Griffith cited the Merrill case in his federal court action—but to no avail.
The Merrill action “is not binding precedent on this court,” Judge Wooten ruled, noting that Merrill funneled money through a non-Finra member specifically to avoid any kind of arbitration.
Industry attorneys say use of alternatives to Finra, such as AAA and JAMS (formerly the Judicial Arbitration and Mediation Services), are not uncommon for employees on the institutional side of the industry.
And they say alternative forums do offer some advantages.
“I think the level of panel is far better in the AAA, but it is far more expensive,” said David Gehn, a lawyer at Gusrae Kaplan Bruno & Nusbaum in New York, who represents individual advisors.
“If firms pick up the cost [of AAA], you can’t argue about that,” Gehn said.
Baur’s independent contractor agreement with First Command requires each party to a dispute to pay their own forum costs.
For disputes relating to its incentive stock plan, Ameriprise pays all fees above what courts would charge, with parties responsible for their own legal representation.
Despite some advantages at AAA, lawyers who represent individual brokers tend to prefer Finra, where arbitrators are more likely to be familiar with industry practices and procedural rules are less formal. AAA arbitrators “are more likely to strictly follow contracts than at Finra,” said David Robbins, a partner in the New York City law firm of Kaufmann Gildin & Robbins LLP, who works as a AAA arbitrator.
Despite its rules requiring Finra arbitration between registered representatives and firms, Finra is “very reticent [to] compel a non-member firm to arbitrate at Finra,” said Larry Moy, an employment lawyer and partner at Outten Golden LLP in New York.