| Rodriguez de Quijas v. Shearson/American Express Inc. | |
|---|---|
 | |
| Argued March 27, 1989 Decided May 15, 1989 | |
| Full case name | Opelia Rodriguez de Quijas, et al., Plaintiffs-Appellees, v. Shearson/Lehman Brothers Inc., f/k/a Shearson/American Express, Inc., and Jon Grady Deaton, Defendants-Appellants. Mary Grace Norman, Plaintiff-Appellee, v. Shearson/Lehman Brothers Inc., f/k/a Shearson/American Express, Inc., etc., et al., Defendants-Appellants. Adelina Trapero, Plaintiff-Appellee, v. Shearson/Lehman Brothers Inc., f/k/a Shearson/American Express, Inc., Its Successors and Assigns, and Jon Grady Deaton, Jointly and Severally, Defendants-Appellants. Gene Griffin and Gertrud Griffin, Plaintiffs-Appellees, v. Shearson/Lehman Brothers Inc, f/k/a Shearson/American Express, Inc., etc., et al., Defendants-Appellants. |
| Docket no. | 88-385 |
| Citations | 490 U.S. 477 (more) 109 S. Ct. 1917; 104 L. Ed. 2d 526 |
| Argument | Oral argument |
| Opinion announcement | Opinion announcement |
| Case history | |
| Prior | Arbitration compelled, 845 F.2d 1296 (5th Cir. 1989) |
| Holding | |
| Arbitration procedures have improved enough since Wilko v. Swan to sufficiently guarantee protection of investor rights under Securities Act of 1933; appellate court decision overruling that case is upheld but Supreme Court retains exclusive prerogative to overrule its own precedent in future. Fifth Circuit affirmed. | |
| Court membership | |
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| Case opinions | |
| Majority | Kennedy, joined by Rehnquist, White, O'Connor, Scalia |
| Dissent | Stevens, joined by Brennan, Marshall, Blackmun |
| Laws applied | |
| Federal Arbitration Act, Securities Act of 1933 | |
This case overturned a previous ruling or rulings | |
| Wilko v. Swan (1953) | |
Rodriguez de Quijas v. Shearson/American Express Inc., 490 U.S. 477 (1989), is a United States Supreme Court decision concerning the arbitration of securities fraud claims. It was originally brought by a group of Texas investors against their brokerage house. By a 5–4 margin the Court affirmed the Fifth Circuit Court of Appeals and ruled that their claims under the Securities Act of 1933, which regulates trading in the primary market, must be arbitrated as stipulated in their customer agreements.
The decision overruled a 1953 case, Wilko v. Swan. Justice Anthony Kennedy's majority opinion found that arbitration procedures offered more adequate protection for investors than they had when that case was decided. John Paul Stevens's short dissent criticized the majority for taking it upon itself to overturn a precedent that, he argued, Congress had purposely left intact during a major overhaul of the securities laws in the mid-1970s. Both criticized the Fifth Circuit for having overruled Wilko before the Court itself did, reminding lower courts that only the Supreme Court could overrule itself, an aspect of the decision that has come in for some criticism.
Many courts besides the Fifth Circuit had chosen to disregard Wilko after the Supreme Court's own decision in Shearson/American Express Inc. v. McMahon that claims under the Securities Exchange Act of 1934, which applies to the secondary market, were also arbitrable if a contract so provided cast serious doubt on the logic of the older case. As a result of Rodriguez de Quijas, many more securities fraud claims were heard in arbitration instead of the courts, an intended outcome that has supporters and critics and led to long-term changes in how the securities industry conducts arbitration. The decision was the last in the Mitsubishi trilogy, which expanded the use of arbitration from contractual disputes to statutory claims during the 1980s.