A FINRA Arbitration provides several motions to dismiss. The following are motions to dismiss before or after the case-in-chief.
FINRA Rule 12504(a) Motions to Dismiss Before a Party Concludes its Case-in-Chief
FINRA believes that parties have the right to a hearing in arbitration. Therefore, motions to dismiss filed prior to the conclusion of a party’s case-in-chief are discouraged and granted only under limited circumstances. According to FINRA Rule 12504(a), the panel cannot act upon a motion to dismiss a party or claim, unless the panel determines that:
- the non-moving party previously released the claim(s) in dispute by a signed settlement agreement and/or written release, or
- the moving party was not associated with the account(s), security(ies) or conduct at issue.
If a party files a motion to dismiss on multiple grounds, including eligibility, the panel must decide eligibility first, pursuant to FINRA Rule 12206. If the panel grants the motion to dismiss on eligibility, it must not rule on any other grounds for the motion.
If filing a FINRA Rule 12504(a) motion, the party must do so in writing, separately from the answer, and only after filing the answer. Such motions must be filed at least 60 days in advance of the hearing, and the other parties will have 45 days to respond. Any reply must be made within five days of receipt of a response. FINRA staff will forward motions and responses to the full panel for review. The panel should ask the parties to provide briefs if it needs additional information to decide a FINRA Rule 12504(a) motion to dismiss.
Not only do FINRA Rule 12504(a) motions require the input of the entire panel, but the panel must also hold a hearing before it grants such a motion, unless the parties waive the hearing requirement. If the panel grants the motion, the decision must be unanimous and accompanied by a written explanation. If the panel denies the motion to dismiss, a party may not re-file it, unless specifically permitted by panel order.
FINRA Rule 12504(b) Motions to Dismiss After a Party Concludes its Case-in-Chief
The restrictions set forth in FINRA Rule 12504(a) do not apply to FINRA Rule 12504(b) motions to dismiss after a party concludes its case-in-chief. After the claimant has presented its case—including all documentary evidence and testimony—but before the respondent presents its case, the respondent may ask the panel to dismiss the claim on the grounds that the claimant failed to prove the allegations in the statement of claim or failed to prove a right to recovery. Generally, these motions are made orally at the hearing after the claimant’s presentation.
When ruling on motions to dismiss after a claimant has concluded its case-in-chief, arbitrators should view the evidence in the light most favorable to the claimant. If the claimant has presented credible evidence to support a recovery, the panel should deny the motion. However, if the testimony and documents do not support any possible recovery, the panel may grant the motion to dismiss the claim.
Both sides have invested a lot of time and effort in the arbitration. Arbitrators should be sure that all parties had a full opportunity to argue the motion to dismiss.
Consider the following issues before granting a motion to dismiss:
- Did the claimant have the chance to call all witnesses? Why or why not?
- Did the claimant meet its burden of proof? When determining this, remember to look at all evidence presented in the light most favorable to the claimant.
- Does the claimant have any further witnesses, evidence or testimony to offer?
The panel may direct the respondent to present its case, even if the claimant’s case is weak and the respondent’s motion has some validity.
If the panel grants a FINRA Rule 12504(b) motion and dismisses all of the claimant’s claims after the presentation of the claimant’s case, the panel must still complete the following tasks:
- render a written award under FINRA Rule 12904; and
- consider how to allocate forum fees and costs among the parties.
If the panel grants a FINRA Rule 12504(b) motion to dismiss on some but not all of the claimant’s claims, the hearing would proceed as to the surviving claims.
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