*1 v. BYRD INC. REYNOLDS DEAN WITTER 4, 1985 March 4, 198 4 Decided Argued December No. 83-1708. White, J., Court. opinion for unanimous J., Marshall, delivered p. 224. post, concurring opinion, filed Eugene argued W. Bell petitioner. the cause for With him on the Fitzgerald. briefs was Kevin K.
Eric argued V. Benham the cause and filed a brief for *2 respondent.* opinion delivered the of the Court.
Justice Marshall question presented complaint whether, when a raises both federal pendent securities claims and state claims, a Federal deny District Court a motion to ar- of bitration the despite parties’ state-law claims agree- ment to disputes. arbitrate their granted certiorari to among resolve conflict Appeals Federal Courts of on question. U. S. 1240
HH In Byrd 1981, A. Lamar practice sold his dental and in- vested $160,000in through securities Reynolds Dean Witter Inc., a securities broker-dealer. The value of the account by declined more than September $100,000between 1981and Byrd March 1982. complaint against filed a Dean Witter in the United States District Court for the Southern District of alleging California, §§ 10(b), 15(c), violation of and of Exchange Securities Act of 1934, 15 U. §§78j(b), S. C. 78o(c),and 78t, and provisions. various state-law Federal jurisdiction over the state-law claims was diversity based on citizenship principle pendent and the jurisdiction. In complaint, Byrd alleged agent that an of Dean Witter had traded in his prior account without his consent, that num- ber of transactions executed on behalf of the account was misrepresentations excessive, that by agent were made an of Dean Witter as to the status of the account, and that agent acted with Dean knowledge, Witter’s participation, and ratification. *Joseph G. Riemer III and Fitzpatrick William J. filed a brief for
the Securities
Industry Association,
Inc., et al. as amici curiae urging
reversal.
in 1981,
Dean Witter
Byrd
his funds
invested
When
“[a]ny
providing that
Agreement
signed a Customer’s
he
arising
undersigned
out
you
controversy
between
shall
thereof,
relating
or the breach
this contract
of or
11. Dean
App.
for Cert.
by
to Pet.
arbitration.”
be settled
severing
accordingly
an order
for
a motion
filed
arbitration,
compelling their
state
pending
resolution
those claims
staying
argued
the Federal
App.
12.
It
action.
federal-court
§§
(Arbitration
Act),
1-14,
C.
9 U.
S.
Act
Arbitration
valid,
“shall be
provides that arbitration
grounds
upon
as exist
such
enforceable, save
irrevocable,
any contract,”
equity
the revocation
inor
at law
compel arbitration
required
§2,
parties
an
authorizes
The Act
claims.
the state-law
*3
petition
federal district
agreement
to
arbitration
any
referable
compelling
issue
arbitration
an order
for
§§
Dean
agreement.
4. Because
3,
under
arbitration
to
sub-
not
claim was
federal securities
assumed
and could
provision
contract
ject
the arbitration
to
to
it did not seek
only
forum,
the federal
in
resolved
in its
denied
Court
claim.1 The
of that
held that
(1953), this Court
Swan,
427
U. S.
346
v.
1 In Wilko
12(2)
§
of the
arise under
to arbitrate claims
agreement
predispute
772(2), was not enforceable.
§
1933,
C.
15 U. S.
Securities
1933, 15 U. S. C.
Act of
§ 14 of the Securities
language in
pointed
Court
any
with
waiving compliance
“stipulation”
any
“void”
77n,
§
declares
arbitrate
that an
Act, and held
of the Securities
“provision”
remedy,
a judicial
to seek
right
waiving the
stipulation
ato
amounted
later,
Scherk
Years
S., at 434-435.
U.
void.
346
therefore
was
questioned
(1974),
Co.,
I—I I—I
Confronted
issue we address2 —whether to compel
of pendent
state-law claims when the federal
court will in
event
any
assert
jurisdiction over a federal-
law claim —the Federal Courts of Appeals have adopted two
different approaches. Along with the Ninth Circuit in this
case, the Fifth and Eleventh Circuits have relied on the “doc-
trine of intertwining.” When arbitrable and nonarbitrable
arise
claims
out of the same transaction, and are sufficiently
intertwined factually and legally,
the district
under
court,
this view,
in its
discretion deny arbitration as to the
arbitrable claims and
all the
try
claims
together
Indeed,
courts.
numerous District Courts and
Appeals
Courts
held that the
Wilko
analysis
applies
10(b)
§
claims arising under
of the
Securities Exchange
1934,15
Act of
§78j(b),
U. S. C.
and that
to arbitrate such claims are therefore
g.,
e. DeLancie.
See,
unenforceable.
Birr,
Co.,
Wilson
v.
(CA9
1255,
648 F. 2d
1258-1259
1981); Merrill
Pierce,
Lynch,
Smith,
Fenner &
Moore,
Inc. v.
823,
590 F. 2d
827-829
(CA10 1978); Weissbuch v.
Lynch, Pierce,
Merrill
Smith, Inc.,
Fenner &
(CA7
831,
558 F. 2d
1977);
833-835
Sibley Tandy Corp.,
540,
543 F. 2d
(CA5
543,
1976),
and n. 3
denied,
cert.
217 policy strong federal acknowledge the courts These court.3 two offer but enforcing arbitration in favor to decline should nevertheless why courts district the reasons they that assert First, situation. compel arbitration they to consider preserve what necessary to result such securi- federal the over jurisdiction exclusive the court’s be “inter- anof suggest, arbitration they otherwise, claim; ties proceeding and precede the might state claim twined” thereby the bind might by arbitrator factfinding the done the reason second estoppel. The through collateral court the arbitration, declining to by efficiency; they cite redundant perhaps and proceedings bifurcated avoids twice. questions factual litigate same the to efforts Eighth Circuits and Seventh, Sixth, contrast, In courts the district divests Act Arbitration that the held containing both in cases regarding any discretion requires instead and claims, nonarbitrable and when of arbitrable compel arbitration courts that both conclude courts These so. do asked policy it strong federal meaning plain through its parties bargain of to enforce requires courts reflects, economy views [its] own substitute “not arbitrate, Heinold v. Congress. Dickinson efficiency” those 1981).4 (CA7 646 2d F. Inc., 661 Securities, Arbitration courts latter agree these arbi- compel requires district compel, a motion parties files theof one claims trable main- possibly inefficient would result where even Ac- forums. in different separate tenance compel arbitration. decision reverse cordingly, we Inc., 2d F. Smith, 693 Pierce, & Fenner Lynch, v. Merrill Belke 3 See 318, 334-337 Co., F. 2d 637 & Oppenheimer Miley v. 1982); (CA11 1023 Inc., F. 550 Reynolds, Dean v. Cunningham also 1981); see (CA5 1982). (ED Cal. 578 Supp. Inc., F. Smith, 733 Pierce, & Fenner Lynch, Merrill v. also Surman See 1983). (CA6 Co., 2d 314 F. Liskey Oppenheimer (CA8 1984); 2d *5 HH t—I I—I The Arbitration provides that written agreements arbitrate controversies arising out of an existing contract “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law in equity the revocation of any contract.” 9 U. S. §2. C. itsBy terms, the Act leaves no place for the exercise of discretion aby district court, but instead mandates that district courts shall direct the parties proceed to arbitration on issues as to which an arbitra- tion agreement has been signed. §§3, 4. Thus, insofar as the language of the Act guides our disposition of this case, we would conclude that agreements to arbitrate must be enforced, absent a ground for revocation of the contractual agreement.
It is suggested, however, that the Act does not expressly address whether the same mandate —to enforce arbitration true where, as here, —holds such a course would result in bifurcated the arbitration agreement is enforced.5 Because the Act’s drafters did not explicitly 5Bifurcated proceedings might result in several kinds of cases in volving securities transactions. For example, since this Court’s decision Swan, Wilko v. swpra, claims arising see n. §12(2) under of the Securities Act of not be resolved through arbitration, and when court is 12(2) confronted with a claim, pendent state claims, and a motion to compel arbitration, bifurcated proceedings might result. If Wilko applies to claims arising under provisions other of the Acts, Securities the same situation would arise. Also, when as here a federal securities claim state-law claims are filed a party to the arbitration only asks that the district arbitration only of the pendent state claims, the prospect of a bifurcated proceeding arises.
Finally, federal courts have addressed the same issue when confronted
with federal antitrust actions and pendent state
g.,
e.
See,
claims.
Lee Ply*Gem Industries, Inc., 193 U. S. App. D.
112, 121,
C.
593 F. 2d
1274-1275, and n. 67 (holding that arbitrable claims should not become
“subject to adjudication in court merely because they are related to non-
claims,”
dispute
arises out of a contract containing an
agreement to arbitrate), cert. denied,
“It is practically appropriate the action should be taken at this time when there is so much agitation against the costliness and delays of litigation. These matters can be largely eliminated by agreements arbitration, arbitration agreements are made valid Id., enforceable.” at 2. Nonetheless, passage the Act was motivated, first and foremost, by a congressional desire to enforce agreements *7 into which parties had entered,7 and we must not overlook this principal objective when construing the statute, or allow the fortuitous impact of the Act on efficient dispute resolu- tion to overshadow the underlying motivation. Indeed, conclusion is compelled by the Court’s recent in holding Moses H. Cone Memorial Hospital v. Mercury Construction
6According to the Report: “The need for the law arises from an anachronism of our American law. Some ago, centuries because of the jealousy of English courts for their own jurisdiction, they refused to enforce specific agreements to arbitrate upon ground that the courts were thereby ousted from jurisdic- their tion. jThis ealousy survived long for so period that the principle became firmly embedded in English common law and adopted was byit the American courts. The courts have felt that the precedent was too strongly fixed to be overturned without legislative enactment, although they have frequently criticised the rule recognized and illogical its nature and injustice which results from it. This bill declares simply that such agreements for arbitration shall be enforced, provides and a procedure in the Federal courts for their enforcement.” H. Rep. R. No. 68th Cong., 1st Sess., (1924). 1-2 See also Cohn & Dayton, The New Federal Arbitration L. Va. Rev. 283-284 7See also 65 Cong. (1924) (“It Rec. 1931 creates no new legislation, grants no new rights, except a remedy to enforce an in commer cial contracts and in admiralty contracts”). order an affirmed (1983), we which in U. S. Corp., 460 even agreement, anof requiring enforcement pro- bifurcated in result would though because “occurs noted, we misfortune, ceedings. That nec- piecemeal resolution requires law federal relevant id., 20. at agreement,” an arbitration give essary effect that, (“The Act establishes Arbitration id., at 24-25 also See scope concerning of any doubts law, a matter as arbitration”). favor resolved should be issues argument that by the persuaded are not therefore Act—enforce- Arbitration goals of the two between conflict encouragement efficient agreements private ment in favor resolved dispute resolution—must speedy drafters. the intent realize order the latter towas passing the Congress in concern preeminent entered, parties had into private enforce agree- rigorously enforce we requires that concern litigation, “piecemeal” the result even arbitrate, ments to in another countervailing policy manifested absent at least compelling arbitration By supra. 1,n. See statute. successfully protects the a district of state-law rights under their parties and rights of the contractual Act. Arbitration
IV *8 Appeals Courts some however, suggested, is also It decide should courts district held, have is before claim federal a nonarbitrable pendent claims pro- findings in the arbitration otherwise because them, subsequent ain collateral-estoppel effect might ceeding is believed effect preclusive This proceeding. securi- in resolution interest pose a threat compel arbitration.8 a refusal to warrant ties Inc., 693 Smith, Pierce, & Fenner Lynch, v. Merrill g., Belke 8 See, e. Cunning 336; 2d, at Co., 637 F. & Oppenheimer Miley v. 1026; 2d, at F. at Supp., 582. Inc., F. Reynolds, 550 Dean ham v. 222
Other courts have held that the claims should
separately
preclusive
resolved, but that this
effect
stay
warrants a
pending resolution of the federal
securities claim.9 In this case, Dean Witter also asked the
stay
Court to
the arbitration proceedings pending
resolution of the federal claim,
suspect
and we
it did so in
response to
holdings.
such
preclusive
believe that the
effect
pro-
of arbitration
ceedings
significantly
less well settled than the lower court
opinions might suggest, and that the consequence of this
misconception has been the formulation of unnecessarily
procedures.
contorted
We conclude
stay
that neither a
proceedings,
joined
nor
proceedings,
necessary
protect
the federal interest in the
proceeding,
federal-court
and that
the formulation of collateral-estoppel
adequate
rules affords
protection to that interest.
Initially, it is far from certain
proceed-
that arbitration
ings
any preclusive
will have
litigation
effect on the
nonarbitrable federal claims. Just
.
last Term, we held that
neither the
provision
full-faith-and-credit
judicially
of 28 U. S. C.
§1738, nor
fashioned rule
preclusion,
permits
a federal court to
judicata
accord res
or collateral-estoppel
unappealed
effect to an
arbitration award in a
brought
case
42
under
U. S. C. 1983. McDonald v. West Branch, U. S. 284
requires
full-faith-and-credit statute
give
federal preclusive
the same
effect
ato State’s
judicial proceedings as would the courts of the State ren-
dering
judgment,
and since
judicial
arbitration is not a
proceeding, we held that the statute
apply
does not
to ar-
bitration
Id.,
awards.
at 287-288.
analysis
The same
in-
evitably
apply
would
any unappealed
state 9See,
g.,
e.
Surman v.
Lynch,
Merrill
Pierce, Fenner
Smith,
Inc., 2d,
F.
62-63;
Dickinson at
Securities,
Heinold
Inc.,
It is so ordered. Justice concurring. White, join
I opinion. the Court’s separately I only write to add a few regarding words two issues that it undeveloped. leaves premise controversy before us respond is that ent’s claims under the Exchange Securities Act of 1934 are not notwithstanding arbitrable, contrary agreement parties. opinion The Court’s rightly concludes that the question whether that is so is not before us. Ante, at 216, n. 1. I Nonetheless, note that this is a matter of substantial
doubt. In Wilko v. Swan, 346 (1953), U. S. 427 the Court held regard unenforceable with 12(2) § claims under of the 1933Act. It relied on three inter statutory provisions: § connected 14 of the Act, which voids any “stipulation binding . . any . person acquiring any security compliance to waive any provision” of the Act; §12(2), which, the special noted, right creates “a recover misrepresentation for substantially differs from the common-law action”; §22, which allows suit any state or competent jurisdiction provides for process. nationwide service of 346 U. S., at 431, 434-435; 15 U. S. 77l(2), C. §§77n, 77v. reasoning
Wilko’s cannot mechanically transplanted § 1934Act. While 29 of that § Act, 15 78cc(a), U. S. C. equivalent § is to 14 of the 1933 counterparts of the other provisions two imperfect are altogether. absent Juris- diction under the 1934 Act is being narrower, restricted to the federal § courts. 15 U. S. C. 78aa. important, More cause 10(b) of action under and Rule 10b-5, involved here, MacLean express. Herman See than implied rather is (1983). The nn. 380, and S.U. Huddleston, chap any provision compliance with phrase “waive literally added), §78cc(a) (emphasis thus C.S. 15 U. ter,” solicitude Wilko’a Moreover, inapplicable. Congress, by right” established “special of action—the cause necessarily appropriate where 431—is atS., 346 U. from so different implied judicially of action cause action.* the common-law *11 before. reservations expressed these has The 513-514 506, U. S. Co., Alberto-Culver
Scherk question remains emphasize that them I reiterate be must holdings contrary the lower open, doubt. some viewed should a district that clear opinionmakes Court’s fear for all, it at refuse stay arbitration, any, other perceive few, can IAnd preclusive effect. its pending out- staying the arbitration for possible reasons the arbitration enforcement Belated the lawsuit. come refusal than interference though less substantial clause, disappoints the significantly nonetheless all, it at enforce purpose of the clear parties frustrates expectations of the the two that it is decided once addition, In agreement. their the concern independently, go forward proceedings are delayed. be should suggests neither that speedy resolution places being lawyers in two impossibility While scheduling, it require some accommodation once at be presumption heavy should me that seems normal proceed its each will lawsuit by determined to be remains the matter while And course. tous nothing before record in the I see Court, stayed. present should case in the indicate to victims right of action private provide a explicitly does *The 78p, 78r. 78i, §§C. 15 U. S. 9,§§ See illegal conduct. certain respondent. by on is relied sections those None