The assault on investors’ rights to sue in court continues, with yet another attempt to compel mandatory arbitration of investor claims through a change in company bylaws.
The latest onslaught is being championed by Hal Scott, a Harvard Law professor and frequent critic of securities lawsuits. In November, Scott submitted a shareholder proposal on behalf of a trust he represents to Johnson & Johnson, Inc., a New Jersey corporation, seeking to amend the company’s corporate charter to require arbitration of all federal securities claims. Scott’s draconian proposal further seeks to prohibit class and joined claims, as well as eliminate appeals or challenges of awards, rulings and decisions.
The stakes for shareholders are high. Arbitration is neither cost effective nor practicable for investors who have lost money due to corporate misconduct, and lacks important safeguards guaranteed by the court system—the rights to a jury trial, discovery and a public hearing, to name just three.