Texas Governor Rick Perry appointed today Justice Eva Guzman of the 14th Court of Appeals to serve on the Supreme Court of Texas. Justice Guzman will replace Justice Scott Brister, who left the court in September. As Don Cruse at the Supreme Court of Texas Blog points out, an appointed Justice does not have to be confirmed by the Texas Senate until the next session, so Justice Guzman can run for a six-year term in 2010. Read more at the Houston Chronicle and the Office of the Governor. Hat tip to the Hispanic Bar Association of Austin.

To follow up on our recent posts on securities arbitration (available here and here) we thought that you would like to know that the Financial Industry Regulatory Authority (FINRA) announced on October 5, 2009 the expansion of its two-year pilot program that gives investors who are filing claims the option to select an arbitration panel composed of three public arbitrators instead of two public and one non-public. Read more about the pilot program at FINRA’s website: FINRA to Expand Program Evaluating All-Public Arbitration Panels. Following is also a October 5, 2009 statement by North American Securities Administrators Association (NASAA) President and Texas Securities Commissioner Denise Voigt Crawford regarding the expansion of FINRA’s pilot program: “Regardless of the scope of FINRA’s pilot program on the composition of arbitration panels, a greater issue remains – the mandatory ‘take-it-or-leave it’ clause in brokerage contracts, which forces all investors to agree to mandatory, industry-run arbitration administered by FINRA, the securities industry self-regulatory organization.” “The only chance of recovery for most investors who fall victim to Wall Street wrongdoing is through a single securities arbitration forum controlled by the securities industry. NASAA believes that the securities arbitration system should be truly voluntary and that Congress should end mandatory securities arbitration.” On October 6, 2009 Texas Securities Commissioner Crawford testified before the U.S. House Financial Services Committee about regulatory reform. Find the text of the complete testimony here. Also find links to prepared testimony of all invited witnesses to the hearing: Capital Markets Regulatory Reform: Strengthening Investor Protection, Enhancing Oversight of Private Pools of Capital, and Creating a National Insurance Office. Any thoughts? Technorati Tags: arbitration, ADR, law, FINRA, securities arbitration, Texas Securities Commissioner

John Fleming sent us the following comments about our post of yesterday (find the post here): I have a beef with the Solin’s approach. FINRA has a new pilot program that allows customers to choose arbitration panels with only non-industry arbitrators. Guess what? In reality customers and their lawyers are actually choosing to have industry arbitrators on the panels in about 50% of the cases, even when they can exclude them. Privately, lawyers who actively represent customers in arbitration with FINRA have told me they often prefer to have an industry insider-they know really stinky behavior when they see it and may often be tougher on the offender than a public member. There are really four questions at play here and within the consumer arbitration debate generally. One is how well are consumers and employees doing in these proceedings (and how does this compare to court outcomes)? Here the really good empirical evidence is just emerging. You have to throw out many of the so called studies which have been sponsored by people with agendas. I don’t think that either the Public Watch survey dissing arbitration or the US Chamber survey praising it deserve serious consideration. What little independent research is emerging seems to indicate consumers and employees that proceed in truly neutrally administrative forums such as before the American Arbitration Association (ok, so I am on their panel), and JAMS do as well or maybe a little better than they might in a court setting. The second question is the question of choice. One of the fundamental principles of the Alternative Dispute Resolution movement is party choice. Regardless of evidence that consumers and employees may do well in arbitration, people resent the fact that the agreement to arbitrate is buried in a contract of adhesion. It just does not feel very much like a choice. Third is the question of consumer access. I do think there is merit in the argument that for some consumers and employees the arbitration forum may actually be more accessible than litigation. This is especially so when the claims are too small to generate interest of contingent fee lawyers. Of course, forum access fees are an issue in arbitration. However, the courts are generally moving in the right direction by refusing to enforce arbitration clauses where the forum access fees could deter consumers or employees from pursuing their claims. Fourth, is the real elephant in the room. There is a sense that the driving force for including arbitration in consumer and employee contracts is a hope that large companies can write their way out of being exposed to class actions. I find it interesting that now that we have rules for class arbitration proceedings, you see clauses that say something like “will if it is determined that the waiver of class action is unenforceable, then any class proceeding will be in court.” John C. Fleming Hays & Owens, L.L.P Brazos Suite 500 Austin, Texas 78701 We welcome your comments about this controversial topic! Technorati Tags: arbitration, ADR, law, FINRA, securities arbitration

Our friend John C. Fleming from Hays & Owens, L.L.P sent us the following post: [update: find John C. Fleming’s comment about this post here] A reader of my blogs sent me an e-mail with a Customer Agreement from a major brokerage firm. She asked me to look it over and tell her if she should sign it. The first thing that struck me was this clause: “Brokerage activities are regulated under different laws and rules than advisory activities and generally do not give rise to the fiduciary duties that an investment adviser has to its clients.” The agreement pointed out that the brokerage firm “…may face certain conflicts of interest and as such, its interests may differ from yours.” These statements are typically inserted in account opening agreements. I asked the reader this question: Why would you entrust your assets to a firm that tells you it does not have to act in your best interests and further that it may have conflicts of interest with you which it will resolve in its favor? It gets worse: The agreement also provided that all disputes must be resolved by mandatory arbitration. Not before an impartial panel, but one appointed by FINRA, which is essentially a trade group for the securities industry. William Galvin, the highly respected Secretary of the Commonwealth of Massachusetts aptly described FINRA’s arbitration process in testimony before a congressional sub-committee as “an industry sponsored damage-containment and control program masquerading as a juridical proceeding.” Read more at: http://www.huffingtonpost.com/dan-solin/why-dont-you-just-give-yo_b_230578.html Read the full post: Why Don’t You Just Give Your Broker a Gun and Tell Him to Shoot You? Dan Solin, The Huffington Post, July 14, 2009. To learn more about arbitration of securities disputes, visit Mark J. Astarita’s Securities Law Blog section on arbitration. Technorati Tags: arbitration, ADR, law, FINRA, securities arbitration