Arbitration v. Litigation: Plotting the Future

Alan J. Foxman, a securities arbitration attorney in Boca Raton, Fla., and a former staff attorney in the NASD arbitration department, says the court in the [Sawtelle] case was not cavalier in its decision. While New York courts have vacated arbitration awards three times in the past year, the power to review an arbitration award is "among the narrowest known to the law," according to Manhattan Supreme Court Justice Michael D. Stallman, who affirmed the arbitrators' decision in the Sawtelle case last year. While not wishing to interfere with arbitrations, judges believe the punishments meted out by arbitrators should be reasonable. Last year, a record 7,704 new arbitration cases were filed with the NASD, approximately 30 percent of which were for actions between brokers and their firms. A total of $139 million in damages was awarded, of which $23 million were punitive awards. This was an 11 percent increase over 2001. Only 2 percent of arbitration awards have been overturned in recent years.