This post first appeared on the Securities Arbitration Alert blog. The blog’s editor-in-chief is George H. Friedman, Chairman of the Board of Directors for Arbitartion Resolution Services, Inc.
FINRA Dispute Resolution Services (“DRS”) has posted case statistics for full-year 2022, with recent trends persisting, resulting in a strong finish in arbitration filings.
After FINRA DRS posted the November 2022 stats, we opined in SAA 2023-01 (Jan. 5) that: “recent trends suggest[] a strong end to the year in arbitration filings.” That prediction was spot on.
The Headlines
We offer these headlines: 1) overall arbitration filings for the year – 2,671 cases – were down 8% for the year (but up from minus 11% in November); 2) cumulative customer claims declined by 11% (up from -14% In November); and 3) industry arbitration filings were down just 2% (-5% in November). We had said in # 01: “That all three case filing figures are again improved over the previous month indicates to us that – for the fourth month in a row – arbitration filing declines have definitely rebounded.” With the full year stats now posted, we can clearly assert that case arbitration case filings rebounded strongly in the second half of the year.
Potpourri
Overall arbitration turnaround times were steady at 18.3 months, with hearing cases now taking 19.8 months (both figures are barely changed over the past three months). There were 746 mediation cases in agreement last year, a 21% increase (but way down from May’s torrid plus 137% pace). This stat in fact has declined steadily the past several months. The mediation settlement rate remains very high at 91%. There are now 8,180 DRS arbitrators, 3,977 public and 4,203 non-public. These numbers declined across the board in December, to us suggesting a year-end culling. Pending cases stand at 3,091, an increase of 15 from November (the first jump in several months).
Employment Claims
We examined in SAA 2022-47 (Dec. 15) the November “Top 15 Controversy Types in Intra-Industry Arbitrations” stats to determine where employment filings might end up at the end of the year. Specifically, we looked at these controversy types: breach of contract; U-5 related libel or slander; promissory notes; libel, slander, or defamation; discrimination or harassment; and wrongful termination. At that time, we said: “as a group, projected year-end filings will decline from 640 cases to 558, a 12.8% decline. Of the six categories, only two – U-5 related slander or libel and generic libel or defamation – are projected to increase, with the remaining ones all declining.” Let’s see how we did (see the chart below drawn from the year-end stats):
| Category | 2021 | 2022 Act | 22-21 Diff |
| Breach of contract | 268 | 225 | -43 |
| U-5 libel/slander | 89 | 84 | -5 |
| Promissory notes | 126 | 84 | -42 |
| Libel/slander/defamation | 59 | 69 | 10 |
| Discrimination/harassment | 36 | 25 | -11 |
| Wrongful termination | 62 | 50 | -12 |
| Total | 640 | 537 | -103 |
The actual decline for the group was 16%, or 103 cases filings.
Impact of New Law
We repeat here our past coverage of this topic. A new statute might impact the “discrimination/harassment” controversy type going forward. The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (“Act” or “EFASASHA”) was signed into law by President Biden in March 2022 at a White House ceremony. The statute gives the employee or class/collective representative the right under the Federal Arbitration Act to opt out of predispute arbitration agreements and class action waivers by invalidating them after a dispute arises. FINRA on May 13 filed with the SEC SR-FINRA-2022-012, Proposed Rule Change to Amend the Code of Arbitration Procedure for Industry Disputes (“Code”) to Align the Code with the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021. The changes, which were approved by FINRA’s Board of Governors last March, were effective immediately, as provided in the Notice of Filing and Immediate Effectiveness published in the Federal Register on May 24 (Vol. 87, No. 100, P. 31592).
Although the changes were immediately effective on May 13, the Authority on July 15 issued Regulatory Notice 22-15. The rule change language is contained in Attachment A. Among the changes: Rule 13201 was amended by adding new paragraph (c) to provide that a party alleging a sexual assault claim or sexual harassment claim that has agreed to arbitrate before the dispute arose may elect post-dispute not to arbitrate the claim under the Code. New paragraph (c) also provides that the claim may be arbitrated if the parties have agreed to arbitrate it after the dispute arose.
(ed: *We said in # 01: “Despite the recent mini-surge in arbitration case filings, if the trend holds, the 2,423 arbitrations filed through November straight-lines to only about 2,650 yearly arbitration filings, a weak year by any measure.” The final year-end stat was 2,671 arbitration filings. **Ten years ago, the 2012 stats showed 4,299 yearly arbitration case filings. The all-time high-water mark was in 2003, when that post tech-wreck figure was 8,945 cases. Past year stats can be found here. ***It seems to us the recent market volatility will fuel arbitration filings. However, as we said before, we think that EFASASHA will minimally impact employment case filings at FINRA.)
