The Law Planet Blog

There was a study published recently by Dan Solin, a lawyer in New York City, and his co-author Eddie O'Neal, a professor, which conclued that mandatory securities arbitration is unfair. Now, I will admit that I (and others) make a pretty good living in securities arbitration venues of the NASD and NYSE. But I don't understand what all the hand-wringing is about and I certainly don't understand the conclusions that these two gentlemen reached.

Most importantly, I think, they completely discounted the notion that the broker-dealers settle the tough cases and try the cases that they can't settle or think they can win. I don't know Mr. Solin but I don't think he does any defense work (he is a member of PIABA, the Public Investor Arbitration Bar Association), I find it hard to believe that he can simply dismiss this notion as "anecdotal." In my firm's practice, where we represent customers, brokers and broker-dealers, we have seen the vast majority of our cases settle before they go to hearing. It's not just anecdotal, it's a fact.

There are some distinct advantages in arbitration. The strict evidentiary rules don't apply. This allows hearsay, double hearsay, newspaper articles and the like into evidence. An old saw in arbitration is that arbitrators "let everything in" and they will "take it for what it's worth." You won't see a judge do that.

Expert witnesses are another area where arbitration is more lenient. When I first came to Florida, I examined a proposed expert and he admitted that he was not an expert on securities laws, even though he was going to testify in a securities fraud case. His testimony was allowed. In court, he would most likely have been shown the door.

There really isn't a way to study the purported fairness or unfairness of securities arbitration by just looking at numbers. But look at PIABA's name. Notice the word "Arbitration." Trust me, no one is holding a telethon for impoverished securities lawyers.

That's the view from The Law Planet in Jupiter, Florida.