The Law Planet Blog

Recently, I wrote about Dan Solin's "study" of securities arbitration and the conclusion that mandatory arbitration is unfair. I suggested that the authors of the study incorrectly dismissed the commonly-held belief that the bad cases for the brokerage firms get settled while the defensible ones generally go to hearing. The "study" has received much press recently, including this article in The Washington Post by Michelle Singletary.

I read a recent arbitration award that made me think of this study, again. In a case involving Raymond James, the Claimants dismissed the claim after one day of hearing. The arbitration award specifically discussed the Claimants' dismissal of the claim with prejudice and a representation that the allegations against the individual broker were without basis and should be expunged. I know both lawyers who handled the case and they are well-known and experienced securities arbitration lawyers.

What this award says to me, between the lines, is that an overnight settlement was reached. This was possibly due to the evidence that was brought out during the first day of hearing. My question vis a vis Mr. Solin's study is this - Does this count as an investor loss? My guess is that it does. This just goes to further prove the flawed nature of this study.

It disappoints me that a number of media outlets and politicians are hanging their hats on this study, which is intellectually flawed. If these special interests (and I admit that I would probably be termed a special interest as well) get their way, just wait another 15 to 20 years. They'll be begging to go back to arbitration after a series of successful motions to dismiss and incomprehensible jury verdicts.

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