Everybody seems to have a theory about which factors really matter for purposes of trying to predict how a particular arbitrator might rule. More often than not, however, such theories ultimately boil down to little more than intuition and gut instinct. Are older arbitrators better than younger ones? Does it matter whether an arbitrator has prior legal experience? When it comes to picking an arbitration panel, it would be nice to be able to make decisions based on something more substantive than one’s gut.

A recently published paper titled “The Influence of Arbitrator Background and Representation on Arbitration Outcomes” by New York University's Stephen Choi, University of Pennsylvania's Jill Fisch, and University of Michigan's Adam Pritchard, together with a prior paper titled “Attorneys as Arbitrators” by the same authors, attempt to remedy this dilemma by providing a rigorous analysis of various factors to determine which arbitrator attributes are truly relevant when it comes to predicting how a panel might behave.[1]  

In their first study, the authors purport to analyze a dataset of 422 randomly selected arbitrators and their 6,724 FINRA arbitration awards from 1992 to 2006 (the arbitration proceedings took place in 44 different jurisdictions, including Puerto Rico and the District of Columbia). In their latest study, the authors examined 417 randomly selected FINRA arbitration awards from 1998 to 2000. Following are some of the more interesting findings made by the authors:

  • Professional arbitrators are more likely to award lower amounts to investor-claimants — but only when they are serving as a non-chair arbitrator.[2]   
  • Arbitrators with connections to the securities industry are more likely to award lower amounts to investor-claimants; however, this correlation is essentially eliminated when the investor-claimants are represented by an attorney.
  • Inexperienced attorneys are more likely to award lower amounts to investor-claimants.
  • Arbitration panels are more likely to award lower amounts to investor-claimants if the chair is retired or over 65 years old.
  • Arbitration panels are more likely to award lower amounts to investor-claimants if the non-chair, “industry” arbitrator has regulatory experience — but only when the investor-claimants are not represented by an attorney.[3]
    • Arbitration panels are more likely to award higher amounts to investor-claimants if the one non-chair, “public” arbitrator has regulatory experience — regardless of whether the investor-claimants are represented by an attorney.
      • This correlation is even more pronounced when both non-chair arbitrators have regulatory experience.  
  • Arbitration panels are more likely to award lower amounts to investor-claimants if the chair is an attorney who represents brokers or brokerage firms.
    • This correlation is even more pronounced when at least one other arbitrator on the panel is also an attorney who represents brokers or brokerage firms. 
    • However, the authors found no significant relation between attorneys who represent brokers or brokerage firms and award size when the attorney is not the chair.
  • Attorneys who represent investors are not more likely to give higher awards to investor-claimants — regardless of whether they are serving as the panel chair.
    • Likewise, attorneys who represent both brokers or brokerage firms and investors are not more likely to give higher awards to investor-claimants — regardless of whether they are serving as the panel chair.
  • Arbitration panels are more likely to award lower amounts to investor-claimants if the chair is an attorney and also has donated money to Republican political candidates; and panels are more likely to award higher amounts to investor-claimants if the chair is an attorney and also has donated money to Democratic political candidates.[4]
    • This correlation is even more pronounced when the chair and at least one other arbitrator on the panel have donated money to political candidates of the same party.