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Rodriguez de Quijas v. Shearson/American Express, Inc.

Supreme Court of the United States

March 27, 1989, Argued ; May 15, 1989, Decided

No. 88-385

Opinion

 [*478]   [***533]   [**1918]  JUSTICE KENNEDY delivered the opinion of the Court.

 The question here is whether a predispute agreement to arbitrate claims under the Securities Act of 1933 is unenforceable, requiring resolution of the claims only in a judicial forum.

Petitioners are individuals who invested about $ 400,000 in securities. They signed a standard customer agreement with the broker, which included a clause stating that the parties agreed to settle any controversies "relating to [the] accounts" through  [**1919]  binding arbitration that complies with specified procedures. The agreement to arbitrate these controversies is unqualified, unless it is found to be unenforceable under federal or state law. Customer's Agreement para. 13. The investments [****5]  turned sour, and petitioners eventually sued respondent and its broker-agent in charge of the accounts, alleging that their money was lost in unauthorized and fraudulent transactions. In their complaint they  [*479]  pleaded various violations of federal and state law, including claims under § 12(2) of the Securities Act of 1933, 15 U. S. C. § 77l(2), and claims under three sections of the Securities Exchange Act of 1934.

The District Court ordered all the claims to be submitted to arbitration except for those raised under § 12(2) of the Securities Act. It held that the latter claims must proceed in the court action under our clear holding on the point in Wilko v. Swan, 346 U.S. 427 (1953). The District Court reaffirmed its ruling upon reconsideration and also entered a default judgment against the broker, who is no longer in the case. The Court of Appeals reversed, concluding that the arbitration agreement is enforceable because this Court's subsequent decisions have reduced Wilko to "obsolescence." Rodriguez de Quijas v. Shearson/Lehman Bros., Inc., 845 F. 2d 1296, 1299 (CA5 1988). We granted certiorari,  [****6]  488 U.S. 954 (1988).

The Wilko case, decided in 1953, required the Court to determine whether an agreement to arbitrate future controversies constitutes a binding stipulation "to waive compliance with any provision" of the Securities Act, which is nullified by § 14 of the Act. 15 U. S. C. § 77n. The Court considered the language, purposes, and legislative history of the Securities Act and concluded that the agreement to arbitrate was void under § 14. 2 But the decision was a difficult one in view of the competing legislative policy embodied in the Arbitration Act, which the Court described as "not easily reconcilable," and which strongly favors the enforcement of agreements to arbitrate as a means  [***534]  of securing "prompt, economical  [*480]  and adequate solution of controversies." 346 U.S., at 438.

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490 U.S. 477 *; 109 S. Ct. 1917 **; 104 L. Ed. 2d 526 ***; 1989 U.S. LEXIS 2397 ****; 57 U.S.L.W. 4539; Fed. Sec. L. Rep. (CCH) P94,407

RODRIGUEZ DE QUIJAS ET AL. v. SHEARSON/AMERICAN EXPRESS, INC.

Prior History:  [****1]  CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT.

Disposition:  845 F. 2d 1296, affirmed.

CORE TERMS

arbitration, buyers

Business & Corporate Compliance, Pretrial Matters, Alternative Dispute Resolution, Validity of ADR Methods, Civil Procedure, Arbitration, General Overview, Labor & Employment Law, Collective Bargaining & Labor Relations, Labor Arbitration, Enforcement, Criminal Law & Procedure, Fraud, Securities Fraud, Elements, Securities Law, Blue Sky Laws, Offers & Sales, Civil Liability Considerations, Releases & Waivers, Securities Act Compliance, Jurisdiction, Subject Matter Jurisdiction, Initial Offerings, Jurisdiction Over Actions, Concurrent Jurisdiction, Postoffering & Secondary Distributions, Scope of Provisions, Statutory Application & Interpretation, Contracts Law, Contract Conditions & Provisions, Arbitration Clauses, Federal Arbitration Act, International Trade Law, Dispute Resolution, International Commercial Arbitration, Arbitration, Governments, Courts, Judicial Precedent