Code will apply.

Perhaps even more unsettling to some, a single arbitrator decides the case. This leaves the ultimate decision-making power to one individual and his or her sole opinion. Particularly in a “paper” proceeding, it is difficult to place your trust and confidence in a single decision-maker. In full arbitrations, there are most often times three arbitrators on a panel whom ultimately decide the case. This at least gives individuals the sense that there is an exchange of opinions and ideas taking place between several decision-makers. There is a better shot that at least one of the arbitrators has similar experiences to your own and perhaps would therefore be more sympathetic to your cause.

Another drawback to Simplified Arbitration, for some, is the fact that the parties do not get to testify in person. To some, the process of laying their case before a panel of arbitrators or a judge serves an important purpose. It not only ensures the panel or judge sees them for who they are but further gives them the opportunity to hear the story straight from the source. And for many, it provides a sense of closure to the dispute that may not otherwise be provided by Simplified Arbitration.

Another, perhaps more technical drawback that deserves attention is the potentially limited discovery. But that is a matter for another day and will be discussed in depth in part four of the Simplified Arbitration Series.