57 Bus. Law. 999 (2001-2002)
Beyond Precedent: Arbitral Extensions of Securities Law

handle is hein.journals/busl57 and id is 1019 raw text is: Beyond Precedent: Arbitral Extensions
of Securities Law
By Lewis D. Lowenfels and Alan R. Bromberg*
In two landmark decisions in 1987 and 1989, respectively, Shearson/American
Express, Inc. v. McMahon1 and Rodriguez de Quijas v. Shearson/American Express,
Inc. ,2 the U.S. Supreme Court in effect mandated that disputes in the securities
industry that are the subject of predispute arbitration agreements be resolved by
arbitration panels rather than by the courts.3 At the time these two decisions were
issued, most knowledgeable people shared the belief that the securities industry
had worked diligently to achieve this result and looked forward to the protections
and benefits that the new litigation forum would provide. Indeed, it was widely
accepted that the business people, lawyers, and securities industry representatives
who comprise the majority of the pools from which arbitrators are drawn, would
be conservative in their decisions and, in general, would favor the industry's
positions. There was also widespread concern that these securities arbitration
panels might begin to erode or effectively limit certain legal positions in favor of
public investors adopted by the courts. Moreover, such a trend, if it began to
develop, would be particularly difficult to discern because most arbitration panels
do not issue reasoned opinions and the decisions they do issue are, generally
speaking, not subject to appeal.
Interestingly, the anticipated results described in the preceding paragraph did
not come to pass. Indeed, after fourteen years of experience with securities ar-
bitrations it is possible to reach certain tentative conclusions which are not at all
consistent with the anticipated results described above. In a number of important
areas, instead of favoring defendant brokerage firms and their personnel, securities
* Lewis D. Lowenfels, A.B., Harvard University, LL.B., Harvard University, is a partner in the New
York law firm of Tolins & Lowenfels; Public Governor of the American Stock Exchange 1993-1996;
Adjunct Professor of Law, Seton Hall University School of Law; co-author with Alan R. Bromberg of
SECURITIES FRAUD AND COMMODITIES FRAUD (1999), a six-volume treatise published by West Group.
Alan R. Bromberg, A.B., Harvard University, J.D., Yale University, is a University Distinguished
Professor of Law, Southern Methodist University; of counsel, Jenkens & Gilchrist, a Professional Cor-
poration; co-author with Lewis D. Lowenfels of SECURITIES FRAUD AND COMMODITIES FRAUD (1999),
a six-volume treatise published by West Group.
The authors thank Seth Dombeck, Esq. for his valuable assistance in the preparation of this Article.
1. 482 U.S. 220 (1987).
2. 490 U.S. 477 (1989).
3. McMahon, 482 U.S. at 238; Rodriguez de Quijas, 490 U.S. at 486.

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