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SHEARSON/AMERICAN EXPRESS INC. v. McMAHON |
| Continued Page 4 of Section III |
III |
| The McMahons nonetheless argue that we should find it significant that Congress did not take this opportunity to address the general question of the arbitrability of Exchange Act claims. Their argument is based entirely on a sentence from the Conference Report, which they contend amounts to a ratification of Wilko's extension to Exchange Act claims. The Conference Report states: |
"The Senate bill amended section 28 of the Securities Exchange Act of 1934 with respect to arbitration proceedings between self-regulatory organizations and their participants, members, or persons dealing with members or participants. The House amendment contained no comparable provision. The House receded to the Senate. It was the clear understanding of the conferees that [482 U.S. 220, 237] this amendment did not change existing law, as articulated in Wilko v. Swan, 346 U.S. 427 (1953), concerning the effect of arbitration proceedings provisions in agreements entered into by persons dealing with members and participants of self-regulatory organizations." H. R. Conf. Rep. No. 94-229, p. 111 (1975).
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The McMahons contend that the conferees would not have acknowledged Wilko in a revision of the Exchange Act unless they were aware of lower court decisions extending Wilko to 10(b) claims and intended to approve them. We find this argument fraught with difficulties. We cannot see how Congress could extend Wilko to the Exchange Act without enacting into law any provision remotely addressing that subject. See Train v. City of New York, 420 U.S. 35, 45 (1975). And even if it could, there is little reason to interpret the Report as the McMahons suggest. At the outset, the committee may well have mentioned Wilko for a reason entirely different from the one postulated by the McMahons - lower courts had applied 28(b) to the Securities Act, see, e. g., Axelrod & Co. v. Kordich, Victor & Neufeld, supra, at 843, and the committee may simply have wished to make clear that the amendment to 28(b) was not otherwise intended to affect Wilko's construction of the Securities Act. Moreover, even if the committee were referring to the arbitrability of 10(b) claims, the quoted sentence does not disclose what committee members thought "existing law" provided. The conference members might have had in mind the two Court of Appeals decisions extending Wilko to the Exchange Act, as the McMahons contend. See Greater Continental Corp. v. Schechter, 422 F.2d 1100 (CA2 1970); Moran v. Paine, Webber, Jackson & Curtis, 389 F.2d 242 (CA3 1968). It is equally likely, however, that the committee had in mind this Court's decision the year before expressing doubts as to whether Wilko should be extended to 10 (b) claims. See Scherk v. Alberto-Culver Co., 417 U.S., at 513 ("[A] colorable argument could be made that even the [482 U.S. 220, 238] semantic reasoning of the Wilko opinion does not control [a case based on 10(b)]"). Finally, even assuming the conferees had an understanding of existing law that all agreed upon, they specifically disclaimed any intent to change it. Hence, the Wilko issue was left to the courts: it was unaffected by the amendment to 28(b). This statement of congressional inaction simply does not support the proposition that the 1975 Congress intended to engraft onto unamended 29(a) a meaning different from that of the enacting Congress.
We conclude, therefore, that Congress did not intend for 29(a) to bar enforcement of all predispute arbitration agreements. In this case, where the SEC has sufficient statutory authority to ensure that arbitration is adequate to vindicate Exchange Act rights, enforcement does not effect a waiver of "compliance with any provision" of the Exchange Act under 29(a). Accordingly, we hold the McMahons' agreements to arbitrate Exchange Act claims "enforce[able] . . . in accord with the explicit provisions of the Arbitration Act." Scherk v. Alberto-Culver Co., supra, at 520. |
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Click to read more about this landmark case or listen to what Theodore Eppenstein has to say supporting his client's position. |
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Supreme Court Case
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