SAN DIEGO UNION TRIBUNE PUBLISHING COMPANY — Sep 8, 2002
Abstract:
The NASD recently told San Diego attorney Jeffrey Lendrum that his case representing two elderly investors could be heard in Nevada. "To ask a 70- or 80-year-old to travel to Nevada for a week and pay for a lawyer to travel for a week and have your experts travel would force the costs of the arbitration to rise unnecessarily," says Lendrum, who turned the NASD down.
The NASD is simply protecting its members, the brokerage houses, says San Diego attorney Mark Brewer. "Every day that this dispute continues is an extra day that the brokerage community has in defending these claims," says Brewer. Legal fact-gathering is delayed, benefiting the brokers.
In 1998, California declared that claimants had to be represented by attorneys. The NASD did not object "because it was an additional hurdle for the claimant," says Brewer. But the NASD is objecting to the 2002 reforms because it could be a hurdle for the brokerage houses.
Full Text:
Pssst. Wanna slip away to Vegas for some excitement? It's not an enticing pitch, say elderly investors who believe they have been fleeced by a brokerage house but, because of a legal dispute, can't arrange an arbitration hearing in California.
The National Association of Securities Dealers, which along with the New York Stock Exchange is suing California, is trying to deal with a backlog of hundreds of arbitration disputes by urging disputants to go to cities in nearby states -- particularly to Vegas, Phoenix, Portland, Reno and Seattle.
The NASD recently told San Diego attorney Jeffrey Lendrum that his case representing two elderly investors could be heard in Nevada. "To ask a 70- or 80-year-old to travel to Nevada for a week and pay for a lawyer to travel for a week and have your experts travel would force the costs of the arbitration to rise unnecessarily," says Lendrum, who turned the NASD down.
Del Mar attorney Tim Karen went to San Diego Superior Court to ask for a court hearing -- not arbitration -- for his clients, who not only have severe medical problems, but also can't afford to go out of state for arbitrations. On Wednesday, the judge permitted the case to be heard in court, rather than in arbitration, but on medical grounds, not on the basis of the NASD/California dispute.
Attorney Bradd Milove has filed two suits. He will argue that his clients' complaints against brokerages be heard in court or by the American Arbitration Association -- "forums not dominated by the NASD or New York Stock Exchange," he says. "Justice delayed is justice denied."
On July 1, new rules on all kinds of arbitrations went into effect in California. Among many things, arbitrators are required to disclose significant personal relationships they may have with parties to the arbitration or to lawyers on either side.
The NASD and NYSE immediately rebelled and on July 22 they sued California in U.S. District Court in San Francisco, claiming that California's tougher disclosure requirements impinge on federal rules that govern securities arbitrations.
No more new arbitration panels have been set up, and cases are piling up. The NASD beefed up panels in nearby states to handle some of the California arbitrations.
At first, both parties to a dispute had to agree to go out of state. Then, beginning this month, the NASD said that aggrieved investors could unilaterally demand that the hearings be heard elsewhere.
"At first, brokerage firms were not agreeing to go to other states," says Arthur S. Leider of Investors Arbitration Specialists. He has just sent in 10 cases in which his clients are willing to go to other states. "My clients would like to have their cases heard without delay."
But the NASD is simply protecting its members, the brokerage houses, says San Diego attorney Mark Brewer. "Every day that this dispute continues is an extra day that the brokerage community has in defending these claims," says Brewer. Legal fact-gathering is delayed, benefiting the brokers.
"The brokerage community is running scared, with all the shenanigans that have been uncovered," says Brewer. Brokerage firms are trying to erect all the barriers they can, and the NASD is helping.
The NASD "has gone to court against California and said, We don't give a (expletive) what your laws are, we are not going to adhere to your laws," says Brewer.
In 1998, California declared that claimants had to be represented by attorneys. The NASD did not object "because it was an additional hurdle for the claimant," says Brewer. But the NASD is objecting to the 2002 reforms because it could be a hurdle for the brokerage houses.
When signing up for a brokerage account, people waive their rights to a jury trial, full discovery and emotional distress damages. "In return, the brokerages say they will provide a fast and cost-effective way to resolve disputes. But it is not fast -- it takes two years, and it is actually more cost-effective to go to Superior Court," says Brewer.
Says Lendrum, "I have cases that have been on file for nine months, and I do not have an arbitration panel; we have sent discovery requests to the brokerage houses and certain documents are not being produced and we have no one to decide the discovery dispute." .
But San Diego attorney James Krause says there are legitimate questions to be decided, and it is appropriate that the court be asked to rule. "We are filing arbitrations in California and waiting," says Krause. "We think this will be resolved quickly, but maybe we're optimistic."
Don Bauder's e-mail address is don.bauder@uniontrib.com
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Sub Title: [1,2,3 Edition]
Column Name: Don Bauder
Start Page: H-2
Companies: National Association of Securities Dealers Duns:06-200-9279 NAICS:813920 NAICS:813920 Duns:06-200-9279
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