On the Fairness of Securities Arbitration

June 18, 2009

This article raises some interesting points about the new regulatory reforms and the fairness of securities arbitration.

If you accept the unfairness premise as begin true, why aren’t we discussing the fact that the SEC (through its underling, FINRA) forces individuals to arbitrate their claims, by use of a rule that requires every employee of the brokerage industry to arbitrate disputes with his employer, and every customer.  Mark J. Astarita, Time for Government Mandated Arbitration to Go

As has been noted, there is a 90 day statute of limitations in place to commence a CLPR Article 75 proceeding to vacate or modify the arbitration award.  In the Matter of Lowe decided last year:

The straightforward but apparent issue of first impression in an appellate court in New York is whether the 90-day statute of limitations set forth in CPLR 7511 (a) begins to run on the date on which the arbitrator’s decision was mailed to petitioner or the date on which it was received by petitioner or his or her agent. We conclude that the operative measuring date is the date on which the decision was received by the petitioner or his or her agent[.] Matter of Lowe (Erie Ins. Co.) 2008 NY Slip Op 07735 [56 AD3d 130] October 10, 2008

If a proceeding is commenced within the 90 days after the arbitration, the battle is not yet over.  The arbitrator is held to a particular standard:

An arbitrator exceeds his power by going beyond a specifically named limitation on his authority, by issuing a totally irrational decision, or by issuing a decision that violates a strong public policy…An award is irrational where the arbitrator lacked any “proof whatever to justify the award” , or misconstrued the parties= agreement to the extent of fashioning a new agreement for them . Otherwise, an arbitrator=s award is not subject to judicial review because of errors of law or fact[.] L. Anthony Joseph, Jr. v. Milbank, Tweed, Hadley & McCoy, LLP (2004).


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