Review of Court Decisions - Dispute Resolution Journal - Vol. 42, No. 3
Originally from Dispute Resolution Journal
SECURITIES-ARBITRABILITY-SECURITIES EXCHANGE ACT OF 1934-RULE 10b-5 - RICO-FEDERAL ARBITRATION ACT
Agreements to arbitrate future disputes raising statutory claims, such as those under the Securities Exchange Act of 1934 and the Racketeer Influenced and Corrupt Organizations Act, are enforceable under the Federal Arbitration Act absent a clear expression of congressional intent to the contrary. Eugene and Julia McMahon entered into a customer agreement with Shearson/American Express, Inc., providing for arbitration of disputes. The McMahons subsequently filed a complaint against Shearson, C)lleging fraud in violation of § 10(b) of the Securities Exchange Act of 1934 (Exchange Act), 15 U.S.C. § 78j(b); Securities Exchange Commission (SEC) Rule 10b-5, 17 C.F.R. § 240.10b-5; and the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C § 1961 et seq. Shearson moved to compel arbitration of all claims pursuant to the customer agreement. The Second Circuit held that the Exchange Act and RICO claims were not arbitrable, relying on Wilko v. Swan, 346 U.S. 427 (1953), and American Safety Equipment Corp. v. McGuire, 391 F.2d 821 (2d Cir. 1968). The United States Supreme Court granted certiorari to resolve the conflict among the circuits regarding the arbi trability of§ 10(b) and RICO claims.