we would like to begin our arguments for focusing on mr grant wallace appeal as opposed to the issues that are being raised by the n a s d in the state of california with regard to preemption and injunction order in which the court found that he was not subject to the our program that credit suisse first boston had and that he was in the wrong court and was required as the exclusive jurisdiction to go to the n a s d which by the way he did within five days of that order we went to the n a s d the reason we did that is clear mr grunwald has been unemployed for an extended period of time he was employed by credit suisse first boston he alleges that credit suisse first boston scapegoated him and two other employees at the time that the u s attorney for the southern district that time they weren't requiring a waiver they were entitling parties if they wanted to go forward to go to one of four locales outside of the state of california which would have involved in implicit waiver of the standard so there's no brought to this court's attention last week it's a court of appeal california court of appeal case that was finally on october twenty ninth of this year and came down after everything and in that case which we think is extremely significant the court is essentially followed the approach that we suggested to the district court the court recognized that the threshold determination was not whether or not you were entitled to the right as the district court found the threshold determination was if you have a right to a speedy an expeditious arbitration under the f a a and the judicial deter decisions that interpret the then the argument here is very simple a law was enacted by the state of california the law on its face applies to all citizens of the state of california there is a legal dispute pending between jurisdiction that was still on the books it's on the books today notwithstanding what the district court held and it is not a final decision and so what the allen court said and they made specific reference to this in their decision matter is going to go on for years in the courts can go all the way up to the u s supreme court we now have parallel cases going in that in the state court and in the federal court and in that intervening time the issue of so he's not waiving now the question is are the regulators providing a forum within which he can litigate his dispute and allen said they're required to provide an expeditio the federal district courts will be reviewed on appeal to the ninth circuit and from there possibly answer surely by the united states supreme court state court litigation will work its way up to the courts of appeal and then by petition for review to the california supreme court it may be several years before the validity of the ethical standards is finally determined goes on to say paine webber suggests that the arbitration hearing the not be scheduled or held pending the determination of whether the ethical standards are valid we disagree public policy favors arbitration as a speedy and inexpensive method of resolving disputes the purpose of arbitration is to voluntarily resolve private disputes in an expeditious manner three attraction i believe it's because employment disputes under their rules are to be litigated in close proximity to the place of employment and one well you know it's interesting because there are two types of cases generally that are handled before these their sorrows the vast majority of cases are customer complaint cases they're investor cases where investors are alleging churning out of suitability things of that nature and and that is that this majority of the cases this is there is a small percentage of the cases that are employment cases that are brought up in this tribunals what is it called there are the forms of the n a s d specify that the director will select the location in the employment case and that's where i'm coming from that that in an employment place the director will select the location in close proximity to the place of employment the allen court was dealing with an investor case and in an investor case the director may designate where the case will be heard but under normal says that that the director can compel and a litigant to arbitrate outside of the state and in fact if there was such a rule they wouldn't have given an option to us they would have just directed us to go try your case here what they did in that rule change was they said you will be entitled to have your case certain california based upon an explicit waiver of the standards or should you so desire you can have your matter in one of these four out of state locations but of course implicit in that is that you will not be given the standards the standards will not apply to that hearing and we are you again based upon the determination in alan because alan went back n a s d agreed that if you wanted to have your matter out of alan and in the alan kay yes that's true yeah it was the same rule the same rule is that if you want your matter heard you can go to one of these four jurisdictions but the court interesting specify which forum and then the case was remanded to the trial court saying the trial court you decide whether that location is unreasonable and reasonable and just if it's unreasonable an this dispute because that's going to go on for a period of years and ultimately this party will be not denied the right to a speedy an expeditious arbitration and absent that right the jurisdiction over the dispute  good and that the the party is free to go to court to get the issue resolved and that was what we argued to the district court below now some way somehow and also i'd like to point out one thing  the issue of preemption and the issue of the judicial counsels of exceeding its authority and those points were raised at virtually the eleventh hour in our case in other words we filed the motions we filed supplemental motions urging the state we would bring that to the court's attention say now look what's going on here we're facing a situation where the district court basically said to the s r o as you filed in the wrong court you can't sue these state entities under the eleventh amendment in district court but sorrow's didn't didn't then go to state court to litigate the claim they filed a notice of appeal which extended the issue not on the merits but on the issue are they in the right court we brought that to the right the court could say let's do it in a hurry because we don't want to get involved in the tough case and that would be the rule well i appreciate that you know if if we were all like to  reasonable and just to go elsewhere our position is it's unreasonable and i'm just because we're being required to waive our right before there's been a final determination that that right that right that we're entitled we're not  judicial council standard issue of whether or not the statute extended to s r o arbitrations and therefore did not reach these other issues but let me address those first of all what in essence when you had a way from the get beyond the position of please don't decide any of these issues what you get is what mr grunwald is asking this court to do which is to say look there at the california legislature has done something past some statute and the california digital council has acted on that whether or not that's within or out let's assume for a minute it's within their authority to do this what he's saying is the result of that the ne x t is required to adopt sense that there are there are a number of ways in which the standards are preempted by the exchange act one is direct conflict and that is not so much in the issue of what is the intent behind the stands in terms of what's types of matters need to be disclosed but it's who does the disqualification and how does that occur that is in direct conflict under the judicial council standards the parties themselves can disqualify they make the choice not only that the parties themselves and under the judicial council standards can disqualify regarding this of whether or not there i actual challenge to an arbitrator yes there is a striking in a ranking but when arbitrator selected parties may challenge those arbitrators on some ground but the director of arbitration then has to determine the validity or yes if you when you look at section twelve eighty one point ninety one what you'll find to your surprise when you read that statute over and over again as i did when it first was the net did is that the parties simply can disqualify after the disclosures are made it's in our appendix  disclosures and then the parties simply make a challenge to that arbitrator you're disqualified there is no provision for some third party determining the validity or the basis of that challenge and in fact the party does not that it's because of the certain disclosure or not so there is that better to ask and it's the ability of the parties as opposed to a third party that is the director of arbitration to make the determination as to whether there is cause that is in direct conflict so there you have a direct conflict and which requires preemption at least that portion of  one exactly but the point is that the arbitration provision allows that challenge to be made by parties and there is there is no provision there for the point that once you get down into this though there is a point at which the director of arbitration has certain responsibilities and duties and is charged with certain acts and responsibilities and the any is the system and those are in conflict with what has already filed a mammoth brief in this case which is quite clearly made its self its point that no it is considered this and has rejected it it does not want to follow these rules and it is not proposing to adopt them and will not adopt them supremacy clause problem by following rules that aren't really our rules and that aren't in our if they aren't what the parties have agreed to when they're arbitration agreement when they agreed to follow the rules but will follow of those well but it was certainly made clear involved that the parties have the ability to establish what sort of set of rules they're going to arbitrate under and to suggest that now you've got a choice here between respect they're recommending arbitrator's not the arbitrary eyes well i think there's two answers that first we need to address that issue if and when the california legislature decides to make arbitrators that qualification some for something that the state has arguably done and said this is applicable only to arbitration agreements arbitration agreements you got to do x y and z we don't care what your rules are and that is  preemption as a matter of fact but i don't think that there is there can be a distinction here when you have cases and this very court striking down venue provisions they don't need if you can't do that how can the court require this type asked who says they have to adopt them as mr lee said the f c c says we would have to adopt the california standards by rule before we could comply with them if we were to attempt to adopt the california standards we would be out of compliance with the f c c rules subject to federal san propose rules to the f c c we have a set of procedures in place that's already been approved by the f c c and approved by the supreme court as protecting investors and other arbitration parties the states are not free to intrude in any way on those a host of reasons let me let me lay out a couple one is the sheer cost of compliance the evidence we submitted in mayo showed that it would cost over seven million dollars in the first year alone for the n s t that to attempt to come into compliance with the california s that we would be undertaking all of that expense which ultimately would be borne by arbitration parties presumably if we change our fee schedule to no additional purpose that the current scheme works well the f c c says it works well the federal courts that works well we think  attorneys and so forth the n a s d would track all that information give you one example the california standard would require every arbitrator to disclose all the fees that credit suisse has paid to an idea over the past five years that's millions of dollars in registration fees administrative fees perhaps there have been fines or penalties all sorts of miscellaneous things that have nothing to do with arbitration because remember this and the other side of any as d is the is the regulatory body that regulates the securities industry so that you know that and we they would render the ultimate integrity and finality of arbitration awards suspect because a clever lawyer could find a failure a technical failure to comply with california standards that would not affect the partiality of the other that's an important point our arbitrators are concerned about their ability to comply with california standards it's a huge record keeping burden on them they get paid a very modest stipend for performing this public service their lawyers who centrally volunteer their time they don't want to be day your honor so it's it's nothing like the commercial arbitrators you charged it's like law from partners by the hour they're paid a small amount for the day and then they get her stances covered i believe is five hundred dollars a day see have overstayed my welcome i do want to you know what you want to give me your arm i'm here to answer questions i would like to make one final point counsel said this will be eventually decided in a court of competent jurisdiction here we what we were what i was doing was essentially parroting what the allen court suggested which was that there are issues could have been resolved by mere application of contractual principles relative to arbitration and that inactive for the public benefit and under civil code section thirty five thirteen my client's not even permitted to make such a waiver that that waiver and he certainly not permitted to waive the  a and under all of the decisional authority interpret in the f a a and we are eighteen months now beyond the point and we still don't have a panel and we still don't have a hearing and the argument is well i had to do was wait and you could have your discretion is subject to the provisions of the f a a and accordingly if the director of uses that discretion the parties can go to court and they can get relief percentage of these matters are ever raised or ever brought out because what are we talking about your honour's we're talking about a situation where an arbitrator fails to make a disclosure and it is subsequently determined by a party well that is very unlikely to happen what we're looking for is transparency in the system we want that checklist that fourteenth you know all those items checked off so that at least we know when the arbitrator has gone through the list instead of looking at it from a general perspective that there's nothing that would cause me to be anything but impartial and i don't have to disclose anything go through the list and say yes no yes no so we can ask questions and exercise our peremptory challenges in an appropriate way one final point that i wan arbitrator has discretion either on his own initiative or at the request of a party so that the arbitrator if you're somebody who's an independent individual that comes in he's hearing this thing and he says you know what i'm going to send this out somewhere