Reference no: EM132226303

Synopsis:

Rodriguez de Quijas et al. v. Shearson/ American Express 490 U.S. 477 (1989)

Facts: Even though a group of securities investors signed agreements requiring that account disputes be settled by binding arbitration, when their investments went bad, the investors brought suit in court alleging fraudulent and unauthorized transactions in violation of the Securities Act of 1933 and the Securities and Exchange Act of 1934. The U.S. Supreme Court held that the agreement to arbitrate securities claims was binding and the courts were not the only forum in which securities disputes are to be resolved.

Issue: Whether it is permissible for courts to allow legal claims to be resolved by arbitration rather than in a court of law.

Decision: Yes

Reasoning: Kennedy, J.: The Court’s characterization of the arbitration process is pervaded by “the old judicial hostility to arbitration.” That view has been steadily eroded over the years. The erosion intensified in our most recent decisions upholding agreements to arbitrate federal claims raised under the Securities Exchange Act of 1934, under the Racketeer Influenced and Corrupt Organizations (RICO) statutes, and under the antitrust laws. The shift in the Court’s views is shown by the flat statement in Mitusbishi Mostors Corp. v. Soler Chrysler-Plymouth, Inc., 473 US 614 (1985): “By agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum.” To the extent that [our decisions] rested on suspicion of arbitration as a method of weakening the protections afforded in the substantive law to would-be complainants, it has fallen far out of step with our current strong endorsement of the federal statutes favoring this method of resolving disputes.

There is nothing in the record before us, nor in the facts of which we can take judicial notice, to indicate that the arbitral system would not afford the plaintiff the rights to which he is entitled. AFFIRMED

Answer and explain the following questions, For the above Case of Rodriguez de Quijas v. Shearson/American Express.

1a. Do you agree with the court that “by agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum”? Why or why not?

1b. If arbitration awards can only be reviewed by a court for reasons such as fraud or collusion on the part of the arbitrator, unconstitutionality, and so on, aren’t the courts virtually foreclosed to the parties? Discuss.

1c. Are you surprised that the Court would rethink its previously hostile position on arbitration and now decide to endorse arbitration?