I read with interest earlier this week that a judge in Texas conducted a one-day bench trial via Zoom, apparently representing the first time this has happened. I understand that hearings, i.e., matters that involve arguments of counsel, rather than the introduction of evidence through the examination of live witnesses, are often done over the phone or by video, and that has been the case since long before the coronoavirus hit. Such remote arguments are not necessarily as effective as being right in front of a judge or a panel, but they work ok; well enough that they are widely accepted. Indeed, even the United States Supreme Court has announced that rather than simply suspending oral arguments, as it has historically done in circumstances that dictate against holding sessions in open court, it will, starting in May, entertain oral arguments via remote access.
But, a trial is different than a hearing. In a trial, the factfinder is called upon to make a credibility determination for each testifying witness, and that determination is based not just on what the witness actually says, but how the witness says it, and how he or she acts on the witness stand, including the slew of non-verbal communications that we tend to pick up on subconsciously. Given that, I wondered how the judge in Texas felt that he was able to be fair to the parties before him.
And understand, this is not merely an academic exercise for me and my clients. For just in this past week, I have learned of both a FINRA arbitration panel and a FINRA Hearing Officer in a pending Enforcement matter who have raised the prospect of conducting a final evidentiary hearing by Zoom, rather than waiting to do it in person. And, frankly, I find that a bit scary.
Let’s start with arbitration. As you all likely know by now, FINRA has determined to administratively stay all in-person arbitration hearings through July 3. But, that is not the end of the story. In that same release, FINRA also made the following statement:
Finally, FINRA Dispute Resolution offers virtual hearing services (via Zoom and teleconference) to parties in all cases by joint agreement or by panel order. These services provide high-quality, secure, user-friendly options for conducting video and telephonic hearings and sharing documents remotely. Staff is available to schedule virtual hearings and provide technical support. Parties that are interested in exploring this option are encouraged to contact their Case Administrator for details.
Focus, for a second, on the language that I have highlighted. This says that a Zoom hearing can happen not only when the parties jointly agree to do so, but, as well, “by panel order.” In other words, FINRA has told panelists that they have the power simply to insist that in-person hearings may happen via Zoom, presumably even over the parties’ objections. Has any panel taken that grant of authority seriously? Well, at least one I know of has. It has issued a directive that states that in light of this language from FINRA,
the Panel is now considering the implementation of a Virtual Hearing to be conducted May 18-22, 2020 and Orders the parties to continue to prepare for a final hearing during those scheduled dates until further advised. At such time all issues are resolved to be able to move forward with the final hearing the parties will be notified.
Note that this directive does not say that the hearing will happen as long as the parties all agree to proceed. It doesn’t even invite input from the parties. It just says that this hearing is happening as long “all issues are resolved,” whatever those issues may be. I concede that arbitration panels have considerable power, but I wonder whether that power is sufficiently broad to compel parties to conduct an entire final hearing by Zoom, even, theoretically, over their objections.
As for Enforcement, FINRA has issued a similar decree as in arbitrations: “The Office of Hearing Officers (OHO) has postponed hearings of Disciplinary Proceedings scheduled through July 3, 2020 with the exception of pending Expedited Proceedings, as they are not conducted in person.” I have a case that is scheduled to go to hearing in June, so I presume that this general postponement means the hearing is off. But, not necessarily. The Hearing Officer assigned to the case correctly observed that it may be a looong time before anyone is truly comfortable traveling to a hearing, sitting in a small, confined conference room all day/every day for a week or more with ten or 15 other people, staying in a hotel, dining at restaurants every day. Given that, who knows just how long it may be until this in-person hearing can safely be scheduled. (And I say “in-person” here because FINRA Rules, specifically, Rule 9261(b) provide that “[i]f a hearing is held, a Party shall be entitled to be heard in person, by counsel, or by the Party’s representative.”)
So, the Hearing Officer has suggested – but not dictated – that, perhaps, it may make sense to keep the case on the calendar in June and do it using Zoom. Otherwise, this case may not get heard for many, many months. I am not sure how this will be resolved; indeed, as I said, the Hearing Officer is merely mulling over the idea of a Zoom hearing. But the longer these Shelter In Place orders continue, and the longer it takes for life to return to “normal,” the more hard-pressed FINRA may become to get its hearing calendar moving, even if that means exploring options to traditional in-person hearings.
And let’s be clear: as cool as Zoom is, it never functions completely smoothly. Sometimes it doesn’t even come close to smooth. Maybe you’ve been in a Zoom meeting like this one. The report of the Texas bench trial I mentioned at the beginning of this post (from Law360) includes this comment:
Throughout the trial there were sporadic interruptions involving Zoom, most notably the several times the court reporter told the parties she could no longer hear what they were saying. At one point message notifications could be heard coming from Black’s [one the attorneys] computer, which he attributed to his “family group chat” before turning the sounds off.
The point is, even a relatively simple meeting is rendered awfully difficult when its participants are forced to do it over a computer. The question is whether it is so difficult that it would render it unfair to a respondent forced to defend him- or herself using such technology, and unfair to the point of depriving the respondent of due process. I, for one, simply cannot see how it can work.
Just want to provide an update on this: Wunderlich Securities lost an arbitration in which the final session of the hearing was held via Zoom, with the consent of all parties. Wunderlich has now filed a Petition to Vacate the Award with the U.S. District Court for the Southern District of New York. You can read that here. While Wunderlich raises a number of troubling issues involving the panel’s conduct during the entirety of the hearing, the Petition does specifically complain about the session that was done via Zoom. According to the Petition,”the Panel was inattentive [during the Zoom session], with Arbitrator Finard looking at other screens, typing, and eating during the course of the presentation. Arbitrator Gross even blocked her screen during the hearing,preventing the parties from confirming that she was even participating. And at one point during closing arguments for WSI and Mr. Wunderlich, Chairman Hollyer walked away from his screen.” I will report when I learn the outcome of the Petition.
 It is worth noting that in arbitration hearings, the occasional witness is permitted to testify remotely, by phone or video. But, this is only done by motion, and the other party has the right to lodge objections to the proposal. Moreover, it is typically reserved only for “minor” witnesses, whose testimony will be short and limited to a discrete topic or two.