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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* INTRODUCTION 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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