Investor advocates accuse brokerages of using stall tactics in arbitration hearings.

Are investors getting the stall when they seek damages from securities brokerage houses?

Since a landmark 1987 Supreme Court ruling, investors who have financial disputes with their brokers or stock brokerages are compelled into binding arbitration -- there is no recourse through the civil court system.

Generally speaking, the arbitrating body is the National Association of Securities Dealers, an industry-financed body which provides arbitration panels of one to three people to settle disputes between investors and their brokers. Depending on whom one talks to, the NASD arbitrations are generally fair or tainted by industry bias -- but most parties agree the process is bogging down, and that's inherently unfair to investors.

"Where we used to get a case to arbitration in 10 to 12 months, now it is 14 months or 16 months and getting worse," groused William Levine, tough-talking founder and chairman of Woodland Hills-based Investors Arbitration Services Inc., a group that represents investors in disputes with brokerages.

Levine added, "The (brokerage house) lawyers are mucking the process up, taking more time on discovery, playing games in discovery (not quickly providing the requested information), asking for continuances and claiming situs problems (schedule conflicts)."

Worse, even after he wins for clients in arbitration, the brokerage house may take months to pay, said Levine. "We had clients, an elderly couple in Sherman Oaks, win $117,200 from Yaeger Securities in Encino in October. My clients still haven't been paid (as of mid-February)," said Levine's in-house counsel, Alan Friedenphal.

Establishing a time limit between the filing of a claim and an arbitration hearing would be in order, said Levine.

The problem of delay is often acute for investors, because many of them are elderly, said lawyer Joe Lovretovich, partner in the Woodland Hills-based Lovretovich & Karen law firm.

"Clients can only let things drag out so long," he said. "They get tired. Lawyers get tired. I think sometimes the defense (brokerage) counsel purposefully drags things out, hoping to get plaintiffs to settle."

Typically, the NASD does not award interest costs on top of settlements, or punitive damages, so there is an incentive on the part of brokerages to delay, said plaintiff lawyers.

In addition, dragging things out typically lessens the resolve of plaintiff investors, said plaintiff lawyers. "After a while, they just want to get the money, even 50 cents on the dollar -- we have had clients living in their cars," said Levine. "How long are you going to hold out when you are living in your car?"

Even simple cases, such as "churning" cases (in which a broker is charged with excessive trading in a client's account to run up fees, and which can usually be easily proved or disproved by inspecting trading records) now often take more than a year just to get into arbitration, said Lovretovich.

Citing a defense stall tactic, Lovretovich said he has nine clients with very similar cases pending against Prudential Securities, involving that brokerage's troubled real estate partnerships. To expedite matters, Lovretovich asked the NASD to hear all cases at once. Prudential's counsel argued the cases should be heard separately. The NASD ultimately allowed combining the cases. According to the NASD, the national average for the amount of time it takes to complete a case is 9.7 months. NASD statistics also suggest a growing complexity in arbitration cases. In 1990, the average case was settled in 3.2 "sessions" -- with each session defined as a meeting of arbitrators and litigating parties which exceeds four hours. In 1993, the average case required 4.9 sessions to resolve.

Like several other plaintiff lawyers, Lovretovich said he believes the arbitration process should be removed from the NASD and given to the American Arbitration Association, another business arbitrating body. But unlike the NASD, AAA is independent from the securities industry.

"The AAA arbitrators are good, they are fast, and the results are more fair. You file with them, they appoint a single arbitrator, and you get it done. I see no reason why an industry (the securities industry) should be allowed to regulate itself," said Lovretovich.

Lawyers for brokerages contend the process isn't so bad or lengthy and, if anything, it is often biased against brokerages.

"There is greater pre-hearing discovery today than before, and that has been raising the cost of arbitration. But generally speaking, the NASD has been getting arbitrations to an initial hearing in less than a year," said Robert Logan, nameplate partner and co-founder of the Long Beach-based firm of Keesal, Young & Logan.

Logan's firm has attained a national reputation as defense counsel in arbitration for major brokerages, and argues between 100 and 125 cases a year.

His firm is regarded as a powerhouse by local brokers and investor lawyers because of its skill in arbitration and its knowledge of local arbitrators and their preferences and biases.

"I have seen them in arbitration, and they can get things fixed for their clients," said a broker who formerly worked for Prudential Securities, who asked not to be identified. "They have a great deal of skill in this arena."

But Logan said his firm wants to settle cases quickly and, "if anything, the process is a bit tilted against the brokerages. When a large punitive award is awarded, we can't contest it." Logan thought punitive damages should never be awarded by the NASD, since there is no appeals process. But even Logan concurred that a limit should be set on the amount of time that should lapse between the filing of a claim and an arbitration hearing.