Elizabeth Warren has once again taken up the charge to end pre-dispute arbitration agreements, which she calls “forced arbitration.” I have addressed the topic on numerous occasions and while I am a fan of arbitration, pre-dispute arbitration agreements can be an issue, particularly in consumer cases, such as car rental and credit card agreements.
The process and issues are quite different in the securities dispute area, and we must remember that it was the United States Government that forced all brokers and brokerage firms to arbitrate disputes, whether they agreed to do so or not. The rest of the pre-dispute arbitration issues arise from that unilateral government action.
Alan Wolper, another securities attorney, has an excellent blog post on the topic. In addressing the issue, he says that he would welcome the end of mandatory arbitration. While I suspect Alan is being a bit tongue in cheek, his point is well taken:
I wonder, however, if the claimants’ bar can say the same thing. Some of the Statements of Claim I receive likely could not survive a motion to dismiss for failure to state a claim. (Of course, I can’t file that motion in arbitration, as the Code of Arbitration Procedure doesn’t allow it.) Some could not survive a motion to dismiss based on the statute of limitations (an argument that makes arbitration panels really uncomfortable, for some reason). Some could not survive a motion on the pleadings. Some could not survive a motion for summary judgment. Some might even subject the lawyer who signed it to sanctions under Rule 11, given how far removed some of these things are from the truth. I acknowledge that court will cost my clients more, and will take longer. But, if it means that justice is really served, that the playing field is truly level, and I can go into battle armed with the various procedural devices that don’t exist in arbitration, then I would be all in.
I have been representing investors, financial professionals and firms in securities arbitrations for over 30 years, in over 600 arbitrations. In nearly every case, the process was at least as fair as court litigation, with significant savings in time and money. However, if we want to remove pre-dispute arbitration agreements, and only arbitrate when everyone agrees to do so AFTER the dispute arises, I too am fine with that. My investor clients may not be, as many of them will be shut out from bringing their claims at all.
The costs of court litigation are simply too high.
The End to Mandatory Arbitration?
Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.
He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page - SECLaw.com, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.