Limitations on Motions to Dismiss
Recently, FINRA,(Financial Industry Regulatory Authority, the successor to the merger between the NASD and the NYSE) announced that it was proposing an new rule designed to limit the pervasive and what many believe to be the abusive use of dispositive motions in securities arbitration. Quoting from the Notice to Members:
“Under FINRA's proposal, if a party (typically a respondent firm) files a dispositive motion before a claimant finishes presenting its case, the arbitration panel would be limited to three grounds on which to grant the motion: (1) if the parties previously had settled their dispute in writing; (2) "factual impossibility," meaning the party could not have been associated with the conduct at issue; or (3) the existing six-year time limit on the submission of arbitration claims. The rule proposal also would require that arbitrators hold a hearing on such motions and that any decision to grant a motion to dismiss be unanimous, and be accompanied by a written explanation.
The proposed amendments also would require the panel to assess against the filing party all forum fees associated with hearings on dispositive motions if the panel denies the motion, and would require the panel to award costs and attorneys' fees to the party that opposed a dispositive motion deemed frivolous by the panel. Under the rule proposal, when a respondent files a dispositive motion after the conclusion of the claimant's case, the provisions above would not apply. However, the rule would not preclude the arbitrators from issuing an explanation or awarding costs or fees.”
This proposal is a big step in the right direction. Claimants and their attorneys have long had to respond to many baseless and time consuming dispositive motions, in an attempt by Respondents to deny them their day in court. Hopefully, this rule proposal signifies a more pro-investor stance on the part of the organization charged with investor protection.













