*1 QUIJAS аl. v. SHEARSON/ RODRIGUEZ de et AMERICAN EXPRESS, INC. Argued May 88-385. March
No. 1989 Decided *2 Kennedy, J., Court, opinion Rehnquist, delivered in which White, J., O’Connor, Scalia, JJ., C. joined. Stevens, and and opinion, Brennan, dissenting Marshall, filed a in which and Black- JJ., joined, post, p. 486. MUN, Downey argued Denis A. the cause filed and briefs for petitioners. argued respondent. Theodore A. Krebsbach cause * Jeffrey
With him on the brief was L. Friedman. opinion delivered the Kennedy of the Court. Justice question predispute agreement The here whether a arbitrate claims under Securities Act of 1933 is unen- requiring only forceable, resolution of the claims in a forum.
I Petitioners are individuals who invested $400,000 about in They signed agreement securities. a standard customer stating broker, with par- which included clause agrеed “relating ties [the] to settle controversies through binding complies accounts” arbitration that specified procedures. agreement to arbitrate these con- unqualified, troversies is it unless is found to be unenforce- Agreement able under federal or state law. Customer’s ¶ petitioners 13. The investments sour, turned and eventu- ally respondent brоker-agent charge sued and its in of the alleging money accounts, was lost unautho- complaint they rized and fraudulent transactions. In their * Paul Windels III Industry filed a brief for the Securities Association as amici curiae et al. urging affirmance. including pleaded law, violations of federal and state various 12(2) § claims under Securities Act of U. S. C. 77l(2), § claims under threе sections of the Ex change Act of 1934. ordered all the claims be submitted
The District Court
12(2)
except for those raised under
of the Se-
to arbitration
proceed
Act.
It
curities
held that the latter claims must
holding
point
action under
clear
the court
our
on the
Wilko
II required de case, 1953, The Wilko decided the Court to agreement termine whether an to arbitrate future controver binding stipulation compliance constitutes a waive sies “to any provision” Act, of the Securities which is nullified with § by 14of the Act. 15U. S. C. 77n. The Court considered purposes, legislative history language, and of the Securi agreement was Act and concluded that the to arbitrate ties §14.* But the was a difficult one void under decision competing legislative policy view the embodied easily Arbitration which the Court described as “not Act, strongly reconcilable,” and which favors the enforcement of agreements “prompt, securing to arbitrate as a means of eco- carefully holding apply only
* The Court limited its to to arbitratiоn “prior controversy.” which are made to the existence of a 438; id., (Jackson, J., contrast, concurring). at see at 438-439 In U. uniformly apply “courts have concluded that Wilko does not to the submis existing disputes.” Express sion to arbitration of Shearson/American (1987). McMahon, 220, Inc. v. S. adequate nomical and solution of controversies.” 346 U. S., at 438. recognizеd obviously
It has been Wilko was not cor- language prohibiting ‘compliance rect, for “the waiver any provision easily of this title’ could have been read re- provisions including late to substantive of the Act without remedy provisions.” Alberto-Culver Scherk, Co. v. (CA7 1973) (Stevens, dissenting), F. 2d n. rev’d, U. S. 506 The Court did not read the lan- guage way gave in Wilko, however, two reasons. rejected argument First, Court that “arbitration is merely a form of trial to used in at § be lieu of trial law.” 346 S.,U. 433. Court that 14 found instead does not permit right judicial waiver of “the forum” in select favor arbitration, id., because “arbitration lacks the certainty buy- [the aof suit at law under the toAct enforce rights,” er’s] id., at 432. Second, the Court concluded that protect buyers wаs intended to of securi- length equal ties, who not often do deal at arm’s and on terms by offering with sellers, them “a wider choice of courts and enjoyed participants venue” than is in other business making right transactions, “the select forum” particularly valuable feature of the Id., Securities Act. at 435. *4 justify interpretation
We do think not these an reasons of prohibits agreements disputes 14 that to arbitrate future relating purchase of securities. The Court’s charac- process pervaded terization of the arbitration isWilko by Judge judicial hostility what Jerome Frank called “the old Shipping Amtorg to arbitration.” Kulukundis Co. v. Trad- (CA2 1942). ing Corp., 126 F. 2d 978, 985 That view has steadily years, beginning been eroded over the in the lower supra, (Stevens, dissenting) Schеrk, courts. See at 616 cases). (citing The erosion intensified our most recent upholding agreements decisions to arbitrate federal claims the raised under 1934, of Act see Shear- Express Inc. v. McMahon, 482U. S. 220 son/American Corrupt Organizations Influenced and Racketeer the under (RICO) laws, see ibid., and antitrust see under the statutes, Corp. Chrysler-Plymouth, Inc., v. Soler Motors Mitsubishi Reynolds Inc. also Dean See Witter U. S. (1985) (federal Byrd, arbitration statute U. S. rigorously “requires arbi enforce that we Mercury trate”); Hospital v. Con Moses H. Memorial Cone (1983)(“[(Questions Corp., of arbi S.U. struction healthy trability regard for the must with a be addressed arbitration”). policyfavoring The shift in the Court’s federal adopted away from in Wilko is those on arbitration views “By agreeing in Mitsubishi: the statement shown flat statutory party forgo a not the sub claim, does a arbitrate only rights it submits to statute; the afforded stantive judicial, arbitral, forum.” an rather than resolution in suspi on To the extent that Wilko rested S., at 628. weakening protections method as a of of arbitration cion complainants, it law to would-be substantive affordеd strong step endorse current far of our fallen out has resolving favoring of this method of federal statutes ment disputes. presumption disfavoring of outmoded
Once right proceedings side, it clear that to one becomes set are of courts forum the wider choice select § 14 is Act that features the Securities such essential not provisiоns. properly waiver of these construed to bar they be waived under cannot are so critical Nor buy- place Act was intended to that the Securities rationale equal footing an with sellers. Wilko on ers of securities provisions kinds the Securities two identified different objective. are substan- Some that would advance placing prоvision seller burden on the such as the tive, buyer alleges proving fraud. See 346 lack of when scienter §77Z(2). proce- citing S. Others are 15 U. C. S.,U. highlighted specific improvements procedural dural. *5 provisions Wilko are the statute’s broad venue in the federal process the existence of courts; nationwide service of amount-in-controversy courts; federal the extinction of the applied requirement that had to fraud suits when were brought diversity jurisdiction in federal courts under rather grant than as a federal cause of action; and of concurrent jurisdiction possi- in the state and federal courts without lity citing of removal. See 346 15 U. S. C. 77v(a). § construing prohibition
There is no sound basis for § waiving “compliance any provision” 14 on of the Se apply procedural provisions. curities Act to to these Al though by buyers the first three measures do facilitate suits grant jurisdiction securities, of of concurrent constitutes explicit complainants protec authorization for to waive those by filing possibility tions suit in state court without of re moval to fedеral court. These measures, moreover, are present in other federal statutes which have not been inter preted prohibit predispute agreements enforcement of Express arbitrate. See Shearson/American Inc. v. McMa supra (construing Exchange hon, the Securities Act of 1934; ibid, §78aa); (construing see 15 U. S. C. the RICO statutes; §1965); see 18 Corр. U. S. C. Mitsubishi Motors v. Soler Chrysler-Plymouth, supra (construing Inc., the antitrust 15). § laws; see 15 U. S. C. 29(a)
Indeed, § in McMahon the Court declined to read Exchange language Securities Act of which is every respect § the same as 14 Act, com- 77v(a) § pare prohibit 15 U. S. C. with 78aa, to enforcement predispute agreements only to arbitrate. The conceivable regard distinctiоn in between Securities and the Act is that the former statute allows jurisdiction concurrent federal-state over causes of action and provides jurisdiction. the latter statute for exclusive federal thought if But even this distinction were to make differ- suggest agreements, all, ence at it would that *6 specialized effect, “in a kind of forum-selection are which Co., Alberto-Culver U. S. clause,” Scherk prohibited Act, not be under the Securities should provision jurisdiction, they, the like concurrent since objective buyers allowing of securi advance of serve to disputes, right resolving to select the forum for ties broader judicial in we or otherwise. And McMahon whether it be why rejected explained length aver at we the Wilko Court’s resolving disputes over to arbitration as a forum for sion relatively especially light transactions, in securities expansion Commis of recent authority regulate arbitration to oversee and to those sion’s repeat procedures. at 231-234. We need not S., 482 U. arguments here. those language strong
Finally, of in we stressed the McMahon law as a matter of federal Act, which declares the Arbitration agreements irrevocable, and valid, “shall be that arbitration eq upon grounds in at law or as exist enforceable, save such §2. any uity S. C. 9 U. contract.” for the revocation party opposing carries arbitration statute, that Under separate showing Congress in a that intended the burden judicial such preclude remedies, that or a waiver of statute to inherently judicial un with the conflicts waiver of remedies purposes derlying other statute. in said dissent But as Justice Frankfurter
226-227. nothing in this case: “There is so it is true Wilko, facts of which we can take us, before nor record system . . would not af that the arbitral . notice, to indiсate rights plaintiff to which he is entitled.” ford have carried their burden of S., at 439. Petitioners not U. showing are not enforceable that arbitration Act. under the Securities language quoted above the Arbitration from of give party opposing relief where the
also allows the courts agree- presents “well-supported claims that of fraud or оver- ment to arbitrate resulted from the sort power whelming provide grounds economic that would ‘for Mitsubishi, the revocation of contract.’” S., harmony 627. avenue of relief This with the Securities protect buyers by removing Act’s concern to of securities disadvantages buyers “the under which labor” dealings supra, Although pe- Wilko, with sellers. at 435. suggest agreemеnt titioners to arbitrate here was *7 showing adhesive in nature, support record contains no factual suggestion. sufficient to that
Ill suggest Appeals We do not that the Court of on its own au thority step renouncing should have taken the Wilko. If a precedent application yet of this Court has direct in a case, appears rejected rest to on reasons in some other line of deci Appeals sions, the Court of should follow the case which di rectly leaving prerogative controls, to this Court the of over ruling its own decisions. We now conclude that Wilko was incorrectly prevailing decided and is inconsistent with the uniform governing construction other federal statutes ar setting bitrаtion of business transactions. Although normally properly we are reluctant to overturn construing our decisions statutes, we have done toso achieve interpretation statutory language, a uniform of similar Com missioner v. Estate Church, 335 U. S. 649-650 seriously interpretation and to correct a erroneous of statu tory language congressional policy that would undermine as expressed legislation, g., Boys in other e. see, Markets, Inc. (1970) (overruling Retail Clerks, S. 240-241 (1962)). Refining Sinclair v. Atkinson, Co. S. purposes Both overruling would be served here the Wilko decision.
It also would be for undesirable the decisions Wilko and McMahon to continue to exist side Their side. inconsis- tency principle is at odds with the that 1933 and 1934 harmoniously Aсts be should construed because “consti- components regulatory ofthe federal scheme tute interrelated governing Ernst Ernst v. securities.” & transactions (1976). In ex- case, 425 U. S. Hochfelder, subjected ample, petitioners’ under the 1934Act were claims Act was not their claim the 1933 arbitration, to while under required proceed go permitted but was to arbitration, to claims, for similar That result makes little sense in court. supposed arise within facts, similar which are based on single regulatory In the incon- addition, scheme. federal sistency the es- and McMahon undermines between Wilko of the two a harmonious construction rationale for sential litigants manipulating discourage from statutes, which is merely аllegations one of the to cast their claims under rea- another. For all of these rather than securities laws the decision Wilko. we overrule sons, therefore, finally argue Wilko, if the Court overrules Petitioners retroactively ruling apply facts of this its it should not standing general long disagree. rule of case. We *8 controls in the Court’s decision law announced College g., Al- v. e. Saint Francis See, bar. case at (1987); v. Schoo Khazraji, 604, 608 States 481 United U. S. (1801). cases, the Peggy, In civil 103, 109 some ner 1 Cranch applica rulings prospective to have its Court has restricted present. specific only, Chev circumstances are tion where 106-107 Under 404 U. S. Huson, ron v. Oil applica customary approach, rulе of retroactive Chevron Although appropriate our decision to overrule here. tion is principle arbitration a new of law for establishes Wilko ruling agreements Act, furthers under the Securities purposes undermin Arbitration Act without and effect of the Today’s ruling, ing moreover, Act. those of Securities inequitable produce 404 results,” “substantial does not any allegation petitioners make serious do not relating disputes they agreed in to their future to arbitrate holding that such in reliance on Wilko’s vestment contracts the courts. Our held unenforceable would be 486 is
conclusion reinforced our assessment that resort to the process inherently arbitration does not undermine of the rights petitioners afforded substantive under the Securi- ties Act. judgment Appeals Court of is
Affirmed.
Justice
Stevens,
Brennan,
whom Justice
Jus-
join, dissenting.
tice
Marshall,
Justice Blackmun
Appeals
The Court of
refused to
v. Sivan,
follow Wilko
346
(1953), controlling precedent
427
U. S.
of this Court. As
majority correctly acknowledges,
the Court
ante,
Appeals
engaged
judi-
therefore
in an
brand of
indefensible
subject
cial activism.1 We, of course, are not
to the same
upset
precedents.
restraint when asked to
one of our own
opinion gives
statutory provision
But when our earlier
con-
meaning,
Congress
during
crete
which
elects not to amend
ensuing
duty
respect Congress’
354decades, our
work
product
strikingly
duty
similar to the
of othеr federal
respect
product.2
courts to
our work
1 After the Court decided
Express
Shearson/American
Inc. v. McMa
hon,
I dissent. Cardozo, resources, the Judicial Nature of B. see limited courts’ (1921)”). Process precedent- these arguments some of first debated the Court Indeed S., Wilko, 346U. Compare now overrules. opinion majority setting (Frankfurter, J., re dissenting). Most id., 432-438, at 439-440 with McMahon, upon the supra, an action based cently were revisited 225-238, Compare Act of 1934. dissenting part). id., concurring part (Blackmun, at 243-266