Document: 414 U.S. 117 94 S.Ct. 383 38 L.Ed.2d 348 MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., Petitioner,v.David WARE No. 72-312. Argued Oct. 9, and 10, 1973. Decided Dec. 4, Syllabus When respondent voluntarily terminated his employment as an account executive in petitioner securities broker's San Francisco office for a similar position with competitor, determined, pursuant to forfeiture clause of its employees' profit-sharing plan, that respondent, by entering competitive employment, had forfeited all rights the plan's benefits. Respondent sought declaratory judgment California state court was unlawful under § 16600 Business Professions Code, which invalidates every contract restraining person from engaging lawful business. Petitioner answered, inter alia, condition respondent's approval New York Stock Exchange; at time applied on Exchange form such approval, required Rule 345(a)(1), pledging abide rules; 347(b) agreed submit arbitration any controversy arising out termination employment. On petitioner's appeal denial petition order directing arbitration, Court Appeal held written agreement arbitrate did exist, but plan invalid restraint trade law when residents, contributions were wages provisions Labor Code giving wage earners right action due unpaid despite private arbitrate. Held: Rules 345(a)(1) 347(b), promulgated self-regulatory measures 6 Securities Act 1934 (the Act), pledge those rules, do not pre-empt avenues relief otherwise available law. Pp. 125—140. (a) does fall Exchange's mandate protect investing public insure just equitable practices set forth §§ 6(d) 19(b) Act, so require pre-emption contrary rule, there being nothing or SEC rule regulation specifying favored means resolving employer-employee disputes, it clear would be subject SEC's modification review 19(b). 134-136. (b) cannot categorized part need uniform national regulation, no revelation nationwide uniformity exchange's housekeeping affairs is necessary, shown area claims vital federal policy. 136—137. (c) The 'applicable laws' referred 6(c) subjects exchange rules requirement consistency 'and applicable laws State located,' are this instance, merely because City, apply compelling dispute validating since has independent existence creating some sort spurious application States, requires adopted outside Act's context comport located. 137—139. (d) Where manifested strong statutory policy protecting what regards undesirable economic pressures affecting relationship, should prevail absent interference regulatory scheme; case only interference, structure manifests congressional intent policies operate vigorously. 139—140. (e) Even though profitsharing open eligible employees United petitiner's business interstate, unduly burden interestate commerce. P. 140. 24 Cal.App.3d 35, 100 Cal.Rptr. 791, affirmed. William H. Orrick, Jr., Francisco, Cal., petitioner. Joseph C. Barton, respondents. Mr. Justice BLACKMUN delivered opinion Court. 1 This presents question whether certain Exchange, self-regulating 1934, 48 Stat. 885, 15 U.S.C. 78f, employee's employee answered negative. 791 (1972). Because significance federal-state relations, we granted certiorari. 410 908, 93 956, 35 269 (1973). 2 * Respondent, David Ware, July 1958 entered employ Merrill Lynch, Pierce, Fenner Smith, Inc., corporation, registered representative 'account executive' office. Ware worked continuously until March 1969 he relationship accepted one Lynch's competitors. 3 Lynch broker-dealer member-corporation Exchange. Since prior 1958, firm noncontributory Profit-Sharing Plan States. Under may have allocated both vested unvested units, therein described. Article 11 relates 'Forfeiture Benefits' upon happening specified events. One event activity: 4 '11.1 A Participant who, determination Committee, terminates Corporation provokes engages occupation is, Corporation, affiliate subsidiary thereof, shall forfeit benefits become Trust Fund respect units credited fiscal years subsequent year ended December 30, 1960.' 5 Committee provided Plan's Art. 1. It less than five nor more nine persons (not necessarily employees) appointed serving 'at pleasure Corporation.' 1.2 states 'shall administer Plan' determine questions administration, interpretation Plan, conclusive binding persons.' At 1969, account. Upon departure, 11.1, determined him Plan. 7 In January 1970 filed class against members Committee. purported consist other similarly situated former California. Declaratory effect 11.1 'unlawful void law,' defendants obligated pay 1960, date 8 Although statute cited complaint, parties appear agree suit rested principally Code. reads: 9 'Except chapter, anyone restrained profession, trade, kind extent void.' 10 answer, alleged reasonable resraint competition States; that, 22.11 construed according York; lawful, valid, enforceable; Ware's executed application, form, representative, 345(a)(1);2 30(j) member emplyment settled instance party;3 approved application; sole remedy arbitration; declaration cause discriminate administration deprive process invoking 1281.2 Civil Procedure,4 petitioned above-quoted pledge, contained 'abide Constitution Board Governors Exchange' submitted himself 'to jurisdiction Exchange.' 12 opposed grounds existed between Lynch; if existed, adhesion; made provision illegal law, arbitrable. 13 trial court, minute order, denied compel arbitration. 14 then appealed. exist; 'a contractual agreement'; 'approval registration parties.' Cal.App.3d, 40—41, Cal.Rptr., 795—796. went hold, however, unenforceable trade. Id., 42—43, 796—797. Cited supporting authorities Frame v. Smith 20 668, 97 811 (1971), where same ineffective also enforceable existed,5 Muggill Reuben Donnelley Corp., 62 Cal.2d 239, 42 107, 398 P.2d 147 (1965). Finally, Appeal, while taking note California's 'strong policy' favoring wages, within meaning 2006 2297 229 gave 'the bring claim spite arbitrate.' 43—44, 797—798. hearing Supreme without opinion. See 45, 791. II 16 broad issue thus presented us authority delegated pre-empts Specifically, concerned whether, present case, preclude compulsory Supremacy Clause; interferes industry; legislation unconstitutionally burdens interstate 17 resolve these questions, think necessary principles stock delineated Court's decision decade ago Silver 373 341, 83 1246, 389 (1963), examine geneses statute. 18 A. considered extent, antitrust exchanges regulated Act. mere passage effect, pro tanto, repeal laws, particular instances scope purposes justified will upheld challenge. 357—361, 1257. With specific presented, exercised 'tremedous Power,' id., 361, 1259, two nonmenbers discontinuing their direct-wire telephone connections notice, hearing, statement reasons. view, circumstances, procedural guarantees possibility procribed provide 'extremely beneficial keeping straying into areas wholly foreign Act.' 362, 1259. also, Ricci Chicago Mercantile 409 289, 300—301, 573, 579, 34 525 19 contrast Silver, confronted here conflicting schemes. concerns interrelationship statutes adopted, respectively, Federal Government State. analytical framework instructive, nonetheless. There reviewed carefully scheme Congress identify character self-regulation furtherance aims objectives. U.S., 349 1252. mindful, behind which, laws. So here, overlook body relating sensitive separate, yet coordinate, sovereignities. Our analysis tempered conviction proper approach reconcile operation schemes another rather holding completely ousted.' 357, 1257.8 principle emerged premise based judgment, repealing exclusivity provisions, pre-empted 'only achievement B. amended, 78a 78hh—1, 'regulates markets brokers dealers.' Report Special Study Markets Commission, H.R.Doc. 95, pt. 1, 88th Cong., 1st Sess., (1963). Two types reflected Some impose direct requirements prohibitions. Among mandatory registration, restrictions broker dealer borrowing, prohibition manipulative deceptive practices. Other flexible rely technique achieve Ibid. Supervised self-regulation, although consonant traditional governance exchanges, allows monitor interest.9 DOUGLAS, Chairman observed permits 'take leadership playing residual role. keep shotgun, speak, door, loaded, well oiled, cleaned, ready use hope never used.' W. Douglas, Democracy Finance 82 (J. Allen ed. 1940). 21 provides Commission. 6, 78f. outlaws transactions conducted unregistered exchanges. 5, 78e. conditions showing 'just adequate fair dealing investors.' 6(d), 78f(d). An seeking must meet requirements. enforce far powers compliance members' Commission's regulations thereunder. 6(a)(1), 78f(a) (1). include disciplining 'conduct proceeding inconsistent trade.' 6(b), 78f(b). And supply Commission copies constitution, articles incorporation, bylaws, data information 'as appropriate interest protection 6(a) (3) (2), 78f(a)(3) (2). 22 supervisory. Apart responsibilities registering 'alter supplement' 'necessary investors traded exchange.' 19(b), 78s(b).10 authority, designated 'similar matters.' As consequence, scrutiny, re S.E.C. 270, 294 (1941), and, instead, they interests insuring investors, kindle curiosity serve identifiable purpose. noted, moreover, supervisory power sparingly. Industry Study, Subcommittee Securities, Banking, Housing Urban Affairs, S. Doc. 93—13, p. 180 23 supervision, qualification autonomy enforced 'inconsistent (Act) thereunder located.' 6(c), 78f(c). From relevant portions apparent accorded maximum reposed needed manner allow initiative responsibility self-regulators.' supra, 726. words Senate issued enactment, 25 'Thus promulgating pertaining ordinary remain themselves. fail adequately authorized step them so.' S.Rep. 792, 73d 2d (1934). 26 aim supervised harmful unfair trading To practice contravenes policy, auhorized supervision action. Correspondingly, germane investor shadow umbrella; 27 side statutes. By addition 1959 codified earner, solitary-collective-bargaining exception, recover employer, regardless Selected Legislation, Cal.St.B.J. 581, 706—707. due, apparently, legislature's desire worker exploitative employer who demand prospective sign away advance resort judicial system redress grievance. statute's legislative history sparse, exception carved collective-bargaining disputes obvious conclusion individual, nonunion, unprotected earner intended beneficiary State's grace providing remedy. fortified fact 200(a) defines 'wages' broadly 'all amounts labor performed description, amount fixed ascertained standard time, task, piece, commission basis, method calculation.' itself noted established . promoting' right, "favored' lawfully accrued him.' City Ukiah Fones, 64 104, 108, 865, 867, 369, 371 (1966). be, too, legislature felt awarding something short compensation. event, harder substance Local 659 Color Corp. America, 47 189, 302 (1956), decided 1280 Procedure, enforcement characterizing 'irrevocable,' waiver mutual rescission. 'save exist equity revocation contract.'11 California, thus, exclude happens contain clause. 28 liberal intendment reinforced Appeal's observation 44—45, 798, Arbitration revised 1961, embraced attempt change first earlier 1959. record clear, attention drawn 1961 229. asked reconsider unanimous vote favor ground uncertainty Journal 2215—2218 (May 1961). motion later waived, bill transmitted Assembly. 2287 8, Thus, mind 229, placed focus 'historical friendliness institution arbitration.' Feldman, Modernized—The So.Calif.L.Rev. 413, (1961). Section survived scrutiny now important through courts. 29 might consider, suggests embodied quoted, 121. been many entrenched commentary.12 We pursue depth considerations because, our 16600, standing alone apart existing support uphold challenge inclination buttressed different results reached Frame, respectively. (California) foreclosed permissive plan. served nullify contract's provision, nonetheless, precluded. way contrast, provoked reliance face declared again but, addition, unenforceable, relying rest court's not, cannot, disturb lie other. 30 background, turn arguments advanced here. III 31 n. 3, falls practices.13 Its contention confidence industry integrity ability jeopardized failures major brokerage houses consequent substantial losses public. Investor further undermined, said, protracted litigation firms over airse relationships; airing erode market; hand, internalize expeditious economical resolution arbitrators familiar customs 32 seen discussion above, 78f(d) 78s(b), establish measure congressionally interest. gives limited 'for securities' 'insure administration' exchanges.14 Measured standards, conclude 347(b). 33 begin obvious, specifies disputes.15 amicus, concedes much, conclude, suggests, attenuated peripheral, exists all.' Brief States 9. result protection. shaken disputes. explanation why proceeding, even public, prevent lessening confidence. difficult understand muffling grievance cloakroom undermine market. contrary, generally sophisticated market tend restored light impartial adjudication. Furthermore, concerned, employee-employer substitute effective disciplinary abusive practice. very function. 345(b), example, disapprove, thereby forestall, person, 345(d) spells punitive trade,' 'acts detrimental welfare Exchange,' These measures, designed directly related ordinarily expected yield categorized, regulation. desirable. demonstrated vital, way, Convenience management desirable, plea objectives Indeed, Congress, field, exclusive Cf. Rice Santa Fe Elevator 331 218, 234—236, 67 1146, 1154, 91 L.Ed. 1447 (1947); Campbell Hussey, 368 297, 302, 327, 329, 299 Instead, 78f(c), explicitly exchange) 'Where collaboration courts find conflict.' Union Brokerage Co. Jensen, 322 202, 209, 967, 972, 88 1227 (1944). cases agency check behavior therefore, '(s)ome self-policing, administrative courts, incompatible fulfillment 359, 1258. argued city York, said error applying compelled validated 36 persuaded intended. assertion interest, hinges integrally substantially consistent located.16 37 If State, normal conflict come play, rule's depends conflict. Were so, purpose choice-of-law itself. More importantly, purportedly foster ephemeral considers broker-dealers like located therefore subject, 'state location' theory, States' sacrifice individual's expectation treatment residence rules. decline believe elements old regime complete objectives, conflicts comes controversy. After all, organized association accordance location. Any extraterritorial contends, course, sought. ascribe regarded common sense. D. Brennan stated: 'The derived decisions field commerce deemed preemptive absence persuasive reasons—either nature matter conclusion, unmistakably ordained.' Florida Lime Avocado Growers, Inc. Paul, 132, 142, 1210, 1217, 1163, 248 39 contexts, measured frustrates legislation. Colorado Anti-Discrimination Comm'n Continental Air Lines, 372 714, 724, 1022, 1027, 84 (1963); Perez Campbell, 402 637, 1704, 233 (1971); Trade, 247, 253—255, 1160, 1468 (1947). last term speaking Court, 'are precise guidelines,' 'each turns peculiarities special features question,' pervasive comprehensive follows fulfill purposes. Burbank Lockheed Terminal, 411 624, 638—639, 1854, 1862, 547 40 considering relationship. prevails scheme. 41 E. suggested, finally, operates level; represents nature, business; What above answer argument. line principle, long established, National Government's power, Commerce Clause, regulate Southern Pacific Arizona, 325 761, 766—767, 65 1515, 1518, 89 1915 (1945); Brotherhood Locomotive Firemen Enginemen Chicago, R.I. P.R. Co., 393 129, 323, 289 (1968); Huron Portland Cement Detroit, 362 440, 80 813, 852 (1960). 43 44 ordered. 45 Affirmed. 46 STEWART took case. '22.1 validity thereof York.' 'Rule 345. No organization '(1) permit perform regularly duties customarily unless een acceptable ..' Paragraph '(j) I me my party obtaining 30(d) reads part: '(d) read approved, hereby myself Constitution, April provides: '(b) party, procedure prescribed elsewhere rules.' language '§ Order controversy; petition; 'On alleging thereto refuses controversy, determines exists, that: '(a) waived petitioner; Grounds agreement. .' months earlier, reversed denying seemingly arrived ultimate opposite held, 671—673, 811, 813—815, (like Ware) arbitrate; basis using doctrine adhesion avoid 16600; agreement's 'must allowed defeat' entire unlawful; 'latent agreements permissible breaches misappropriation secrets. raised circumstances earned remaining unpaid. All matters, involve fact, properly 673, 815. But mention 200 see nn. 6—7, infra, 43, 797, '(t)he consider section agreement.' Apparently, neither 200. Definitions 'As used article: 'Wages' includes Actions payment wages; 'Actions article collection claimed individual maintained regard involving concerning collective bargaining containing added Cal.Stats.1959, c. 1939, 4532. supported extending back century. (1960); International Assn. Machinists Gonzales, 356 617, 78 923, 1018 (1958); (1944); Savage Jones, 225 501, 715, 56 1182 (1912). arose after panic 1907 when, response concern speculation, President Theodore Roosevelt urged take Cong.Rec. 1347, 1349 (1908). Nothing happened, 1929 crash. became 'transactions commonly over-the-counter affected makes control matters thereto.' 2, 78b. Self-regulation policing tradition, self-governance; financial community strongly governmental daily task magnitude simply could effectively aspect industry. Comment, Minn.L.Rev. 597—598 (1964); L. Loss, Regulation, 1175—1176 (1961), 3138—3139 (1969). making See, 11, 78h, 78i, 78k. promulgate repealed replaced make saving 1281 read, contract.' Cal.Stats. 461, pp. 1540—1541, 2. citations following West's Ann.Calif.Bus. Prof.Code et seq. phrase practices' inappropriately justify refers 6(b) 78f(b), expulsion, suspension, type contemplates. circumscribed limitations enumerated None categories requiring endorsed suitability federally created rights. Wilko Swan, 346 427, 431, 74 182, 98 168 (1953); Coenen R. Pressprich 453 F.2d 1209 (C.A.2), cert. denied, 406 949, 92 2045, 337 White dissenting Bulk Carriers, Arguelles, 400 351, 374—375, 409, 421, 456 (1971). cases, situations act Yet Swan customer's 1933, 77n, notwithstanding 3. Prima Paint Flood Conklin Mfg. 388 395, 87 1801, 1270 (1967). contains indicating continues not. 28(a), 78bb(a), remedies equity.' affect insofar provisions' 'or thereunder.' 28(b), 78bb(b), modify (exchange) taken settle bound thereby.'

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