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Alerts and Updates

Beware of Pitfalls in Remote FINRA Hearings

May 26, 2020

Beware of Pitfalls in Remote FINRA Hearings

May 26, 2020

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This recently occurred in a FINRA arbitration that was partially remotely held on Zoom.

Due to COVID-19, FINRA has postponed all in-person arbitration and mediation hearings through July 31, 2020, and is offering remote hearing services using Zoom and teleconference. The parties can jointly request a virtual hearing option or the panel may order the parties to proceed using a virtual hearing option.

Parties considering a remote hearing should consider the pitfalls of such hearings―particularly that they may be an inadequate substitute for an in-person hearing or that they will provide another ground on which decisions may be challenged.

This recently occurred in a FINRA arbitration that was partially remotely held on Zoom. A month after the panel issued an $11.4 million award in favor of claimants, on May 5, 2020, respondents filed a petition in federal court to vacate the award, inter alia, because the panel was inattentive and distracted during their Zoom hearing. Respondents allege that a panel member was “looking at other screens, typing, and eating during the course of the presentation” and another allegedly “blocked her screen during the hearing, preventing the parties from confirming that she was even participating.” Respondents claimed that closing arguments had to be paused when the chairman just “walked away from his screen.”

The petition is under review in the U.S. District Court for the Southern District of New York, Wunderlich Securities Inc. et al. v. Dominick & Dickerman LLC et al., Case No. 1:20-cv-03507. Although the argument may ultimately be rejected, parties holding or considering holding remote hearings with FINRA should be aware that a remote hearing platform provides another ground on which hearings can be challenged. They may run into similar alleged problems with the attentiveness of the panel or their opponent may use that argument, whether warranted or not, to challenge a FINRA arbitration decision that did not go in their favor.

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Duane Morris has created a COVID-19 Strategy Team to help organizations plan, respond to and address this fast-moving situation. Contact your Duane Morris attorney for more information. Prior Alerts on the topic are available on the team’s webpage. 

For More Information

If you have any questions about this Alert, please contact Sharon L. Caffrey, James J. Regan, Walter A. Saurack, any member of the COVID-19 Strategy Team or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.