SEC Considers Replacing Class Actions with Arbitrations
The SEC has is examining a proposal that would permit companies to resolve complaints by disgruntled shareholders with arbitration, and limit the availability of class actions to redress such claims. The Wall Street Journal reported that the SEC is discussing such a proposal. (See http://users1.wsj.com/lmda/do/checkLogin?mg=evo-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB117668947788270878.html%3Fmod%3Dhome_whats_news_us) A change of the law in that direction would have monumental impact. If the SEC is discussing traditional arbitration:
• private arbitrators rather than federal judges would be the decision makers;
• discovery would be limited to the exchange of documents;
• the rationale behind the decisions would not necessarily be provided;
• hearings would be held on a more expedited basis;
• the process would be more informal and private rather than public;
• appellate review would be extremely limited.
The plaintiffs securites class action bar and trial lawyer groups would vociferously
oppose any such changes. Legislative changes in the last 10 years attempting to curtail securities class actions have had mixed practical effects. A change like this might really mean the death knell for class actions.
oppose any such changes. Legislative changes in the last 10 years attempting to curtail securities class actions have had mixed practical effects. A change like this might really mean the death knell for class actions.
