CHAPTER LI.
ARBITRATION.
HOW THE SYSTEM OF SETTLING DISPUTES AND MISUNDERSTANDINGS BY ARBITRATION
HAS WORKED IN THE STOCK EXCHANGE.—WHY NOT EXTEND THE SYSTEM TO
BUSINESS MATTERS GENERALLY?—ITS GREAT ADVANTAGES OVER GOING TO
LAW.—IT IS CHEAP AND HAS NO VEXATIOUS DELAYS.—TRIAL BY JURY A
PARTIAL FAILURE.—SOME PROMINENT CASES IN POINT.—JURY “FIXING” AND
ITS CONSEQUENCES.—HOW JURIES ARE SWAYED BY THEIR SYMPATHIES.—A
CURIOUS MISCARRIAGE OF JUSTICE BEFORE A REFEREE.—THE LITTLE GAME OF
THE DIAMOND BROKER.
Wall Street has derived great prestige and character from the New York
Stock Exchange. In fact, the Stock Exchange is Wall Street, so to speak,
so much so that if the Exchange moved to any other locality, the latter
would become the new Wall Street, to the utter oblivion of the old,
which would soon be eclipsed and regarded as a thing of the past.
The New York Stock Exchange has distinguished itself in many respects,
but there is probably nothing for which it is likely to become more
famous in history than its solution of the great problem of settling
disputes and misunderstandings by arbitration. Other financial bodies
have tried the same substitute for ordinary law proceedings, but it
would appear that greater success has crowned the efforts of the Stock
Exchange in this particular experiment than any other corporate body.
The large number of cases on record that have been amicably settled by
arbitration within the past few years, in which law would have been
formerly considered indispensable, seem to point to a period, probably
not far distant, when arbitration will be the great and ultimate court
of appeal in the large majority of civil cases. Several considerations
will make it the most popular. It is cheaper, less complicated, not
subject to vexatious delay; it is more equitable, and the members
composing the Arbitration Committees are business men, who are quick to
discern, accurate in perception, sound in judgment and decisive in
drawing their conclusions on business principles.
The expense of arbitration is a mere trifle compared with the enormous
sums swallowed up in litigation.
Transactions involving millions of dollars annually in the Stock
Exchange are made subject to settlement by this method of arbitration in
the event of any difference of opinion arising in any particular case.
Very few instances occur in which there is any necessity to carry the
case beyond the jurisdiction of the Arbitration Committee.
The number of cases actually settled in this way would probably cost
half a million dollars annually if they had to be brought into court, to
say nothing of the incidental expenses, which would amount to as much
more, arising from delay, on the scale of present charges by the legal
profession, even leaving out our own Evarts, who is probably the Boss
charger of the Bar.
The success attending the system at the Stock Exchange, I think, goes
far to prove that the method might be universally extended to the great
pecuniary interest and personal comfort of business men throughout the
country, for the adjustment of their misunderstandings and grievances
among one another.
My object in writing upon this subject has for its basis the hope that
this chapter may catch the eye of some of our great merchants in this
and other large cities, and that it may suggest to those of them who
have not contemplated the subject already, the advisability and
necessity of establishing for themselves a similar method of arbitration
to that which has been so successful in the Stock Exchange, to be final
and without appeal, in their respective business affairs.
Experience has fully demonstrated that trial by jury is in innumerable
instances a signal failure; especially has this been so since what is
known as “jury fixing” has become so common in the courts. The practice
of bribing jurors has now become a secret profession, and is so ably
conducted that it is almost impossible, except in rare instances, to
expose it.
But apart from this vicious and criminal practice of tampering with
juries, there are many other reasons why it is next to impossible, in a
large variety of instances, to obtain justice from an ordinary jury.
Human sympathy plays a very important part in the verdicts of juries
generally. I mean by this, class sympathy. A business man who is
regarded by the community as rich and powerful, can hardly expect
justice from a common jury unless the party opposed to him occupies a
similar station in society. Where the position of either the plaintiff
or defendant calls forth sympathy with regard to worldly means, in the
large majority of cases the ordinary jurors will bring in a verdict in
favor of the man of small or moderate means, believing that they are in
duty bound to sympathize with the oppressed. In a case where a clerk or
a woman, for instance, is a party to the suit, it is next to impossible
for a man of means to receive equity at the hands of the great palladium
of our liberty. I am sorry it is so, but I speak feelingly in this
matter, as I have myself been a victim of this unworthy class prejudice,
in a country where all men are theoretically equal.
Counsel usually make a great display over the cases of impecunious
clients, out of all proportion to their magnitude. Mole hills become
ostensibly transformed into mountains in the eye of the highly
imaginative lawyer, who works himself up into such a dramatic pitch of
enthusiasm about the wrongs of his client, that he appears to be in dead
earnest. He infuses the same feeling into the jury, who are beguiled
into solemnity by the force of forensic oratory, and fail to appreciate
the farcical side of the case, but are totally swayed by sentiment and
prejudice, to the utter exclusion of the evidence.
There are many objections, also, to trial or partial trial, by referee,
although it is in many instances an improvement on the jury system. It
is, however, amenable to numerous and flagrant abuses.
As an instance of this, I shall briefly relate a case which some time
ago came within the sphere of my own observation.
A gentleman of my acquaintance had a claim for a very large amount
against a financial man in good circumstances, and it was sent to a
referee, who, after a long, tedious and exhaustive investigation of all
the facts, gave a decision in favor of the plaintiff for several hundred
thousand dollars.
Soon after the decision, the defendant saw the plaintiff, and made him
an offer of thirty thousand dollars to settle the matter, at the same
time stating that if he did not accept the offer, he would either appeal
the case or hunt up fresh evidence for a new trial.
This offer of settlement, which was but a small part of the amount
awarded by the judgment, was naturally declined by the plaintiff, and
application was made to the court under the pretense of newly discovered
evidence, for a new trial, which was granted. Thereupon, after another
tedious trial, the old beaten track having been gone carefully over
again, without omitting any of the aforesaid “whereases, neverthelesses
and notwithstandings,” or any of the monotonous flummery connected
therewith, the case was again sent to the same referee, before whom the
same wearisome inquiry was repeated. This time, however, the referee
relieved the monotony, at the close, by rendering a decision in favor of
the defendant, for a large sum, instead of the plaintiff, as on the
former occasion.
This decision was a genuine surprise to the plaintiff, who then called
upon the defendant and expressed in severe terms his indignation at the
change that had been unwarrantably made in the decision of the referee,
saying he would not submit to it. He was extremely firm in his manner
and said: “I positively assure you that if the judgment is enforced this
town will not be large enough to hold you and myself.”
The successful defendant then said, “What do you want me to do?”
“Well,” replied the plaintiff magnanimously, “I simply desire to be
released of that judgment.”
“Will that satisfy you?” asked the other litigant.
“Yes,” he replied, “under the circumstances. I have had enough of such
law, and want to get rid of it.”
“Well,” said the defendant, “I will do it, and give you a receipt in
full in satisfaction of all claims.”
After this cordial termination of the trouble, the defendant turned to
the plaintiff and said confidentially, “I am sorry you did not take the
thirty thousand dollars which I offered you. I would sooner you had it
than anyone else, as I had to pay it all the same.”
The profound lesson of humility taught in Scripture, that “the first
shall be last and the last first,” was fully verified in this instance.
As litigation is now carried on either before a jury or a referee, it
has a tendency to stir up bad blood, which grows worse as the case
progresses through its various and lengthy stages, leaving relations
more strained and matters for both parties much worse at the end than at
the beginning. As the case drags its slow length along criminations and
recriminations between plaintiff and defendant are constantly elicited,
and family matters that should be regarded as sacred are dragged before
the eyes of the public, subjected to unfriendly criticism, and innocent
parties who have no interest in the case are subject to have their
private affairs made known, to their great mortification, and often to
their great detriment, having a cloud thrown over their reputation long
after the litigants have passed away.
Thus the evils of litigation are far reaching in their consequences, and
frequently exercise a most deleterious influence over the character and
prosperity of those who have nothing to do with the original parties to
the contest, and have no interest in the suit.
The expense is also another important consideration in going to law, and
is only to be measured by the bank balances of the contending parties.
The time lost in the methods of procedure now generally adopted is of
the utmost importance, especially to people the success of whose
business in a large measure may depend on their personal attention
thereto. It is perfectly astounding to reflect on the important portion
of a person’s existence that may be lost in one case, which, from its
inception in the lower court up through the regular gradations of the
Supreme Court and Court of Appeals when a new trial is had, probably
thus going over the entire ground twice, may consume all the way from
five to ten years under the perpetual pressure of mental anxiety and
torture before the end is reached, when at least one, and sometimes both
parties, are financially ruined.
The worry, wear and tear of attending to a lawsuit in the capacity of
either plaintiff or defendant is perfectly incomprehensible to those who
have never passed through the trying ordeal. A person in either
capacity, with his train of witnesses, is obliged to dance attendance on
court every day, no matter how pressing the necessities of his own
business may be. Books must be carried thither, and all his
establishment must be upset for the convenience of the court and to
gratify the whims and caprices of the opposing litigant. The business
places of the two contending parties are entirely disarranged, and the
help thrown into a state of partial disorganization. Each party to the
suit seeks to give the other all the trouble he possibly can, and to
subject him to all the sources of annoyance his imagination can devise.
Such is the spirit imbued by going to law.
A lawyer, therefore, who has about half a dozen moderate cases has thus
his entire time occupied, and while his clients keep out of bankruptcy
his income is as good as the annuity of a life insurance company, and
frequently the security is better.
The effect of the change which I propose, in the majority of cases where
merchants and business men find it necessary now to resort to legal
methods, would perhaps not render the life of the ordinary lawyer so
happy as it is under the present system, but the merchants would gain
ten-fold more than the lawyers would lose, so the effect upon the entire
community would be incalculably beneficial.
The system of arbitration which I contemplate could be extended in every
line of business throughout the entire country, with a Central
Association in New York or any other city that might be agreed upon. In
fact, there might be several business centres, one in each important
city, with its ramifications extending throughout the section in which
its commercial interests more immediately clustered. Branch associations
could be organized in the smaller cities and towns, enjoying all the
facilities of direct communication with the central body, and availing
themselves of all the information and statistics there collected, and
the nature of decisions in special and leading cases of settlement.
Each association in its own city or town should be considered fully
competent to deal with its own affairs, the Central Association being
only consulted as an advisory body. I should recommend also that each
association should have a governing committee, which should constitute
its Court of Appeal, whose decision should be deemed final.
It would hardly be necessary to prescribe penalties for the few isolated
cases that would kick against the arbitration system, and resort to law,
as their legal experience before they got through would be punishment
sufficient without the association taking any further action.
Discipline, however, of a mild character, would have to be enforced in
these and other special cases, for the better efficiency of
organization.
It might be well to have a rule whereby the parties submitting their
cases to arbitration should recognize the necessity, after having the
methods of procedure thoroughly explained to them, of putting themselves
under obligations to abide by the decision.
In carrying out a national idea of this kind of association, business
could be greatly facilitated and much expense saved by the various
committees having due regard to their places of meeting, so as to be as
near as possible to the centre of the greater number of the witnesses in
each particular case.
The courts, which are now greatly overworked, would be immensely
relieved by this system, and they would have more time to sift important
and exceptional cases which, in their nature, could not possibly be made
subjects of arbitration. There are quite enough of such cases to occupy
the time of the various courts.
One of the most vexatious and irritating things connected with court
trials is the constant attendance required, even when no progress is
being made in the case. The expenses, too, are always accumulating.
Though nothing is accomplished the attendance of the lawyers is far from
being a labor of love. Their services must be handsomely rewarded by the
litigants.
Such a process of settlement as I suggest would not, after all, be any
great hardship to the best of the legal fraternity, as there would be
enough work left for them, but it would afford immense relief to the now
overworked judges, while it would facilitate and forward the ends of
justice to an extent that can hardly be imagined by those who have been
always accustomed to the slow and monotonous machinery of the law
courts, and it would help to weed out the large camp following of
pettifoggers, whose occupation would be partially gone.
There is a great deal of time lost in regular court business, causing
much exasperation to the parties to a suit, in settling mere
technicalities and side issues of law, before the real merits of the
case can be reached. Many of these technical delays could be easily
disposed of by business men, on business principles, and by taking a
simple and common-sense view of the matter, by the usual methods pursued
in arbitration.
This new method of settling disputes would do away with the farce of
giving bonds in many cases, which is another great source of annoyance,
and which, after all, only amounts to a mere formality in a large number
of cases, and in many others a very hollow and fraudulent pretense, as
many of the bondsmen are only men of straw, and though technically
qualified, are not in reality responsible for the obligations undertaken
by them.
When good, reliable sureties are offered, in many instances they are put
through an irritating course of examination in relation to their private
affairs, much of which is entirely unnecessary, and only designed to
perplex and annoy them. They are thus obliged to expose matters relating
to their private business, about which the public have no right to know
anything, and they are often examined in such a way, as if they
themselves were on trial, and were attempting criminal concealment of
something that they had a right to disclose. A good deal of this arises
from the impudent, unmannerly style of certain lawyers, who treat a man
as a criminal suspect, when he has no interest in the case whatever, but
has simply come voluntarily forward to assist a friend in trouble.
This is all, however, in the present method of procedure, connected with
the machinery of so-called justice, and this kind of abuse has been
carried to such an extent in some of the instances just referred to,
that very few responsible parties, who know anything about the _modus
operandi_ of qualifying as a surety, are willing to respond to such
calls of friendship. Hence, one of the difficulties in obtaining good
bondsmen, and an additional reason why the professional straw men are so
plentiful.
It probably helps the business of the latter, between whom and the
abusive lawyers there may be an understanding on “boodle” principles.
I shall relate an instance which I consider worthy of permanent record
illustrative of the matters to which I here refer, in which my firm was
victimized.
On the occasion referred to, my firm sued a client for a just debt of
sixteen thousand dollars. The case was sent to a referee, whose
standing, in his particular line, was unquestioned at the time, and very
few men, in his circle, had better family connections. He stood high in
his profession and both sideS were satisfied with the choice. The case
was very long and tedious, having been drawn out to a most provoking
extent by encumbering the record with immense piles of irrelevant
matter. The renewed calls for legal fees on both sides were numerous and
vexatious, yet there was no help but graceful submission to the payment
of this tribute.
After a number of years it was reluctantly conceded by the lawyers that
the evidence was all in on both sides. The litigants breathed heavy and
responsive sighs of relief, each side being confident of victory.
A short time prior to the close of the case, the referee spoke to me,
gratuitously offering his advice to settle the case, as he said he
intended to give a decision adverse to my firm. To this I demurred, and
expressed my determination to fight the case to the bitter end.
The result was, however, that my firm not only did not get a decision in
its favor for the $16,000 to which it was justly entitled, but this
claim was wiped out by this Daniel come to judgment, who gave a decision
in favor of the defendant for $132,000.
I regarded this award as such a terrible outrage upon justice that I
obtained a stay of proceedings, and made an appeal, setting forth
therein the advice given to me by the referee to settle before the case
was closed.
Judge Fancher, who wrote the opinion on behalf of the bench, consigned
that referee to everlasting disgrace, and set aside his opinion. There
the case ended.
Another instance in my experience will illustrate the point which I have
made in regard to the sympathy exhibited by juries with those whom they
regard, rightly or wrongly, as oppressed. At one time I had employed a
clerk at the rate of $2,000 per annum. He was a great disappointment to
me in regard to competency, for the work for which I had engaged him,
and for his entire lack of application to, as well as deficiency in, the
department to which he was assigned. At the end of the first year,
therefore, I gave him notice, in presence of two competent witnesses,
that I should not require him after his year had expired, and advised
him to look out at once for another situation. On the last day of the
year he came to me with tears in his eyes and said that he had been
unable to obtain another place, owing to the bad times prevailing, and
begged me, in the name of his family, who was solely dependent upon him,
to keep him in my services still longer, until he could get another
situation. Purely out of sympathy for his condition, and believing his
story, which was very plausible and pathetic, I told him that he might
remain a short time longer on the same salary, but that I should require
him to use all his exertions to get another place as speedily as
possible.
When he entered on the second term his services were no more use to me
than a fifth wheel is to a coach. After the expiration of a few weeks, I
sent for him and inquired if he had got another situation; I said I had
given him ample time to obtain one, and that I could not consent to keep
him any longer. I therefore requested my cashier to draw a check to his
order for the balance of his wages, up to date, filled in as a part of
the body thereof with the words “payment in full for all claims and
demands.”
Thereupon he left my employment, but called repeatedly at the office
afterward. I assumed that his visits were simply for the purpose of
paying his respects. At the expiration of the second year I received a
notice of suit which he had commenced in Brooklyn for the balance of
salary due him for the year, being at the rate of $2,000 a year for ten
months.
The case came up duly in the Brooklyn court, his only witness being his
father, who had made several calls upon me after the discharge of his
son, on the strength of which he set forth, in his evidence, certain
conferences that should have taken place between him and myself, the
greater part of which were purely fictitious. He was the only witness
called on the side of the plaintiff, while I had five or more witnesses
to substantiate the facts, as I have related them, in relation to the
young man’s discharge, all of them being of most excellent character.
Strange to say, the jury entirely ignored the overwhelming testimony on
my side, and seemed to be altogether influenced by the “spread-eagle”
address of the defendant’s counsel, which I am free to say was both able
and ingenious. He drew a harassing picture of the poverty of the young
man, and presented the imminent destitution of his family in a most
pitiable light, brought about solely by the ruthless treatment of this
hard-hearted millionaire and bloated bondholder. Hence the verdict was
made, through the force of counsel’s oratory, to depend exclusively on
the sympathy of the jury, irrespective of the evidence.
The case occupied several days, with five or six employees from my
office in constant attendance, who were obliged to carry to and from
court, every day, huge books and large quantities of papers, disturbing
the regular business of the office in a very disagreeable manner.
After counsel had gone over the ordinary rigmarole in reviewing the
testimony, the jury went through the formality of retiring, to keep up
appearances, and after a brief interval of absence returned to court
with a verdict for the deeply injured clerk for back pay, together with
interest for the ten months during which he had not rendered me an
hour’s service.
My lawyer was easily able to obtain fresh evidence from other sources,
but he had not considered it necessary to put any more witnesses on the
stand, as he had regarded the testimony already produced more than
ample, so sanguine was he of success, and so fully satisfied of the
plainness of his case, which he considered had only one side, and that
in my favor.
The jury, however, put the boot on the other foot, upset all my
counsel’s calculations and showed him that his law went for nothing
where the famous twelve had the right to judge and legislate at the same
time in accordance with their sympathies and prejudices. Still he went
through the formality of going before the judge with new evidence, and
applied for a new trial, which was ordered on the ground that the
verdict was not in accordance with the weight of evidence.
The new case was called after the customary delays, and the same ground
was duly traversed again, with my additional witnesses, before another
highly intelligent jury, whose prejudices were all on the side of the
greatly injured young man, who sought twelve months’ pay for two months’
useless services. The only witness that appeared again for the defendant
was his faithful and veracious father, whose memory was marvellously
correct in relation to his former statements on the first trial.
There is an old proverb which says that it requires such men to have
good memories. I need not quote it, as almost everyone knows it.
To make a long story short, however, that forensic orator appeared again
for his poverty-stricken client, armed with all the old enthusiasm
exhibited on the former trial. He had not much new matter to present,
but his dramatic attributes, by dint of longer practice, and more
familiarity with his side of the case (it was only necessary for him to
study the one side) had become considerably improved since his former
effort, and it is needless to say that he carried the jury with him.
By that intelligent safeguard of our liberties, the jury, the second
trial was only regarded as an aggravated case of persecution, on my
part, and the verdict was given more cheerfully in favor of the
plaintiff than on the former occasion.
Although it would have been much better for me, from a financial point
of view, to have paid the amount of the exaction, with all the legal and
illegal fees and impositions connected therewith, yet I felt disinclined
to be bamboozled in that way.
When the court was applied to for another new trial, the judge said, “I
have already given you one new trial, taking the responsibility. The
relief you now ask has already been before two juries, and I am not
willing to take upon me any additional responsibility in the matter. You
must therefore look for any further rights or redress to which you may
consider yourself entitled, to the Court of Appeals.”
The case is now, therefore, awaiting the good time and discretion of the
Court of Appeals, where it will, in all probability, be heard and
adjudicated upon sometime within the next ten years. In the meantime the
young man is happy in the reflection that his judgment is a good
investment, drawing six per cent. interest.
There is still another case illustrative of some of the peculiar points
referred to, and showing the truth of the maxim among lawyers that, “You
never know what a jury will do,” in which I had the honor, or the
misfortune to be joined.
A well-known outside broker in Wall Street, who had a large experience
in transacting business for Mr. Sage and other notabilities of the
street, in “puts,” “calls,” and other exterior securities, came to me
one afternoon and asked me if I didn’t want to buy a pair of diamond
earrings.
At that time I had not begun my career as a dealer in diamonds, except
in one solitary instance, and that was when I purchased the wedding
ring, which is one of the requisites in a matrimonial contract for a
long term. I was, therefore, comparatively a tyro in the business, and
the party with whom I was dealing did not fail to take advantage of my
inexperience. I made some inquiry about the diamonds from this broker,
to which I received apparently satisfactory answers, and I concluded
they would suit my wife, and as I had had a good day’s business I made
him an offer of a thousand dollars for the precious ornaments, which he
quickly accepted, and I paid him the money.
In the course of a few weeks after I was waited upon by a diamond dealer
and his lawyer, with neither of whom I had the honor of any previous
acquaintance, and they accordingly introduced each other. The diamond
dealer introduced the lawyer and _vice versa_. I immediately concluded I
was going to get a good stock order from both of them, but I was soon
disappointed as well as surprised to find that these gentlemen had
called on an entirely different kind of business, which was totally
devoid of commissions on any stock transactions.
They said I had a pair of earrings belonging to them, and I declined to
give them up except on return of my thousand dollars.
These two gentlemen bade me good day, and in the course of time I was
served with the usual legal papers in a suit which reached the calendar
after some time. The young man who sold me the diamonds was put on the
stand. He testified that he had received them from a certain diamond
broker, but not the dealer in question, with whom he had had no
connection whatever.
The diamond broker, it appeared, had long been agent for this dealer,
selling diamonds and had, as set forth in the evidence, sold over ten
thousand dollars’ worth in a few years.
During the trial a paper was produced to prove that this broker had
received these diamonds to show them to a customer, and as it turned out
I happened to be the customer. The money which I had paid him for them
he had failed to turn over to his employer, of whom I had no knowledge,
nor had I any chance of knowing him in the transaction.
All the facts were presented, as above related, to the jury, who, after
due deliberation, decided that I must give up the diamonds and suffer to
be cheated out of my thousand dollars.
This case is now on appeal. I have since offered to relinquish the
diamonds and lose my money, rather than suffer the expense and trouble
of continuing the litigation, but plaintiff wants to bleed me further to
the tune of $300 to cover his law expenses. To this illegal tribute I
have not yet submitted, and have resolved to see what virtue there is in
further defense before a higher tribunal.
“Millions of dollars for defence, but not a dollar for tribute,” is a
maxim which it is expensive to follow, but after all, the result of such
a course, if one can afford it, may be morally healthy.
I consider that these cases, in which I acted a rather unenviable part,
are only samples of many which constitute one of the best arguments for
a general system of arbitration, such as I have briefly and imperfectly
outlined.
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