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First Options of Chicago, Inc. v. Kaplan

Supreme Court of the United States

March 22, 1995, Argued ; May 22, 1995, Decided

No. 94-560


 [*940]   [**1922]   [***991]  JUSTICE BREYER delivered the opinion of the Court.

 In this case we consider two questions about how courts should review certain matters under the federal Arbitration Act, 9 U.S.C. § 1 et seq. (1988 ed. and Supp. V): (1) how a district court should review an arbitrator's decision that the parties agreed to arbitrate a dispute, and (2) how a court of appeals should review a district court's decision confirming, or refusing to vacate, an arbitration award.

 [****5]  I

The case concerns several related disputes between, on one side, First Options of Chicago, Inc., a firm that clears stock trades on the Philadelphia Stock Exchange, and, on the other side, three parties: Manuel Kaplan; his wife, Carol Kaplan; and his wholly owned investment company, MK Investments, Inc. (MKI), whose trading account First Options cleared. The disputes center on a "workout" agreement, embodied in four separate documents, which governs the "working out" of debts to First Options that MKI and the Kaplans incurred as a result of  [****6]  the October 1987 stock market crash. In 1989, after entering into the agreement, MKI lost an additional $ 1.5 million. First Options then took control of, and liquidated, certain MKI assets; demanded immediate payment of the entire MKI debt; and insisted that the Kaplans personally pay any deficiency. When its demands went unsatisfied, First Options sought arbitration by a panel of the Philadelphia Stock Exchange.

 [*941]  MKI, having signed the only workout document (out of four) that contained an arbitration clause, accepted arbitration. The Kaplans, however, who had not personally signed that document, denied that their disagreement with First Options was arbitrable and filed written objections to that effect with the arbitration panel. The arbitrators decided that they had the power to rule on the merits of the parties' dispute, and did so in favor of First Options. The Kaplans then asked the Federal District Court to vacate the arbitration award, see 9 U.S.C. § 10 (1988 ed., Supp. V), and First Options requested its confirmation, see § 9. The court confirmed the award. Nonetheless, on appeal the Court of Appeals for the Third Circuit agreed with the  [****7]  Kaplans that their dispute was not arbitrable; and it reversed the District Court's confirmation of the award against them. 19 F.3d 1503 (1994).

We granted certiorari to consider  [***992]  two questions regarding the standards that the Court of Appeals used to review the determination that the Kaplans' dispute with First  [**1923]  Options was arbitrable. 513 U.S. 1040 (1994). First, the Court of Appeals said that courts "should independently decide whether an arbitration panel has jurisdiction over the merits of any particular dispute." 19 F.3d at 1509 (emphasis added). First Options asked us to decide whether this is so (i. e., whether courts, in "reviewing the arbitrators' decision on arbitrability," should "apply a de novo standard of review or the more deferential standard applied to arbitrators' decisions on the merits") when the objecting party "submitted the issue to the arbitrators for decision." Pet. for Cert. i. Second, the Court of Appeals stated that it would review a district court's denial of a motion to vacate a commercial arbitration award (and the correlative grant of a motion to confirm it) "de novo." 19 F.3d at 1509.  [****8]  First Options argues that the Court of Appeals instead should have applied an "abuse of discretion" standard. See Robbins v. Day, 954 F.2d 679, 681-682 (CA11 1992).

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514 U.S. 938 *; 115 S. Ct. 1920 **; 131 L. Ed. 2d 985 ***; 1995 U.S. LEXIS 3463 ****; 63 U.S.L.W. 4459; Fed. Sec. L. Rep. (CCH) P98,728; Comm. Fut. L. Rep. (CCH) P26,398; 95 Cal. Daily Op. Service 3821; 95 Daily Journal DAR 6474; 9 Fla. L. Weekly Fed. S 64



Disposition: 19 F.3d 1503, affirmed.


arbitrability, parties, court of appeals, courts, district court, agreed to arbitrate, confirm, merits, arbitral decision, arbitration award, disputes, leeway, standard of review, circumstances

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