WEBVTT - Robinhood Lawsuits Face Uphill Battle 0:00:00.480 --> 0:00:05.720 You're listening to Bloomberg Law with June Grosso from Bloomberg Radio. 0:00:06.559 --> 0:00:09.800 Robin Hood is facing a barrage of lawsuits by customers 0:00:09.880 --> 0:00:13.760 overclaims it unfairly blocked trading and shares of high flying 0:00:13.800 --> 0:00:17.520 stocks like game Stop, whose share price surge after being 0:00:17.560 --> 0:00:21.640 touted on social media forums. Joining me as commercial trial lawyer. 0:00:21.720 --> 0:00:25.439 David Bissinger, a partner at Bissinger Ashman and Williams are 0:00:25.440 --> 0:00:28.920 these day traders on forums like the Reddit based Wall 0:00:28.960 --> 0:00:33.239 Street bets changing the way the market works. I don't 0:00:33.280 --> 0:00:35.440 know if it's changing the way markets work, but it's 0:00:35.479 --> 0:00:37.959 certainly opening up trading at a level that we've never 0:00:37.960 --> 0:00:42.520 seen before because robin Hood is a commission free UH 0:00:42.640 --> 0:00:46.239 platform in which Robin makes his money and what they 0:00:46.280 --> 0:00:50.040 call payment for order flow UH. In other words, the 0:00:50.640 --> 0:00:53.640 product is really the traders, and robin Hood makes money 0:00:53.640 --> 0:00:56.880 off of the spread between with the buyer of the 0:00:56.920 --> 0:01:00.200 stock pays versus what robin Hood has to pay to 0:01:00.280 --> 0:01:02.920 fill the order UH. And so it's just part of 0:01:03.160 --> 0:01:06.400 an evolution that began, you know, really in the sixties 0:01:06.400 --> 0:01:08.760 and seventies with Charles Schwab and then the elimination of 0:01:08.840 --> 0:01:12.160 fixed commissions and then just the continued reduction and trading 0:01:12.200 --> 0:01:15.039 cost which has characterized Wall Street really for the past 0:01:15.080 --> 0:01:19.399 fifty years. So is the story all about these day 0:01:19.440 --> 0:01:24.920 traders banning together over social media platforms like Reddit's Wall 0:01:24.959 --> 0:01:28.840 Street bets if that's your following, Reddit, I think are 0:01:28.880 --> 0:01:31.480 just part of the story. For example, according to Matt 0:01:31.560 --> 0:01:35.960 Levine on Bloomberg's Money Stuff column, really only a minority 0:01:36.080 --> 0:01:40.360 of the purchases last week of Game Stock stock uh 0:01:40.440 --> 0:01:43.880 were by retail investors. Certainly there's going to be other 0:01:43.959 --> 0:01:47.040 hedge funds uh, And I think it's not well indicated 0:01:47.120 --> 0:01:49.440 or mentioned by the press. That is very likely that 0:01:49.560 --> 0:01:53.320 other institutional traders are on the buy side, uh, Whereas 0:01:53.320 --> 0:01:56.640 the current media frenzy really focuses on the short selling 0:01:56.720 --> 0:02:01.480 hedge fund especially Melvin Capital, which shorts old stock uh. 0:02:01.720 --> 0:02:04.240 You know, however many months ago. So why are the 0:02:04.280 --> 0:02:07.440 hedge funds in it? I think it's probably a mixed bag. 0:02:07.480 --> 0:02:10.040 I mean, for example, the most famous hedge fund that 0:02:10.200 --> 0:02:15.400 is long game Stop stock is Michael Burry, ironically famous 0:02:15.440 --> 0:02:17.600 for shorting the housing market, you know, more than a 0:02:17.680 --> 0:02:20.840 decade ago, as documented by the Christian Bale character in 0:02:20.880 --> 0:02:24.120 the movie the big short UH in this situation, Michael 0:02:24.160 --> 0:02:28.760 Bury started buying game Stop stock I think in the 0:02:28.919 --> 0:02:33.239 third quarter of But what I suspect that once the 0:02:33.320 --> 0:02:36.360 best settled an investigation is conducted, you'll see plenty of 0:02:36.360 --> 0:02:42.560 other hedge funds from to the present UH buying the 0:02:42.600 --> 0:02:45.920 stock as opposed to shorting the stock. Robin Hood has 0:02:45.960 --> 0:02:50.360 been criticized from all sides for restricting trading. So do 0:02:50.480 --> 0:02:54.280 you buy their reason for restricting trading? You know, I 0:02:54.320 --> 0:02:56.600 think there's a good case for it. You know, we 0:02:56.639 --> 0:02:59.400 don't know all of the details. It's really a question 0:02:59.560 --> 0:03:03.120 of whether their rationale that they stated is truthful. But 0:03:03.200 --> 0:03:05.359 there's a good case for it. And the rationale that 0:03:05.480 --> 0:03:08.519 robin Hood gave for stopping trading was they needed to 0:03:08.680 --> 0:03:12.080 ensure that they had adequate net capital. This gets into 0:03:12.280 --> 0:03:17.360 a somewhat esoteric but extremely important question for investors, because 0:03:17.400 --> 0:03:20.840 if robin Hood kept allowing people to drive the stock 0:03:20.960 --> 0:03:23.600 up the Game Stop stock to say a thousand or 0:03:23.639 --> 0:03:27.440 poor more, what you would see is that the net 0:03:27.480 --> 0:03:31.800 capital of robin Hood itself would likely be UH so 0:03:32.040 --> 0:03:36.120 a liquid that it would put robin Hood in jeopardy 0:03:36.160 --> 0:03:39.280 of collapse. Much has happened with like Lehman Brothers and 0:03:39.440 --> 0:03:42.560 other actors in the financial crisis, you know, twelve years ago. 0:03:43.040 --> 0:03:45.920 And so what I think would be ironic would be 0:03:46.000 --> 0:03:49.480 if robin Hood had allowed people to keep trading, and 0:03:49.520 --> 0:03:53.640 then when the bubble inevitably burst, the traders in robin 0:03:53.640 --> 0:03:56.640 Hood buying game Stop stock suddenly would suffer the huge 0:03:56.680 --> 0:04:00.320 losses and by the way, massive margin calls, ruining their lives. 0:04:00.640 --> 0:04:03.000 And then we would see a populoust doubt cry, much 0:04:03.040 --> 0:04:05.960 like the home buyers in the real estate bubble that 0:04:06.080 --> 0:04:08.440 led to the financial crisis of two thousand and eight, 0:04:08.720 --> 0:04:13.320 accusing banks and so forth the predatory lending. Don't forget 0:04:13.800 --> 0:04:17.880 that robin Hood was extending margin to the redditors, the 0:04:17.920 --> 0:04:21.880 supposed redditors trading and buying game stop stocks. So these 0:04:21.880 --> 0:04:24.560 guys buying game Stop stock are not just buying it 0:04:24.560 --> 0:04:27.120 with their own money. They're buying it, you know, on margin, 0:04:27.200 --> 0:04:30.159 with extensions of credit from robin Hood. And the problem is, 0:04:30.200 --> 0:04:34.400 once the traders started accumulating a massive position in house money, 0:04:35.000 --> 0:04:38.360 the margin needs to be ratcheted way way down. And 0:04:38.400 --> 0:04:42.880 so robin Hood certainly had a contractual right. Paragraph sixteen 0:04:42.920 --> 0:04:45.760 of its customer agreement says it can stop trading in 0:04:45.800 --> 0:04:49.920 the stock at any time, and that contractual provision is 0:04:50.040 --> 0:04:53.479 absolutely necessary for any brokerage firm to operate because of 0:04:53.800 --> 0:04:58.159 extreme market volatility events just like this, and robin Hood 0:04:58.240 --> 0:05:00.720 at a certain level. Whether the truth or not here, 0:05:00.720 --> 0:05:03.080 we don't know. There'll be an investigation and we'll find 0:05:03.080 --> 0:05:06.479 out did have to comply with the net capital requirements 0:05:06.480 --> 0:05:09.200 of the Securities and Exchange Commission and the clearing houses 0:05:09.200 --> 0:05:12.240 through which robin Hood trades. Remember that the buyers of 0:05:12.400 --> 0:05:14.479 game Stop stock at robin Hood aren't just buying the 0:05:14.480 --> 0:05:17.919 stock immediately from some other counterparty robin Hood. They're buying 0:05:17.920 --> 0:05:21.839 it through an intermediary called the Depository Trust Corporation d 0:05:22.000 --> 0:05:24.960 t c C. It's a clearing endity, a clearing house, 0:05:25.160 --> 0:05:28.600 and d t c C requires robin Hood to maintain 0:05:29.040 --> 0:05:33.200 adequate net capital, as does the Securities and Exchange Commission. 0:05:33.600 --> 0:05:37.400 So maybe robin Hood's reason for stopping was not truthful 0:05:37.480 --> 0:05:40.520 or accurate, but there's a plausible explanation as to why 0:05:40.560 --> 0:05:43.120 they did it. We'll find out. The SEC has said 0:05:43.160 --> 0:05:47.719 it's closely monitoring the situation. What kind of regulatory problem 0:05:47.720 --> 0:05:51.120 would this be? What's the SEC looking for? Well, I 0:05:51.160 --> 0:05:53.480 think the first thing uh that comes to mind is 0:05:53.520 --> 0:05:56.560 whether or not robin Hood was in fact truthful in 0:05:56.640 --> 0:05:59.120 saying that it's a net capital was in jeopardy. But 0:05:59.160 --> 0:06:02.400 when you look at the massive increase in the stock 0:06:02.480 --> 0:06:05.960 price of game Stop and other of the similar shares 0:06:06.000 --> 0:06:08.360 the reditors were trading in, and the relative newness of 0:06:08.400 --> 0:06:10.800 the platform of robin Hood, and the fact that robin 0:06:10.839 --> 0:06:13.200 Hood did in fact have to, you know, draw down 0:06:13.240 --> 0:06:15.159 from its lines of credit, which you wouldn't have wanted 0:06:15.200 --> 0:06:18.600 to do. I think that the sec will investigate, and 0:06:18.640 --> 0:06:23.279 I'm probably with congressional investigations as well to prepare detailed 0:06:23.320 --> 0:06:26.520 reports whether or not that actually happened. Again, I tend 0:06:26.520 --> 0:06:30.080 to think it did, at least at a certain level. 0:06:30.440 --> 0:06:33.039 Then there's discussion of, you know, how do you regulate 0:06:33.200 --> 0:06:38.039 these new online trading platforms like robin Hood that you know, 0:06:38.080 --> 0:06:41.400 allow a lot more flexible trading than the you know, 0:06:41.440 --> 0:06:45.240 old conventional commission based model. You know, I don't know 0:06:45.360 --> 0:06:49.080 exactly what those regulations would be, but from what I 0:06:49.200 --> 0:06:53.200 see as as securities litigator, I don't see anything here 0:06:53.440 --> 0:06:57.360 that cries out for a radical change in the securities 0:06:57.560 --> 0:07:00.640 regulations we have and it has had for you know, 0:07:00.800 --> 0:07:05.880 nearly a hundred years comparable securities regulations. I mean, even 0:07:05.960 --> 0:07:09.679 before the nine stock market crash, the New York Stock 0:07:09.720 --> 0:07:13.320 Exchange imposed various net capital requirements. They weren't as rigidly 0:07:13.440 --> 0:07:17.640 enforced as after the Securities and Exchange at nineteen thirty four. 0:07:17.920 --> 0:07:20.920 But you know, the wild West of stock trading really 0:07:20.960 --> 0:07:23.280 was in the late nineteenth century, and you know, really 0:07:23.320 --> 0:07:25.720 came to an end well before any of us were born. 0:07:26.880 --> 0:07:29.960 And or Elizabeth Warren called for a broader review by 0:07:29.960 --> 0:07:34.560 the SEC and said, broker dealers that invite individual investors 0:07:35.400 --> 0:07:39.400 need to operate based on basic rules and to keep 0:07:39.440 --> 0:07:43.000 the playing field level. Do you think that's the problem here? 0:07:43.800 --> 0:07:45.880 You know, I'm not even sure what that means. Because 0:07:46.000 --> 0:07:48.920 if you're a trader, well just quite literally, if you 0:07:48.960 --> 0:07:52.080 start out stay with you know, ten thousand dollar trading account, 0:07:52.120 --> 0:07:55.160 you're a small retail investor and you start buying game 0:07:55.240 --> 0:07:58.280 Stop stock. You know, if you started buying it, you know, 0:07:58.320 --> 0:08:01.360 say three or four months ago when it was whatever 0:08:01.400 --> 0:08:04.280 the twenties, uh, and all of a sudden that converts 0:08:04.320 --> 0:08:07.240 into hundreds of thousands of dollars because you've written this 0:08:07.320 --> 0:08:11.280 huge wave and you've been doing that in part on margin. Um, 0:08:11.600 --> 0:08:15.000 I don't know that there's any fundamental right. In fact, 0:08:15.000 --> 0:08:17.680 I'm pretty sure that uh, you know, once I think 0:08:17.720 --> 0:08:20.040 Elizabeth one and and the others, and I would say 0:08:20.120 --> 0:08:23.120 this applies equally to some of the right wing uh 0:08:23.160 --> 0:08:26.960 populism on the issue, uh that once people really sit 0:08:27.000 --> 0:08:29.560 down and realize trading in the stock exchange is an 0:08:29.560 --> 0:08:33.800 incredible privilege and it is not something that just is 0:08:34.240 --> 0:08:37.200 it just doesn't happen. In other words, you need market 0:08:37.280 --> 0:08:40.840 infrastructure to allow for the safe training. And again, just 0:08:40.920 --> 0:08:44.520 look back to the credit crisis when the regulations were 0:08:44.600 --> 0:08:46.760 dropped and all of a sudden you have the democratization 0:08:46.840 --> 0:08:50.720 supposedly of real estate finance that led to horrible outcomes 0:08:50.960 --> 0:08:53.720 for you know, small you know, low income and middle 0:08:53.720 --> 0:08:57.120 income uh families, and so you know, I think it 0:08:57.240 --> 0:09:00.760 was a very you know, the provocative issue. And it 0:09:00.880 --> 0:09:03.800 is so much fun to see the big shots, you know, 0:09:03.920 --> 0:09:07.400 get their noses bloodied and uh see the little guys 0:09:07.600 --> 0:09:10.880 purportedly winning. I get that. It's great fun. You read 0:09:10.960 --> 0:09:14.200 the I would invite all of the listeners to subscribe 0:09:14.240 --> 0:09:17.400 to the Reddit sub account called our slash Wall Street 0:09:17.400 --> 0:09:20.320 bets because it's just funny. I mean, it's just silly 0:09:20.400 --> 0:09:24.600 and goofy. But to say that these traders, these retail traders, 0:09:24.600 --> 0:09:27.960 have a fundamental right to drive up the stock way 0:09:28.000 --> 0:09:32.720 beyond any rational you know, corporate valuation of that stock. 0:09:33.240 --> 0:09:36.240 You know, really, I think mistakes. The purpose of the 0:09:36.240 --> 0:09:39.480 stock market is warm, Buffett says. The stock market in 0:09:39.520 --> 0:09:41.480 the short run is a voting machine. You can drive 0:09:41.520 --> 0:09:43.720 the price way up, But in the long run, it's 0:09:43.800 --> 0:09:47.040 a weighing machine. It weighs the long term earnings, the 0:09:47.080 --> 0:09:50.280 long term cash flows of the companies in which the 0:09:50.280 --> 0:09:53.920 stocks are issued. And I don't think anyone seriously believes 0:09:54.000 --> 0:09:56.840 the Game Stop stock is going to sit at you know, 0:09:56.920 --> 0:09:59.640 four hundred dollars for a long time. I mean this morning, 0:09:59.640 --> 0:10:02.600 at least last night checked it was down down, I 0:10:02.640 --> 0:10:05.040 think in the two hundred range. And when you look 0:10:05.080 --> 0:10:07.559 at the company's cash flows and fundamentals, it's just hard 0:10:07.600 --> 0:10:09.760 to believe that it's going to stay there. Maybe this 0:10:10.200 --> 0:10:13.400 short failing hedge fund, Melvin Capital gets wiped out. Uh, 0:10:13.440 --> 0:10:15.480 maybe there's some yet, you know, come up and for 0:10:15.640 --> 0:10:18.600 a certain small group of hedge funds traders in New 0:10:18.679 --> 0:10:21.400 York or whatever. But I mean, I think it would 0:10:21.400 --> 0:10:24.920 be a mistake to assume that the you know, longside, 0:10:24.960 --> 0:10:29.520 the purchasers of game Stop, are entirely these small investors. 0:10:29.559 --> 0:10:32.000 I think it's very much more likely that there's other 0:10:32.040 --> 0:10:35.600 hedge funds quietly behind the scenes, letting the Reddit guys 0:10:35.679 --> 0:10:39.040 take all the publicity while the hedge funds, uh, you know, 0:10:39.160 --> 0:10:43.160 profit from Melvin's misery. Because hedge funds love beating each 0:10:43.160 --> 0:10:46.280 other up, they tear their faces off every day. This 0:10:46.400 --> 0:10:49.120 is just a public example of something that has been 0:10:49.160 --> 0:10:53.000 going on since trading began. There are close to twenty 0:10:53.080 --> 0:10:58.240 lawsuits by investors against robin Hood. What are the suits 0:10:58.280 --> 0:11:02.000 based on? What do they have to prove? Well, the 0:11:02.080 --> 0:11:04.160 lawsuit I have in front of me, it makes the 0:11:04.240 --> 0:11:07.120 mistake of alleging breach of contract, in other words, that 0:11:07.200 --> 0:11:11.360 the investors supposedly had this contractual right to keep trading. 0:11:11.640 --> 0:11:15.520 The lawsuit itself attaches the customer agreement I quoted earlier 0:11:15.600 --> 0:11:19.360 with paragraphs sixteen that says that robin Hood can put 0:11:19.360 --> 0:11:23.280 a trading halt on customer trading basically at its discretion. 0:11:23.760 --> 0:11:25.880 And so it's hard for me to see as a 0:11:26.000 --> 0:11:28.599 commercial litigator, and especially someone who does a lot of 0:11:28.640 --> 0:11:33.320 securities litigation. How that constitutes a breach of contract when 0:11:33.480 --> 0:11:36.080 Robin Hood had the right to stop the trading, especially 0:11:36.120 --> 0:11:38.599 given the market fundamentals. Now, but it turns out that 0:11:38.720 --> 0:11:42.040 Robin Who has engaged in some chicanery. Okay, maybe, but 0:11:42.120 --> 0:11:44.080 I mean Robin Hood, I'm sure did not want to 0:11:44.120 --> 0:11:47.000 stop trading. I mean, they do better by letting their 0:11:47.000 --> 0:11:50.680 customers actually trade. Maybe it's a cabal, Maybe there's a 0:11:50.720 --> 0:11:53.720 secret tact with Robin Hood and Citadel and these other 0:11:53.760 --> 0:11:57.160 people to shut down the small investors. But I think 0:11:57.160 --> 0:12:00.520 that that's you know, gonna be viewed as implausible. People 0:12:00.760 --> 0:12:04.640 step back and realize how the market system actually works. Again, 0:12:04.679 --> 0:12:06.800 it's great fun, it's great, great fun to see these 0:12:06.840 --> 0:12:09.199 guys get beat up, but you've got to really step 0:12:09.200 --> 0:12:11.520 back and look at the market infrastructure. So do you 0:12:11.600 --> 0:12:16.600 think that these lawsuits then won't survive motions to dismiss Well, 0:12:16.800 --> 0:12:20.319 maybe we find out something provocative in that Robin Hood 0:12:20.320 --> 0:12:23.959 did something nefarious and underhanded. But if it's just simply 0:12:24.040 --> 0:12:27.360 the allegation that Robin Hood breached this contract by you know, 0:12:27.440 --> 0:12:30.400 not allowing people to continue to buy game stop, I 0:12:30.400 --> 0:12:32.959 mean the Temple Laws, which for example, says that deprived 0:12:33.000 --> 0:12:37.640 the customers of profitable trading opportunities. That to me seems 0:12:37.720 --> 0:12:40.800 like a real stretch. It's going to be very difficult 0:12:40.800 --> 0:12:43.640 for an investor to claim I had the right to 0:12:43.760 --> 0:12:47.000 make another a hundred thousand dollars and drive game Stop 0:12:47.200 --> 0:12:50.199 stock all the way to five hundred when game Stop 0:12:50.280 --> 0:12:51.920 can come in and say, now we had the right 0:12:51.960 --> 0:12:53.760 to stop this, and by the way, we had a 0:12:53.840 --> 0:12:56.839 good reason for it. Again, maybe there's something out there 0:12:56.880 --> 0:13:00.000 we haven't seen. Much of the facts, you know, by 0:13:00.120 --> 0:13:04.440 necessity haven't been fully ventilated. But I would I would 0:13:04.559 --> 0:13:09.360 find that implausible again, barring some incredible revelations. Also, do 0:13:09.440 --> 0:13:14.040 the robin Hood investors have to submit to arbitration according 0:13:14.040 --> 0:13:18.440 to the contract? Yeah, the contract does include mandatory arbitration. 0:13:19.120 --> 0:13:22.000 Whether or not that actually occurs is going to be interesting, 0:13:22.040 --> 0:13:24.560 because it may well be robin Hood decides to take 0:13:24.600 --> 0:13:27.720 the investors who filed lawsuits up on their desire to 0:13:27.720 --> 0:13:30.160 be in court, which robin Hood would be allowed to do. 0:13:30.200 --> 0:13:32.600 In other words, robin Hood would be able to waive 0:13:32.720 --> 0:13:36.560 the arbitration requirement, get all these cases consolidated in front 0:13:36.559 --> 0:13:39.520 of a judicial panel. On the multi district litigation and 0:13:39.559 --> 0:13:42.079 maybe get rid of the cases that way, because individual 0:13:42.240 --> 0:13:46.120 arbitrations in such a massive context as this might be difficult. 0:13:46.440 --> 0:13:50.720 You know. I think the Bloomberg piece Chris Dalmus wrote that, 0:13:50.920 --> 0:13:54.080 uh we you and I discussed indicates that these lawsuits 0:13:54.120 --> 0:13:57.320 are probably gonna be around for a while. Uh. My 0:13:57.480 --> 0:13:59.760 sense of it is that they'll die slow and painful. 0:13:59.800 --> 0:14:02.760 That why do you think it will be slow because 0:14:02.760 --> 0:14:06.240 of the massive number of lawsuits that investors have filed 0:14:06.280 --> 0:14:09.360 all over the country, which will trigger this multi district 0:14:09.440 --> 0:14:14.520 litigation process. Uh at least that's I think, you know, 0:14:14.600 --> 0:14:18.120 a one view of it. It. It's conceivable Robin Hood 0:14:18.200 --> 0:14:22.320 decides to challenge to these lawsuits individually, uh, in in 0:14:22.440 --> 0:14:25.640 court after court after court. But given the number of 0:14:25.640 --> 0:14:28.520 the lawsuits, it kind of makes sense that uh, they 0:14:28.520 --> 0:14:31.440 would be consolidated for uh you know, pre trial treatment 0:14:31.480 --> 0:14:35.000 before a multi district litigation channel. That's gonna be again 0:14:35.120 --> 0:14:37.560 something we just have to see and how it plays out. 0:14:38.160 --> 0:14:42.320 Uhbin you could also compel these arbitrations. Are compel these 0:14:42.360 --> 0:14:45.760 lawsuits to arbitration. That's another way to handle it. Um. 0:14:45.840 --> 0:14:49.480 But um, you know, I think that the conventional wisdom, 0:14:49.480 --> 0:14:51.360 and a lot of the like law professors and so 0:14:51.480 --> 0:14:55.120 forth and other experts are are probably right that'll will 0:14:55.160 --> 0:14:58.840 be consolidated before the judicial channel and multi district litigation, 0:14:59.160 --> 0:15:02.640 and that just takes additional time. Just explain briefly why 0:15:02.800 --> 0:15:09.000 companies usually prefer arbitration to trial. Well, the conventional wisdom 0:15:09.320 --> 0:15:14.160 is that it avoids runaway juries. Uh and and you 0:15:14.200 --> 0:15:18.280 know that's definitely true in many instances. I will say 0:15:18.320 --> 0:15:21.480 that I'm a little bit more of an agnostic because 0:15:21.960 --> 0:15:26.280 a lot of planets cases do better in arbitration if if, 0:15:26.320 --> 0:15:29.360 for example, there's no depositions and no motion practice or 0:15:29.360 --> 0:15:32.960 at least not much motion practice, and the cases get 0:15:32.960 --> 0:15:36.480 decided and then once they're decided, there's no appeal. Uh 0:15:36.680 --> 0:15:40.480 So I think there's really kind of a you know, 0:15:40.680 --> 0:15:44.160 pros and cons to arbitration versus court. But there's no 0:15:44.280 --> 0:15:47.720 question that in most consumer contracts like this, they do 0:15:47.760 --> 0:15:51.280 contain arbitration. That's very common in the brokerage industry. The 0:15:51.320 --> 0:15:55.840 cases are typically heard by the UH financial industry regulatory 0:15:55.880 --> 0:16:01.880 authorities arbitration UH subsidiary, and that that is viewed as 0:16:02.200 --> 0:16:06.560 generally being favorable to defendants. But you know, there are cases, 0:16:06.600 --> 0:16:09.400 and I've seen them one I've wanted them myself in 0:16:09.440 --> 0:16:13.160 front of center artitrators. So it isn't just a guaranteed 0:16:13.400 --> 0:16:17.200 victory for the defendants. Uh And in some cases there's 0:16:17.240 --> 0:16:20.840 advantages to the planoff investors. Thanks for being on the 0:16:20.840 --> 0:16:24.840 Bloomberg Law Show, Dave. That's David Bissinger of Bissinger, Ashman 0:16:24.920 --> 0:16:30.440 and Williams. The number of Americans getting divorce plummeted last year, 0:16:30.720 --> 0:16:34.040 and the marriage rate also dropped as thousands of weddings 0:16:34.040 --> 0:16:37.840 were postponed or canceled due to the COVID nineteen pandemic. 0:16:38.360 --> 0:16:41.240 This early look at COVID nineteen's effect on divorce and 0:16:41.280 --> 0:16:45.240 marriage statistics comes from Bowling Green State University's Center for 0:16:45.360 --> 0:16:50.040 Family and Demographic Research. The data contradicts earlier predictions that 0:16:50.160 --> 0:16:53.240 COVID nineteen and the stresses of the quarantine would cause 0:16:53.280 --> 0:16:56.760 divorce rates to surge. Joining me as family law attorney, 0:16:56.800 --> 0:17:00.720 Dan lipschelds of Aaronson, Mayefski and Sloan me, how COVID 0:17:00.760 --> 0:17:05.360 affected your divorce practice. Well, I thought there would be 0:17:05.440 --> 0:17:08.200 you know, there was a lot of news around the country, 0:17:08.280 --> 0:17:12.840 around the world that COVID would cause a significant increase 0:17:13.480 --> 0:17:17.560 in divorces. Um. I have not now agur into the 0:17:17.600 --> 0:17:23.639 pandemic seen that obviously when the pandemic first is and 0:17:23.920 --> 0:17:26.240 being a practicier out in New York City, you know, 0:17:26.320 --> 0:17:30.240 we went down in mid March ahead of other parts 0:17:30.240 --> 0:17:33.280 of the country, and courts were closed, and with courts 0:17:33.320 --> 0:17:36.920 being closed and not having the ability to operate virtually 0:17:36.920 --> 0:17:41.440 at that time, things certainly came to a relatively grinding halt. 0:17:41.880 --> 0:17:44.480 But you know, there was talk, as we said at 0:17:44.520 --> 0:17:46.760 that time and over the course of the summer, that 0:17:47.040 --> 0:17:50.399 when things opened back up, there would be a major, 0:17:50.480 --> 0:17:54.960 major uptick in divorce rates. And I can't say that 0:17:54.960 --> 0:17:57.600 that that's happened. I think that as things have opened 0:17:57.600 --> 0:18:01.080 back up, yes, we've seen an inflow of new matters, 0:18:01.160 --> 0:18:05.399 but currently nothing that is significantly greater than prior to 0:18:05.400 --> 0:18:08.439 the pandemic. And to some extent, I think there's a 0:18:08.440 --> 0:18:11.879 certain type of matter that we've seen and there are 0:18:11.920 --> 0:18:14.679 other types of matters that we have not seen, and 0:18:14.720 --> 0:18:18.359 that deals with I think people in certain economic situations 0:18:18.520 --> 0:18:21.679 and socio economic stature of families. I think that you know, 0:18:21.880 --> 0:18:25.600 a lower socioeconomic stature family or a family where one 0:18:25.720 --> 0:18:28.760 or both spouts have lost job. I think the decisions 0:18:28.840 --> 0:18:31.359 to move forward with the divorce has become certainly a 0:18:31.400 --> 0:18:35.560 harder one, given that divorces can involve complicated issues and 0:18:35.720 --> 0:18:39.960 can be expensive, and the you know, there is still 0:18:40.000 --> 0:18:44.320 a significant backlog of cases, even the courts having been 0:18:44.640 --> 0:18:48.199 opened back up and and operating virtually, even some wealthy 0:18:48.240 --> 0:18:53.199 couples are facing some economic uncertainty at this time, and 0:18:53.280 --> 0:18:56.560 uncertainty you know about kids going to school, things like that. 0:18:57.080 --> 0:18:59.960 Does that affect a wealthy couple's decision to get a divorce? 0:19:00.040 --> 0:19:04.480 M I don't think the same extent that uh, it 0:19:04.640 --> 0:19:09.399 might affect a less wealthy tuckle um. I think that 0:19:09.760 --> 0:19:13.360 people who have access to resources, even where there might 0:19:13.400 --> 0:19:16.639 be a slight downturn, are still going to be in 0:19:16.680 --> 0:19:20.800 a position to make that decision. I think economic considerations 0:19:20.840 --> 0:19:25.320 are always important in choosing whether you're going to be 0:19:25.359 --> 0:19:28.520 moving forward with this divorce the separation. But I think 0:19:28.560 --> 0:19:34.000 that the lower income household, that decision has become much 0:19:34.080 --> 0:19:38.800 much harder than in a wealthy household. And there is also, 0:19:39.680 --> 0:19:42.800 as I said, access to court resources or the ability 0:19:42.880 --> 0:19:48.440 to perhaps engage in some type of alternatives resolution, and 0:19:48.600 --> 0:19:51.239 you know, higher a private judge, which is something that 0:19:51.280 --> 0:19:54.320 I have certainly seen in the more affluent families that 0:19:54.440 --> 0:19:58.439 want to move forward with UM a divorce process that 0:19:58.520 --> 0:20:03.840 might otherwise stalled or you know, significantly delayed because of 0:20:03.840 --> 0:20:07.040 the pandemic. As far as getting a divorce case through 0:20:07.119 --> 0:20:10.960 the courts during COVID, were you able to do that 0:20:11.280 --> 0:20:17.760 or were divorces basically stopped for a while in New 0:20:17.840 --> 0:20:22.920 York State UM, and specifically New York City. Uh, they were, 0:20:23.560 --> 0:20:26.600 they were stopped. UM who aren't even able to commence 0:20:26.640 --> 0:20:29.320 an action for divorce for a number of months. I 0:20:29.359 --> 0:20:33.959 think given that the city or Manhattan the words UM 0:20:34.200 --> 0:20:37.280 more of an epicenter than other parts of the state 0:20:37.320 --> 0:20:40.399 and certainly other parts of the country. UM, other parts 0:20:40.400 --> 0:20:44.800 of state began to open up sooner than New York City, 0:20:45.160 --> 0:20:48.480 and then again once things opened back up, UM, it 0:20:48.560 --> 0:20:52.080 didn't necessarily mean that there were in port in person 0:20:52.119 --> 0:20:56.920 court appearances. In my fielden matrimonial law in New York 0:20:56.920 --> 0:21:00.119 County with his Manhattan, there are still no U in 0:21:00.240 --> 0:21:04.560 person proceedings. That it's all virtual, and that has changed 0:21:04.640 --> 0:21:09.080 the manner in which we've been practicing law. You are 0:21:09.119 --> 0:21:13.920 not appearing in court, you're appearing virtually. UM. The filing 0:21:14.040 --> 0:21:18.040 has gone predominantly to electronic filing. And I think that 0:21:18.119 --> 0:21:22.479 has changed the case in which uh you have access 0:21:22.560 --> 0:21:26.520 to the courthouse, UM, the pace in which cases move forward. 0:21:27.960 --> 0:21:32.720 I you know that there are far less trials then 0:21:32.760 --> 0:21:36.080 there were uh pre pandemic. I think we're still adjusting 0:21:36.119 --> 0:21:41.399 to it. UM. In Manhattan, there are you appear before 0:21:41.400 --> 0:21:44.720 a judge, but economic issues in the case can be 0:21:44.800 --> 0:21:47.919 referred out to a special referee, which is sort of 0:21:47.960 --> 0:21:52.240 an under judge. And those childs have not been done yet. UM. 0:21:52.320 --> 0:21:56.840 So you where there was a huge amount of economic 0:21:57.520 --> 0:22:02.480 cases being sized by a with different referees. UM, those 0:22:02.520 --> 0:22:07.600 have not really restarted yet. UM. And And in addition, 0:22:07.680 --> 0:22:11.840 if you don't consent for there to be a trial electronically, 0:22:12.080 --> 0:22:14.680 then you don't have to participate in one. And it 0:22:14.840 --> 0:22:17.200 can certainly so if there's not consent on both sides, 0:22:17.440 --> 0:22:21.639 it can cause further delay. Has COVID changed custody determinations 0:22:21.640 --> 0:22:26.320 in any way? It's the same process, um, in terms 0:22:26.359 --> 0:22:29.680 of you know, how you would adjudicate or you would 0:22:29.720 --> 0:22:33.840 litigate a custody case. UM. I can't say that there's 0:22:33.880 --> 0:22:41.159 been a significant change in how UH COVID has affected that. 0:22:41.560 --> 0:22:46.200 There are certainly, almost on a weekly basis, new issues 0:22:46.280 --> 0:22:52.200 that arise, and I think judges are consistently confronted with um. 0:22:52.280 --> 0:22:55.200 You know, the same type of issue would arise, and 0:22:55.440 --> 0:22:57.560 most judges would do the same one over a course 0:22:57.600 --> 0:23:00.679 of a certain period of time. For example, you know 0:23:00.720 --> 0:23:05.000 what the pandemic UH started, there would be a divorced 0:23:05.080 --> 0:23:08.840 family or even a family going through a divorce process, 0:23:08.880 --> 0:23:12.280 and one pair wants to be inno vacation homes and 0:23:12.400 --> 0:23:15.520 one parent is an essential work they're living in the 0:23:15.600 --> 0:23:18.679 city and and would like the same access to their child. 0:23:19.200 --> 0:23:24.120 But you have quarantine regulations and you see guidelines, and 0:23:24.200 --> 0:23:27.679 so you know, as the pandemic has evolved, there are 0:23:28.640 --> 0:23:31.920 new questions that arrived, but consistent that that you'll see 0:23:32.000 --> 0:23:34.159 judges having to tackle and having to deal with it. 0:23:34.400 --> 0:23:37.639 And it is interesting, which how can to deal with 0:23:37.680 --> 0:23:41.200 those issues because on one hand, you have a court order, 0:23:41.400 --> 0:23:44.639 perhaps a court order document. On the other you have 0:23:44.800 --> 0:23:49.800 a you know, spec guidelines, or you have a recommendation 0:23:49.880 --> 0:23:54.680 from the governor. And certainly I've seen judges give effect 0:23:54.720 --> 0:23:58.280 to their orders unless there is some type of executive 0:23:58.359 --> 0:24:00.920 order or something that would trump that something coming out 0:24:00.920 --> 0:24:03.520 of all THENY for example, I would say that a 0:24:03.600 --> 0:24:06.200 court should operate in this way given a certain set 0:24:06.240 --> 0:24:10.159 of circumstances. But um, there have been a lot of 0:24:10.320 --> 0:24:16.000