Many of the perceived problems with the securities arbitration system do not reflect deficiencies in the operation of the current system, but rather are a result of the very qualities that make arbitration attractive. For example, participants in arbitration have a limited right of appeal from arbitration awards precisely because they contractually agreed to forego judicial litigation and instead have their disputes considered in a more expeditious and less expensive forum. It is reasonable to believe that if arbitration awards were appealable for the full range of reasons for which judicial decisions may be appealed, the efficiency of the arbitration mechanism would be reduced. Disputants who find that the benefits of arbitration outweigh the sacrificed benefits of the judicial system will support arbitration. Disputants who, however, do not appreciate the benefits of arbitration will not favor the system. Prior to the McMahon and Rodriguez decision, the law applying to the enforceability of arbitration agreements generally accommodated both the interests of plaintiffs who preferred arbitration as a means of dispute resolution as well as the interests of those who did not. Subsequent to McMahon and Rodriguez, however, investors who perceived arbitration to be an unsatisfactory means of resolving disputes with their brokers generally were unable to avoid the consequences of their predispute arbitration agreements. Thus, these decisions created a new concern about the arbitration system. This concern is not a function of the inherent nature of arbitration. This new concern arises from the foreclosure of choice for investors as to whether to engage the arbitration system. Formerly, investors could choose whether to submit their claims to arbitration and, thereby, to experience the disadvantages and advantages inherent in the nature of arbitration. After McMahon and Rodriguez, investors who have entered into predispute arbitration agreements with brokers have little choice but to submit to arbitration any disputes arising out of their customer/broker relationship. This article focuses on the question of how best to respond to this mandatory arbitration and on the attendant concerns of the investing public
David A. Lipton, Mandatory Securities Industry Arbitration: The Problems and the Solution, 48 MD. L. REV. 881 (1989).