by Charles M. Thompson Even though this paper is part of a section of this meeting entitled “Advanced Hearing Techniques”, my belief is that no matter how “advanced” one gets, it is generally always best to resort to the basics. Novice securities practitioners might find the following format helpful as well. It has often been said that arbitrators only want to hear the testimony of the customer and the broker. Some claim that all the rest is unnecessary. Although I would not go to that extreme, I believe that we as practicing attorneys tend sometimes to overwork our cases and try to present too much to the arbitrators/triers of fact. The cases in which I have been most successful have had a common thread – keeping it simple and sticking with the theory of the case. In developing my case I adhere as best I can to the following format from intake to conclusion: First stage (Meeting With Client) – Rather than trust my memory and ability to write notes, I always record the conversation with the client. This first meeting generally lasts at least an hour and half. I have it transcribed as if it were a deposition. Having tried cases for thirty years, I have long since learned that your client is a winner if he or she is believable. During the course of my initial conference with my clients, I not only cover the facts of the case but also naturally go into their investment experience, their education and all the other typical facts that will come out in a hearing. I am specifically looking for facts that would support the Respondent’s case. During this first meeting I will tell the client at the end of the meeting what I think of his or her case and in some cases will even go to the extreme of giving them a settlement value. I often times refrain from the latter. At the close of the meeting, I make sure that I have all of the documents, if I have not had the opportunity to review them before hand. At that time I also give the clients my “homework” sheet for the clients to prepare additional documentation for me. I append hereto as Attachment One what I give the clients at the close of my meeting. Second Stage (Retaining Expert) – Having a more than passing knowledge of securities laws, requirements and regulations, unless there is a specifically strange fact or issue, I typically do not perform any research. It is recommended however, that the novice practitioner in the realm of securities spend whatever is necessary in studying the law as respects his or her case before going to the next step. Even though most of us who practice in this specific area have an extensive library, a novice practitioner might first invest in a two volume set that is by far the best in the industry - David Robbins, Securities Arbitration Procedures Manual Matthew Bender and Co., Inc.(Lexis Nexis). Presuming that research is not required, the second step that the practitioner should follow would be to consult with an expert, presuming the practitioner is not qualified as one. Many practitioners representing Claimants have extensive securities training coming from self regulatory organizations such as the National Association of Securities Dealers (NASD), have been previously with state securities agencies and even stock brokers. For those of us who have not had such beneficial training, one might follow my next step and that is, after receiving all the documents from the client, to prepare all of said documents along with the transcript which has now been reduced to a deposition format and place same in the hands of a reliable expert. Most of us in this field have a handful of experts that we turn to for our routine case load. I have two that I have customarily used. I get a very good report including a recap of the salient facts, the appropriate regulations that have been violated by the Respondent, a proposed plan of attack, additional documents that I should ask for and an extensive damage analysis including net out of pocket damages, market-based analysis, standard deviation and profit loss statement. I have the client pay all expenses, including this, and I collect same from the client to hold in my trust account prior to getting this expert work. Third Stage (Statement of Claim) – Having gotten the documents together, a transcript of my client’s case directly from the client’s mouth and a report from the expert, I am now ready to draft the Statement of Claim. I file all claims with the NASD as opposed to the New York Stock Exchange. I have never considered filing one before the New York Stock Exchange. I generally spend most of the day absorbing the client’s case by his or her transcript, reviewing the documents that have been prepared for me by the client and the expert report. I generally draft a thorough Statement of Claim. I have known some securities claimant’s attorneys whose Statement of Claim resembles a book. Not me. I do not think an arbitrator is going to take the time to read such a manual. Instead I lay out my case for the arbitrator and keep it under fifteen pages, including attachments. I always name the brokerage firm only and do not name the associated person since all it adds is more resolve to fight on the other side and possibly an additional attorney. Unlike Respondents, I only put in my Statement of Claim what I feel like I can prove. It is my judgment that Respondents generally always misstate facts in their Statement of Claim and I have scored a lot of points with arbitrators based upon said misstatements. Claimant’s counsel cannot go wrong to start with the Respondent’s Answer when impeaching the other side’s witnesses.
Back To the Basics
Or
Keep It Simple Stupid
(K.I.S.S.)
1 Fourth Stage (Discovery)– Document requests are basically the only tool we have as securities claimants’ practitioners. For that reason, well thought out discovery requests are paramount. Included as Attachment Two is my standard discovery format in a suitability case. Much of my requests come from NTM 99-90 and its lists. The reader will note that my last request is a “catch all” of the affected lists that apply to the specific case. Expecting that many of my requests will be avoided if at all possible by the Respondent, I word my requests as pointedly as possible. The documents of my clients have been gathered prior to my filing of the Statement of Claim as a general rule, and once I receive a Request for Production, I file an immediate response objecting to inappropriate requests and always fight against interrogatories propounded by Respondent. Examples of common inappropriate interrogatories are as follows:
o
Please state with Specificity all actions which Claimant took to
monitor the activities of the account in question.
o
Please state with specificity all actions which Claimant took in
order to mitigate his damages.
We all know that interrogatories are not allowed under NTM 99-90. Respondents’ counsel are the first to resist interrogatories while in the same case filing same by merely calling them Requests for Information, which is narrowly interpreted by most arbitrators.
1
A handy reference on suggestions in drafting a Statement of Claim is found in “Expert’s Corner – How to Conduct a Complex Financial Arbitration – Part 1: Matters to Consider Prior to Hearing”, Richard Chernick and Rufus V. Rhoades, PIABA Bar Journal, V. 10 No. 3, Fall 2003, at pp. 36&37.
Fifth Stage (Preparation, Preparation, Preparation) – Once documents are received, they should be cataloged and reviewed to make sure that they are in accordance with the requests. If not, a deficiency letter should be sent immediately to Respondents’ counsel. Failing affirmative response to such a letter, a Motion to Compel is the only recourse. The documents should be studied carefully. I once heard a very successful securities lawyer state that in reviewing documents he will go through several pads of sticky notes and colored markers marking up everything he thinks is appropriate to the case. I have followed that format. Sixth Stage (Preparation for Trial) – Prior to hearing I will have my schematics, charts and selected exhibits blown up. I do not normally employ projectors or power point. Exhibits that are in hardcopy and enlarged will normally stay in front of the arbitrators longer. A good practitioner will review all of the exhibits produced by the Claimant and by Respondents as well as documents received by virtue of subpoenas and will know the documents inside and out. I will set aside approximately one week prior to an arbitration hearing to concentrate on the hearing preparation. There is nothing to replace preparation. Although I have known attorneys to prepare only what is to occur the first day of the hearing or trial and then prepare the first night the testimony that is to occur for the next day’s hearing, and so on, I do not agree with that format. I had rather know the case inside and out going into the hearing so that nothing comes up as a surprise. I usually will know the details of the documents better than my client and hopefully better than the broker. Claimant’s counsel should know the documents and numbers as well as an expert who would testify. Since I would have prepared all of the exhibits prior to the hearing, I will have a master Exhibit Book that I utilize which naturally corresponds with the ones prepared for the arbitrators. Corresponding with my Exhibit Books will be my order of proof with highlighted and sticky note pages of what I expect to prove. I try to align the exhibits for the Arbitrators so that they are in the order that they will be presented. Nothing will cause a hearing to lose momentum more than all participants having to spend excessive time in hunting through the Exhibit Books. Seventh Stage (Brief of the Issues) – I always prepare a brief prior to the hearing. This not only educates an occasional arbitrator who is ignorant of securities laws but it also sends a message to the Respondent that I mean business. The issues are easily gleamed from my Statement of Claim and the Statement of Answer filed by the Respondents. If the Respondent is setting forth false defenses in a manipulative manner as is often done by the defense, then I will have set forth for the arbitrators the true nature of the law as opposed to the twisted version normally included in a Statement of Answer. One is finding more and more that Statements of Answer filed by Respondents are nothing more than a twisting of the facts as well as law which is often times misquoted and inapplicable in the case at hand. Another reason for filing a brief is that in NASD arbitration the Arbitrators are not required to follow the law. Being an attorney with a trial background, I have had to make a very troublesome adjustment to expect that a ruling by the panel will be based upon applicable law. By filing the brief, I am keeping in front of the arbitrators and reminding them during the course of the hearing that there are often times sound bases in law and in equity for viewing the Claimants’ case most advantageously. Without a brief, there are no absolutes in the hearing. Arbitrators are left to make decisions in a whimsical and often time ambiguous manner. Eighth Stage (Presentation of Evidence) - I disagree with calling the stock broker first. When I first began this business, I understood In Claimant’s practice “everybody was doing it”. I tried to begin with calling the broker first and in those cases I had only marginal success. In the cases since then I have found greater success by presenting my case without regard to calling on the other side to help me by my calling adverse witnesses. Duke University did a study many years ago that proved that a person accepts as fact the position they are first presented. This is called the Rule for Primacy. Therefore, I present my case. I have my theory ironclad and I either sink or swim with my theory. Naturally, I will make adjustments as the case goes on, but if my client is wrong about their case and I have accepted as fact a
false premise to begin with, then I have wasted my time throughout the preparation of trial of the hearing. I make sure that my case is solid, simple, straight forward and swift. I call it the Four S’s of presentation. Arbitrators are busier than the Judges that I have tried cases before for over thirty years and do not want to waste their time hearing redundant testimony and sifting through arduous reams of documents. My job is to turn a complex fact situation with complex issues and complex concepts into a presentation that follows the K.I.S.S. method. A good practitioner knows the elements that he or she must present and sticks with same. I have had very few cases won by slip up’s on the other side or testimony and evidence from the adverse party gathered during the hearing. My theory is to concentrate on my case and know my case so thoroughly that it will set me up for a good cross-examination when I am presented with false testimony, deceit and a twisted interpretation of documents by the other side. If the arbitrators buy my theory which has been presented in the “Four S” method then there is very little that the Respondent can do to shake the case’s success.
