How to Get Revenge on Wall Street

"Wall Street firms tend to do better in class-actions because they can get rid of lots of claims at a low cost," said Jonathan Kord Lagemann, a New York securities lawyer and a former general counsel for a small brokerage firm. "And they settle for a pretty low recovery rate."

The odds are also pretty good that an investor with anything resembling a legitimate claim will at least get something back in arbitration. Last year, arbitration panels awarded damages to investors in roughly 56% of the cases they heard, according to the NASD, the securities industry's main self-regulatory agency. And that figure doesn't include the hundreds of arbitrations that end each year in a settlement, well before a hearing got under way.

Sweating the Details

But arbitration requires an investor to roll up his or her sleeves and invest a little sweat equity into the case, and that could be time an investor might want to spend elsewhere.

"Our view is that the people we represent want a voice at the table," said J. Boyd Page, an Atlanta securities lawyer who favors arbitration over class-action litigation. "If a client doesn't want to be personally involved and be a really active participant, then I'm going to tell him you really need to look at the class-action."

Page currently represents dozens of investors who intend to file arbitration claims against Grubman and Citigroup in the coming weeks. Many of those investors claim they lost anywhere from $50,000 to $150,000 on telecom stocks that Grubman was touting and Citigroup brokers were pushing as solid investments.

Now, normally an investor who has a beef with a brokerage firm or an analyst wouldn't even get the chance to choose between arbitration and class-action. That's because the overwhelming number of disputes in the securities business get resolved in arbitration -- a private, quasi-judicial process. As a general rule, class-action lawyers avoid getting entangled in disputes between investors and brokers because the claims often turn on each investor's own particular circumstances -- something that renders them unsuitable for mass litigation.