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NEW YORK � An arbitration panel of the National Association of Securities Dealers has taken the rare step of issuing a nine-page ruling that experts say may serve as nonbinding precedent for numerous issues in the nascent area of NASD-arbitration law. The NASD provides parties involved in securities disputes with quicker resolution than the courts by offering a voluntary, stripped-down arbitration process. Parties that agree to arbitrate via an NASD panel can expect minimal discovery, lower costs and a speedy one-page decision. The system has its critics, though, who bemoan the lack of clarity for the basis of some rulings, as well as the paucity of written opinions. But in Baird, Patrick & Co. v. Maxcor Financial, 03-07325, a three-person panel released a decision that found, among other things, that the brokerage company Maxcor Financial did not violate any laws by hiring four at-will employees away from Baird Patrick’s convertibles department. After Maxcor, which lost 61 employees on Sept. 11, 2001, hired the two traders and two salesmen away from its rival Baird Patrick in November 2002, Baird Patrick initiated an action against Maxcor. (Maxcor was purchased in 2005 by BGC Partners, a spin-off of Cantor Fitzgerald, which lost 658 employees in the World Trade Center terror attacks.) Baird Patrick alleged misappropriation of its proprietary system and confidential customer information and unethical conduct on the part of the contested employees. The NASD panel ruled in favor of Maxcor and its four new employees. “It is well settled under New York law, which governs this dispute, that employees at will are free to terminate their employment and join a competitor absent fraud or breach of fiduciary duty,” the panel held. “The mere fact that employees leave together does not make unlawful what would be lawful if they left separately.” The arbitrators were Daniel Lund, Stephen Weiner and Harry Frisch. The decision appears to be the first arbitration opinion to address in writing a number of oft-debated issues in NASD circles. For example, it enumerated the factors that may make an employee a “manager” and thus subject to broader fiduciary obligations. In holding that P. Randolph Hill was not a manager, the arbitrators cited, among other things, his lack of a Series 24 license, that he had never been specifically appointed as a manager and that he did not serve as an officer, director or stockholder of Baird Patrick. The panel also explicitly ruled that New York law governed the dispute and that Maxcor was not “barred by some industry standard or policy statement not to hire a group of employees whose production constituted at least 30 to 35 percent of the department of a rival firm.” Stephen Harmon of Troutman Sanders represented the respondents. He called the decision one of great precedential value. “An NASD award without a reasoned decision is meaningless for practitioners in the field,” he said. “This one is so significant because it has the facts, the law and the reasoning of the panel as it applied the law to the facts.” He added, “This case says that an employer is free to hire from another competitor employees-at-will whether it’s one or two or 30 so long as it doesn’t employ illegal means and so long as its sole goal isn’t to hurt its competitor.” Fordham Law School professor Constantine Katsoris, who is the chairman of the Securities Industry Conference on Arbitration and has served as an NASD arbitrator and mediator for more than 35 years, said the decision is of limited value. Katsoris, who opposes a controversial pending NASD rule to require arbitrators to release written decisions if requested by either party, said this decision would not bind other arbitrators and could even provide “false security” to parties that rely on it. He also said that detailed written decisions slow down the arbitration system, taking away its main advantage over traditional litigation. The rule requiring such opinions when requested would be “counterproductive to what we know as arbitration, which is speed, economy and equity,” Katsoris said. The NASD boasts of maintaining the largest securities dispute resolution forum in the world, handling more than 8,000 arbitrations and 1,000 mediations a year. Mark Fass is a reporter with the New York Law Journal, a Recorder affiliate.

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