Punitive Damages in Securities Arbitration: An Empirical Study
Stephen J. Choi
New York University School of Law
Cornell University, Law School (deceased)
January 2, 2009
Cornell Legal Studies Research Paper No. 1322482
NYU Law and Economics Research Paper No. 09-01
This article provides the first empirical analysis of punitive damages in securities arbitrations. Using a data set of over 6,800 securities arbitration awards, we find that claimants prevailed in 48.9 percent of arbitrations, and that 9.1% of those claimant victories included a punitive damages award. The existence of a punitive damages award was associated with claims that suggested egregious misbehavior and with claims that provided higher compensatory awards. The pattern of punitive awards is more consistent with a traditional view of punitive damages that incorporates a retributive component than with a law and economics emphasis on efficient deterrence. We also test whether securities arbitration results in different punitive damages compared with litigation before juries and judges. The relation between punitive and compensatory awards did not differ substantially between the securities arbitrators’ data and data on juries available from periodic Civil Justice Surveys by the Bureau of Justice Statistics. The rate of punitive awards by arbitrators was higher than the overall rates for juries and judges and slightly lower than the rate of punitive awards by juries in cases lacking bodily injury.
Number of Pages in PDF File: 64
Keywords: Securities, Arbitration, Punitive Damages
JEL Classification: K10, K22, K40, K41, D74
Date posted: January 4, 2009 ; Last revised: June 2, 2009
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