Barbara Black has suggested that the time may have come to reconsider arbitration of federal securities claims against issuers (and not just brokers). And that’s only the beginning. Here’s the abstract:
Ever since the U.S. Supreme Court held that arbitration provisions contained in brokerage customers’ agreements were enforceable with respect to federal securities claims, proposals have been floated to include in an issuer’s governance documents a provision that would require arbitration of investors’ claims against the issuer. To date, however, publicly traded domestic issuers and their counsel have not seriously pursued these proposals, probably because of several legal obstacles to implementation. In addition to these legal obstacles, publicly traded issuers may not have perceived significant advantages to arbitration. Recent legal developments, however, make inclusion of an arbitration provision in a publicly traded issuer’s governance documents a proposal worthy of serious consideration. In particular, because of the Supreme Court’s recent opinion in AT&T Mobility LLC v. Concepcion, issuers may be able to achieve an advantage through adoption of an arbitration provision in their governance documents that they were not able to achieve through PSLRA and the Securities Litigation Uniform Standards Act. They could finally achieve the demise of securities class claims.
And from the conclusion (footnotes omitted):
The overarching policy issue is the future of the securities class actions. Respected academics have previously called for the SEC to take an active role in assessing the strengths and weaknesses of the federal securities class action. There have been similar calls for reform of state securities class actions. Currently there are numerous securities class actions working their way through the judicial system in the wake of the 2008 financial crisis. In short, the time is right for a re-examination of the costs and benefits of securities class actions.
I argued when it was decided that the AT&T case “could end up being one of the most important pro-business cases of the last several years.” That may be an understatment.