Howsam v. Dean Witter Reynolds, Inc.
| Decision Date | 10 December 2002 |
| Docket Number | No. 01-800.,01-800. |
| Citation | 537 U.S. 79 |
| Parties | HOWSAM, INDIVIDUALLY AND AS TRUSTEE FOR THE E. RICHARD HOWSAM, JR., IRREVOCABLE LIFE INSURANCE TRUST DATED MAY 14, 1982 v. DEAN WITTER REYNOLDS, INC. |
| Court | U.S. Supreme Court |
Per respondent Dean Witter Reynolds, Inc.'s standard client agreement, petitioner Howsam chose to arbitrate her dispute with the company before the National Association of Securities Dealers (NASD). NASD's Code of Arbitration Procedure § 10304 states that no dispute "shall be eligible for submission ... where six (6) years have elapsed from the occurrence or event giving rise to the ... dispute." Dean Witter filed this suit, asking the Federal District Court to declare the dispute ineligible for arbitration because it was more than six years old and seeking an injunction to prohibit Howsam from proceeding in arbitration. The court dismissed the action, stating that the NASD arbitrator should interpret and apply the NASD rule. In reversing, the Tenth Circuit found that the rule's application presented a question of the underlying dispute's "arbitrability"; and the presumption is that a court will ordinarily decide an arbitrability question.
Held: An NASD arbitrator should apply the time limit rule to the underlying dispute. Pp. 83-86.
(a) "[A]rbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." Steelworkers v. Warrior & Gulf Nav. Co., 363 U. S. 574, 582. The question whether parties have submitted a particular dispute to arbitration, i. e., the "question of arbitrability," is "an issue for judicial determination [u]nless the parties clearly and unmistakably provide otherwise." AT&T Technologies, Inc. v. Communications Workers, 475 U. S. 643, 649. The phrase "question of arbitrability" has a limited scope, applicable in the kind of narrow circumstance where contracting parties would likely have expected a court to have decided the gateway matter. But the phrase is not applicable in other kinds of general circumstance where parties would likely expect that an arbitrator would decide the question— "`procedural' questions which grow out of the dispute and bear on its final disposition," John Wiley & Sons, Inc. v. Livingston, 376 U. S. 543, 557, and "allegation[s] of waiver, delay, or a like defense to arbitrability," Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U. S. 1, 24-25. Following this precedent, the application of the NASD rule is not a "question of arbitrability" but an "aspec[t] of the [controversy] which called the grievance procedures into play." John Wiley & Sons, Inc., supra, at 559. NASD arbitrators, comparatively more expert about their own rule's meaning, are comparatively better able to interpret and to apply it. In the absence of any statement to the contrary in the arbitration agreement, it is reasonable to infer that the parties intended the agreement to reflect that understanding. And for the law to assume an expectation that aligns (1) decisionmaker with (2) comparative expertise will help better to secure the underlying controversy's fair and expeditious resolution. Pp. 83-86.
(b) Dean Witter's argument that, even without an antiarbitration presumption, the contracts call for judicial determination is unpersuasive. The word "eligible" in the NASD Code's time limit rule does not, as Dean Witter claims, indicate the parties' intent for the rule to be resolved by the court prior to arbitration. Parties to an arbitration contract would normally expect a forum-based decisionmaker to decide forum-specific procedural gateway matters, and any temptation here to place special antiarbitration weight on the word "eligible" in § 10304 is counterbalanced by the NASD rule that "arbitrators shall be empowered to interpret and determine the applicability" of all code provisions, § 10324. P. 86.
261 F. 3d 956, reversed.
O'CONNOR, J., took no part in the consideration or decision of the case.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT.
Alan C. Friedberg argued the cause and filed briefs for petitioner.
Matthew D. Roberts argued the cause for the Securities and Exchange Commission as amicus curiae urging reversal. With him on the brief were Solicitor General Olson, Deputy Solicitor General Kneedler, Meyer Eisenberg, Jacob H. Stillman, and Mark Pennington.
Kenneth W. Starr argued the cause for respondent. With him on the brief were Steven G. Bradbury, Daryl Joseffer Ashley C. Parrish, Donald G. Kempf, Jr., and Bradford D. Kaufman.*
This case focuses upon an arbitration rule of the National Association of Securities Dealers (NASD). The rule states that no dispute "shall be eligible for submission to arbitration . . . where six (6) years have elapsed from the occurrence or event giving rise to the ... dispute." NASD Code of Arbitration Procedure § 10304 (1984) (NASD Code or Code). We must decide whether a court or an NASD arbitrator should apply the rule to the underlying controversy. We conclude that the matter is for the arbitrator.
The underlying controversy arises out of investment advice that Dean Witter Reynolds, Inc. (Dean Witter), provided its client, Karen Howsam, when, some time between 1986 and 1994, it recommended that she buy and hold interests in four limited partnerships. Howsam says that Dean Witter misrepresented the virtues of the partnerships. The resulting controversy falls within their standard Client Service Agreement's arbitration clause, which provides:
"[A]ll controversies ... concerning or arising from . . . any account . . . , any transaction . . . , or ... the construction, performance or breach of ... any ... agreement between us ... shall be determined by arbitration before any self-regulatory organization or exchange of which Dean Witter is a member." App. 6-7.
The agreement also provides that Howsam can select the arbitration forum. And Howsam chose arbitration before the NASD.
To obtain NASD arbitration, Howsam signed the NASD's Uniform Submission Agreement. That agreement specified that the "present matter in controversy" was submitted for arbitration "in accordance with" the NASD's "Code of Arbitration Procedure." Id., at 24. And that Code contains the provision at issue here, a provision stating that no dispute "shall be eligible for submission ... where six (6) years have elapsed from the occurrence or event giving rise to the ... dispute." NASD Code § 10304.
After the Uniform Submission Agreement was executed, Dean Witter filed this lawsuit in Federal District Court. It asked the court to declare that the dispute was "ineligible for arbitration" because it was more than six years old. App. 45. And it sought an injunction that would prohibit Howsam from proceeding in arbitration. The District Court dismissed the action on the ground that the NASD arbitrator, not the court, should interpret and apply the NASD rule. The Court of Appeals for the Tenth Circuit, however, reversed. 261 F. 3d 956 (2001). In its view, application of the NASD rule presented a question of the underlying dispute's "arbitrability"; and the presumption is that a court, not an arbitrator, will ordinarily decide an "arbitrability" question. See, e. g., First Options of Chicago, Inc. v. Kaplan, 514 U. S. 938 (1995).
The Courts of Appeals have reached different conclusions about whether a court or an arbitrator primarily should interpret and apply this particular NASD rule. Compare, e. g., 261 F.3d 956 (CA10 2001) (case below) ( that the question is for the court); J. E. Liss & Co. v. Levin, 201 F. 3d 848, 851 (CA7 2000) (same), with PaineWebber Inc. v. Elahi, 87 F. 3d 589 (CA1 1996) (); Smith Barney Shearson, Inc. v. Boone, 47 F. 3d 750 (CA5 1995) (same). We granted Howsam's petition for certiorari to resolve this disagreement. And we now hold that the matter is for the arbitrator.
This Court has determined that "arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." Steelworkers v. Warrior & Gulf Nav. Co., 363 U. S. 574, 582 (1960); see also First Options, supra, at 942-943. Although the Court has also long recognized and enforced a "liberal federal policy favoring arbitration agreements," Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U. S. 1, 24-25 (1983), it has made clear that there is an exception to this policy: The question whether the parties have submitted a particular dispute to arbitration, i. e., the "question of arbitrability," is "an issue for judicial determination [u]nless the parties clearly and unmistakably provide otherwise." AT&T Technologies, Inc. v. Communications Workers, 475 U. S. 643, 649 (1986) (emphasis added); First Options, supra, at 944. We must decide here whether application of the NASD time limit provision falls into the scope of this last-mentioned interpretive rule.
Linguistically speaking, one might call any potentially dispositive gateway question a "question of arbitrability," for its answer will determine whether the underlying controversy will proceed to arbitration on the merits. The Court's case law, however, makes clear that, for purposes of applying the interpretive rule, the phrase "question of arbitrability" has a far more limited scope. See 514 U. S., at 942. The Court has found the phrase applicable in the kind of narrow circumstance where contracting parties would likely have expected a court to have decided the gateway matter, where they are not likely to have thought that they had agreed that an...
To continue reading
Request your trial
-
Sanchez v. Western Pizza Enterprises, Inc.
...v. Communications Workers (1986) 475 U.S. 643, 649 [89 L.Ed.2d 648, 106 S.Ct. 1415]; accord, Howsam v. Dean Witter Reynolds, Inc. (2002) 537 U.S. 79, 83-84 [154 L.Ed.2d 491, 123 S.Ct. 588]; First Options of Chicago, Inc. v. Kaplan (1995) 514 U.S. 938, 944 [131 L.Ed.2d 985, 115 S.Ct. 1920].)......
-
Douglass v. Serenivision, Inc.
...jurisdiction, at least if their agreement to do so is " ‘clear [ ] and unmistakabl[e].’ " ( Howsam v. Dean Witter Reynolds, Inc. (2002) 537 U.S. 79, 83, 123 S.Ct. 588, 154 L.Ed.2d 491 ( Howsam ).) Does a party clearly and unmistakably consent to have an arbitrator decide his own jurisdictio......
-
Castillo v. Cleannet USA, Inc.
...of contract, the question of arbitrability is, in principle, an issue for judicial determination. Howsam v. Dean Witter Reynolds, Inc. , 537 U.S. 79, 84, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002). The court's role in addressing a question of arbitrability is "limited to determining (1) whether ......
-
In re American Express Merchants' Litigation
...arbitration clause," a dispute which "raises a question of arbritrability for a court to decide." Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002) (internal quotation marks omitted); accord Kristian v. Comcast Corp., 446 F.3d 25, 55 (1st Cir.2006)......
-
International Arbitration Comparative Guide
...of institutional rules which provide that the tribunal can rule on its own jurisdiction. However, in Howsam v Dean Witter Reynolds, Inc, 537 US 79, 123 S Ct 588 (2002), the Supreme Court of the United States considered whether the applicability of a time limit rule for demanding arbitration......
-
Second Circuit Affirms Direction To Arbitrate But Holds The Arbitration Panel Determines Scope Of Contractual Forum Clause
...of venue was for the arbirator to decide. The Circuit discussed the two Supreme Court decision, Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002), and Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (2003), found that its decision in Bear, Stearns & Co. v. Bennett, 938 F.2d 31......
-
Competence-Competence Under U.S. Arbitration Law After BG Group Plc V. Republic Of Argentina
...Corp., 638 F.3d 384, 393 (2d Cir. 2011) (internal quotation marks and alterations omitted). 17 See Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 86 (2002); Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25 18 See BG Grp., 134 S. Ct. at 1207. 19 First Options of Chi., In......
-
U.S. Supreme Court Holds That Arbitrators, Not Courts, Are Entitled To Interpret Local Litigation Requirements In Bilateral Investment Treaties
...given consent to arbitration or whether a particular type of controversy is subject to arbitration. Under Howsam v. Dean Witter Reynolds, 537 U. S. 79, 84-5 (2002), substantive issues are for the courts to decide de novo, while procedural issues are for the arbitrator to decide in the first......
-
Table of Cases
...1225 (3d Cir. 1988), 20 Howell Indus. v. Sharon Steel Corp., 532 F. Supp. 400 (E.D. Mich. 1981), 76 Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002), 37 I Ill. Brick Co. v. Illinois, 431 U.S. 720 (1977), 33 Ill. Corp. Travel v. Am. Airlines, 889 F.2d 751 (7th Cir. 1989), 60, 64, 69,......
-
The Antitrust Laws: An Overview
...Act, the Antitrust Division has not enforced any of its provisions for decades. 205 202. Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84 (2002). 203. See, e.g. , Shaw Group v. Triplefine Int’l Corp., 322 F.3d 115, 122-24 (2d Cir. 2003) (holding that when parties explicitly incorporate......
-
Arbitration: Interface of Thefederal Arbitration Act Andnebraska State Law
...518 (1998). This decision was four years prior to the same determination by the Supreme Court in Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002). 15. Cornhusker Int'l Trucks, Inc. v. Thomas Built Buses, Inc., 263 Neb. 10, 637 N.W.2d 876 (2002). See discussion in text at Part IV, Se......
-
Participation in Litigation as a Waiver of the Contractual Right to Arbitrate: Toward a Unified Theory
...prior to review by the Supreme Court. Stok & Assocs. v. Citibank, N.A., 131 S. Ct. 2955 (2011). 14. Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 15. Id. 16. See Elkouri & Elkouri, How Arbitration Works 287-89 (Alan Miles Ruben ed., 6th ed. 2003). 17. Howsam, 537 U.S. at 83-84. 18. ......