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Abstract:
Securities arbitration today is premised on the cliche that arbitrators will apply undefined fair and equitable standards of decision. We contend that fairness and equity cannot exist in a vacuum and that the rule of law provides the only sensible standard to guide securities arbitrators. Moreover, we argue that the rule of law provides the legitimizing foundation under which securities arbitration must occur.

We will develop two related propositions in this essay. The first is that to achieve fairness, securities arbitration needs procedures that apply substantive legal principles. We call this the need for substantive fairness. The second proposition, much more embedded in the real world, asserts that application of substantive law occurs sporadically and inconsistently in present-day securities arbitration.

We first set forth a theory of substantive adjudicatory fairness relying on mainstream modern legal philosophers such as John Rawls, Lon Fuller, Harry Jones, and Joseph Raz. In addition to unequivocally advocating a rule of law approach for adjudication, these theorists emphasize the relationship of the application of legal rules to notions of fair notice.

This essay next chronicles and critiques developments regarding standards of decision in modern securities arbitration. We examine the work of securities arbitration administrators and regulators as it relates to the goal of substantive fairness. We show that NASD has equivocated between allowing the arbitrators complete discretion to decide cases on any grounds they choose and providing directives for selected questions that only sometimes facilitate the application of legal principles. NASD has flirted with substantive law but intentionally avoided fully embracing it. We advocate a change in securities arbitration - that of publicly and systematically mandating application of the rule of law in NASD awards. Such a change is long overdue and would facilitate a shift to a fairer, less standardless arbitration of customer-broker dispute resolution.

securities, NASD, arbitration, regulated industries, ADR

Abstract:
Two Blue Ribbon business advisory panels have recently proposed arbitration to remedy the problems endemic to shareholder class action litigation. Critics have long assailed shareholder litigation as harmful to firms without conferring a corresponding benefit upon shareholders or the public. Contemporary criticism has focused on the circularity of the remedy in shareholder suits and the charge that even the potential for shareholder litigation harms the competitive edge of the U.S. financial markets. We contend that even accepting these criticisms at face value, arbitration is not the solution. The lure of arbitration as a panacea to cure the ills of litigation is based upon myths concerning modern arbitral realities. First, arbitrators apply substantive and undefined principles of fairness and equity rather than legal rules. Such decisions, once made, are virtually insulated from judicial review. While historically such a system constituted an efficient dispute resolution system between homogenous members of trade groups, modern consumer arbitration rarely takes place between those with any common understanding of applicable norms other than the law. Second, there is a hidden societal cost to moving to an arbitration system to redress securities law claims. Experience teaches us that mandatory arbitration causes the law to atrophy. This trend would be exacerbated in shareholder litigation, which is often based upon implied causes of action, that by their nature depend upon transparent judicial interpretation. Third, modern arbitration will not cure the ills of class action litigation. Arbitration today is no longer particularly quick or efficient in that it has incorporated many of the procedural appendages such as discovery that are common in litigation. However, the procedural protections against the most vexatious lawsuits against corporations would not operate in the world of arbitration. This danger would be intensified if class action arbitrations were allowed. This essay will critique the proposals calling for arbitration of shareholder claims and conclude that arbitration is not an attractive alternative to litigation.

arbitration, corporations, securities, class action, litigation

Abstract:
This article demonstrates that summary judgment is constitutional and does not violate the Seventh Amendment. Two historical antecedents, used by common-law courts, justify modern summary judgment, trial by inspection and demurrer to the evidence. Trial by inspection, as explained by Blackstone, Coke, and Maitland, allowed a common-law judge to inspect evidence visually and then decide "obvious" cases without ever impaneling a jury. In contrast, a jury would be used if pretrial inspection demonstrated legitimate "doubt" about the relevant issue. Demurrer to the evidence, while not identical to summary judgment, is similar because it allowed a judge to take a case away from a jury where the nonmovant's evidence failed to prove a claim or defense. The article criticizes a rigid interpretation of the right to jury trial and, in its place, contends that courts should use a more pragmatic, modern construction of the Seventh Amendment. This pragmatic interpretation of the right to jury trial, which has been used by Justices Rehnquist, Brennan, Rutledge, Stone and McKenna, is consistent with the flexibility of the English common-law. English courts were constantly competing for business and continually changed procedures in an effort to compete effectively. It is this utilitarian and pragmatic common-law history that justifies use of a more pragmatic and flexible construction of the Seventh Amendment.

trial by inspection, Seventh Amendment, Rejection of rigid historical text

Abstract:
Three methodological short cuts potentially streamline antitrust litigation. The availability of the per se approach provides a time tested way to avoid conventional trials where illegality is obvious. However, the seeming collapse of per se rules in modern antitrust cases creates a need for some type of abbreviated assessment of economic impact of alleged restraints. The quick look approach provides a means for a truncated pretrial evaluation of competitive effect. At the same time, a third potential short cut, summary judgment, appears to be readily available in antitrust cases after a period of some skepticism toward its use and appears to also interject pretrial assessment of economic effect into a case. This article first describes the quick look and antitrust summary judgment, and then explores integration of the two complementary concepts. Although I find that only a few cases grant summary judgment using the quick look, I posit that these two different short cuts are capable of efficient synergy in the same case. The paper paradoxically concludes that courts appear skeptical of the quick look's vague contours and, yet, seem willing to employ summary judgment, a similar procedure.

Quick Look, Summary Judgment, per se, Rule of Reason

Abstract:
State arbitration law currently plays an atrophied and minimal role. Modern Supreme Court arbitration cases leave little room for the application of state arbitration law or policy. Federalism principles are ignored by these cases, despite the appropriate custom of deferring to state contract law norms. State arbitration laws have been preempted using an unusual preemption approach that eschews the more common obstacle test. State arbitration laws are also ignored by a series of cases that grant discretion to the arbitrator to decide procedural issues without any meaningful judicial review. We are left with an odd situation in which the only two situations in which state arbitration law applies are where the parties select state law in their agreement to arbitrate or where a transaction is truly intrastate in nature. Each of these situations is uncommon, leaving little role for state arbitration law in the arbitration field.

Arbitration, State Arbitration, Supreme Court, Federalism