Law School Case Brief
Shearson/American Express v. McMahon - 482 U.S. 220, 107 S. Ct. 2332, 96 L. Ed. 2d 185, 1987 U.S. LEXIS 2478
Ordinarily, by agreeing to arbitrate a statutory claim, a party does not forego the substantive rights afforded by statute; it only submits to their resolution in an arbitral, rather than a judicial, forum.
Respondents were several customers of petitioner Shearson/American Express Inc. (Shearson), a brokerage firm registered with the Securities and Exchange Commission (SEC), under customer agreements providing for arbitration of any controversy relating to their accounts. Petitioners moved to compel arbitration of the claims pursuant to the Federal Arbitration Act, which requires a court to stay its proceedings if it is satisfied that an issue before it is arbitrable under an arbitration agreement. The District Court held that respondents' Exchange Act claims were arbitrable but that their RICO claim was not. The Court of Appeals affirmed as to the RICO claim but reversed as to the Exchange Act claims. Shearson petitioned for certiorari review.
Were the claims brought under the Securities Exchange Act of 1934 and the Racketeer Influenced and Corrupt Organizations Act subject to arbitration?
The United States Supreme Court held that claims under antifraud provisions of Securities Exchange Act and treble-damage claims under RICO are arbitrable under Arbitration Act. The Arbitration Act establishes a federal policy favoring arbitration, requiring that the courts rigorously enforce arbitration agreements. This duty is not diminished when a party bound by an agreement raises a claim founded on statutory rights. Respondents' Exchange Act claims are arbitrable under the provisions of the Arbitration Act. Congressional intent to require a judicial forum for the resolution claims cannot be deduced from the Exchange Act, which declares void an agreement to waive compliance with any provision of the Act.
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