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Howsam v. Dean Witter Reynolds - 537 U.S. 79, 123 S. Ct. 588 (2002)


Although the United States Supreme Court recognizes and enforces a liberal federal policy favoring arbitration agreements, there is an exception to this policy. The question whether the parties have submitted a particular dispute to arbitration, i.e., the "question of arbitrability," is an issue for judicial determination unless the parties clearly and unmistakably provide otherwise.


Plaintiff Dean Witter Reynolds, a securities dealer, sued defendant client, Karen Howsam, its client and investor, seeking a declaration that arbitration of the parties' dispute was barred by a time limit imposed by Nat'l Ass'n Sec. Dealers Manual (NASD), Code Arb. P.R. 10304. The investor contended that Dean Witter misrepresented the virtues of an investment, and that the question of whether arbitration of the dispute was time barred under Nat'l Ass'n Sec. Dealers Manual, Code Arb. P.R. 10304, required resolution by the arbitrator. Dean Witter argued that the timeliness of the arbitration raised a question of arbitrability, which could only be determined by a court. hTe district court concluded that the arbitrator, not the district court, should interpret and apply NASD’s time-limit rule. On appeal, the United States Court of Appeals for the Tenth Circuit reversed, holding that the timeliness of the arbitration was subject to judicial rather than arbitral resolution. The investor petitioned for a grant of a writ of certiorari.


Did the court of appeals err when it reversed the district court’s decision that the arbitrator not the district court should interpret and apply NASD’s time-limit rule?




The United States Supreme Court reversed the judgment requiring judicial determination of the timeliness of arbitration under the securities dealers rule, holding that the applicability of the time limit rule was a matter presumptively for the arbitrator, and did not raise a question of substantive arbitrability requiring judicial intervention. The timeliness of the arbitration was a procedural condition precedent to arbitration but did not involve a question of whether the parties were bound by the arbitration clause of their agreement. Further, it was reasonable to infer that the parties intended that the arbitrator, who was comparatively more expert about the meaning of the time limit rule, was also better able to interpret and apply the rule.

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