Source: http://www.chanrobles.com/usa/us_supremecourt/490/477/case.php
Timestamp: 2020-01-21 05:40:43
Document Index: 539031800

Matched Legal Cases: ['§ 14', '§ 7', '§ 14', '§ 14', '§ 14', '§ 771', '§ 29', '§ 14', '§ 77', '§ 78']

(b) The customary rule of retroactive application -- that the law announced in the Court's decision controls the case at bar -- is appropriate chanrobles.com-red
Petitioners are individuals who invested about $400,000 in securities. They signed a standard customer agreement with the broker, which included a clause stating that the parties agreed to settle any controversies "relating to [the] accounts" through binding arbitration that complies with specified procedures. The agreement to arbitrate these controversies is unqualified, unless it is found to be unenforceable under federal or state law. Customer's Agreement ¦ 13. The investments turned sour, and petitioners eventually sued respondent and its broker-agent in charge of the accounts, alleging that their money was lost in unauthorized and fraudulent transactions. In their complaint, they chanrobles.com-red
The Wilko case, decided in 1953, required the Court to determine whether an agreement to arbitrate future controversies constitutes a binding stipulation "to waive compliance with any provision" of the Securities Act, which is nullified by § 14 of the Act. 15 U.S.C. § 7m. The Court considered the language, purposes, and legislative history of the Securities Act and concluded that the agreement to arbitrate was void under § 14. 490 U. S. 438.
We do not think these reasons justify an interpretation of § 14 that prohibits agreements to arbitrate future disputes relating to the purchase of securities. The Court's characterization of the arbitration process in Wilko is pervaded by what Judge Jerome Frank called "the old judicial hostility to arbitration." Kulukundis Shipping Co. v. Amtorg Trading Corp., 126 F.2d 978, 985 (CA2 1942). That view has been steadily eroded over the years, beginning in the lower courts. See Scherk, supra, at 616 (Stevens, J., dissenting) (citing cases). The erosion intensified in our most recent decisions upholding agreements to arbitrate federal claims raised under the Securities Exchange Act of 1934, see 482 U. S. 221 (1985) (federal arbitration statute "requires that we rigorously enforce agreements to arbitrate"); Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U. S. 1, 460 U. S. 24 (1983) ("[Q]uestions of arbitrability must be addressed with a healthy regard for the federal policy favoring arbitration"). The shift in the Court's views on arbitration away from those adopted in Wilko is shown by the flat statement in Mitsubishi:@
Once the outmoded presumption of disfavoring arbitration proceedings is set to one side, it becomes clear that the right to select the judicial forum and the wider choice of courts are not such essential features of the Securities Act that § 14 is properly construed to bar any waiver of these provisions. Nor are they so critical that they cannot be waived under the rationale that the Securities Act was intended to place buyers of securities on an equal footing with sellers. Wilko identified two different kinds of provisions in the Securities Act that would advance this objective. Some are substantive, such as the provision placing on the seller the burden of proving lack of scienter when a buyer alleges fraud. See 346 U.S. at 346 U. S. 431, citing 15 U.S.C. § 771(2). Others are procedural. The specific procedural improvements highlighted in chanrobles.com-red
Indeed, in McMahon, the Court declined to read § 29(a) of the Securities Exchange Act of 1934, the language of which is in every respect the same as that in § 14 of the 1933 Act, compare 15 U.S.C. § 77v(a) with § 78aa, to prohibit enforcement of predispute agreements to arbitrate. The only conceivable distinction in this regard between the Securities Act and the Securities Exchange Act is that the former statute allows concurrent federal-state jurisdiction over causes of action and the latter statute provides for exclusive federal jurisdiction. But even if this distinction were thought to make any difference at all, it would suggest that arbitration agreements, chanrobles.com-red
It also would be undesirable for the decisions in Wilko and McMahon to continue to exist side by side. Their inconsistency is at odds with the principle that the 1933 and 1934 Acts should be construed harmoniously because they "constitute chanrobles.com-red
Petitioners argue finally that, if the Court overrules Wilko, it should not apply its ruling retroactively to the facts of this case. We disagree. The general rule of long standing is that the law announced in the Court's decision controls the case at bar. See, e.g., Saint Francis College v. Al-Khazraji, 481 U. S. 604, 481 U. S. 608 (1987); 5 U. S. 109 (1801). In some civil cases, the Court has restricted its rulings to have prospective application only, where specific circumstances are present. Chevron Oil v. Huson, 404 U. S. 97, 404 U. S. 106-107 (1971). Under the Chevron approach, the customary rule of retroactive application is appropriate here. Although our decision to overrule Wilko establishes a new principle of law for arbitration agreements under the Securities Act, this ruling furthers the purposes and effect of the Arbitration Act without undermining those of the Securities Act. Today's ruling, moreover, does not produce "substantial inequitable results," 404 U.S. at 404 U. S. 107, for petitioners do not make any serious allegation that they agreed to arbitrate future disputes relating to their investment contracts in reliance on Wilko'[email protected] holding that such agreements would be held unenforceable by the courts. Our chanrobles.com-red