Punitive damages are a necessary remedy in broker-customer securities arbitration cases

Reder

Margo E. K.

Reder, Margo E. K.

Dept. of Business Law, Carroll School of Management

Author

text

article

1995monographic

1995

monographic

Englisheng

English

eng

electronicapplication/pdfdigitized other analog

electronic

application/pdf

digitized other analog

The two primary legal doctrines in this Article, punitive damages and securities arbitration, each have produced highly publicized close decisions resulting in inconsistent and contentious litigation. The issues raised by this litigation were joined in the case Mastrobuono v. Shearson Lehman Hutton, Inc., recently decided by the United States Supreme Court. Mastrobuono’s result has enormous financial implications for securities firms and their customers, as well as other industries which arbitrate their disputes.

Securities firms typically require investors to sign a predispute arbitration agreement (PDAA), drafted by their brokers, as a condition to investing. When a dispute arises, it is settled in accordance with previously elected rules, and usually the arbitrator may grant any remedy or relief deemed just and equitable. (Translation: compensatory damages and attorney's fees are available, as are punitive damages, if warranted.) Punitive damages awarded by arbitrators have become a highly publicized lightning rod of sorts, partly due to their perceived frequency and magnitude. The securities industry charges that when arbitration agreements are governed by the law of a state prohibiting punitive damages, state law should control, despite strong federal policy supporting arbitration of all arbitrable claims. Investors, on the other hand, consider punitive damages in arbitration appropriate since punitive damages would frequently have been an available remedy had the case been litigated in court.

Indiana Law Review0090-419829v.1no.105130pp. 105-1301995

Indiana Law Review

0090-4198

29v.1no.105130pp. 105-1301995

29v.

1no.

no.

105130pp. 105-130

105

130

pp. 105-130

1995

Use of this resource is governed by the terms and conditions of the "Creative Commons Attribution-Noncommercial 3.0 United States" license (http://creativecommons.org/licenses/by-nc/3.0/us/)

Business Law

MChBEnglisheng

MChB

Englisheng

English

eng