The Evolution of Punitive Damage Awards in Securities Arbitration: Has the Use of Punitive Damages Rendered the Arbitration Forum Inequitable?

Comment by Denise M. Barton

The forum of arbitration evolved as a means to achieve an equitable result in party disputes. At present, the procedures and administrative structure in effect for securities arbitration fall short of achieving equity. From its inception, federal arbitration law has not been openly accepted in the securities law forum. Despite the expansive provisions of the Federal Arbitration Act (FAA), securities disputes were not explicitly covered under the FAA. Once a source of great debate, it is now accepted that securities disputes are properly resolved in arbitration. The present debate, however, revolves around the power of arbitrators to award and the appropriateness of punitive damages in securities arbitration. Specifically, commentators argue that the very existence of punitive damages in securities arbitration renders the forum inequitable. This Comment maps the arguments advanced in support of awarding punitive damages in securities arbitration and addresses the advantages and disadvantages endemic to punitive damage awards. Furthermore, the Comment discusses how the present use and procedures for punitive damages, not the existence of punitive damage awards, have rendered the securities arbitration forum inequitable. Finally, the Comment advocates the creation of several measures, including award caps and limited review, that would return the forum of arbitration to its equitable ancestry.


About the Author

Denise M. Barton. B.A. Journalism 1991, B.A. Political Science, University of Massachusetts at Amherst; J.D. Candidate 1996, Tulane Law School.

Citation

70 Tul. L. Rev. 1537 (1996)