Rodriguez De Quijas v. Shearson/Am. Exp.

PETITIONER: Rodriguez De Quijas
RESPONDENT: Shearson/Am. Exp.
LOCATION: Residence of Cruzan

DOCKET NO.: 88-385
DECIDED BY: Rehnquist Court (1988-1990)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 490 US 477 (1989)
ARGUED: Mar 27, 1989
DECIDED: May 15, 1989

Denis A. Downey - on behalf of the Petitioners
Theodore A. Krebsbach - on behalf of the Respondents

Facts of the case


Media for Rodriguez De Quijas v. Shearson/Am. Exp.

Audio Transcription for Oral Argument - March 27, 1989 in Rodriguez De Quijas v. Shearson/Am. Exp.

William H. Rehnquist:

We'll hear argument first this morning in No. 83-385, Ofelia Rodriguez de Quijas, et al., versus Shearson/American Express.

Denis A. Downey:

Mr. Chief Justice and may it please the Court:

These cases arise from complaints filed in the Southern District of Texas, Brownsville Division, which allege violations of state common law, including sexual assault, state statutory securities provisions, and federal securities provisions.

Pursuant to the order of the district court, all these issues were ordered submitted to arbitration, with the exception of the 12(2) Securities Act claims.

That order was appealed to the Fifth Circuit Court of Appeals, who in effect held that this Court's decision in McMahon had overruled the Wilko decision, and the Fifth Circuit ordered the 12(2) claims be in fact arbitrated.

And it's on the writ of certiorari to the Fifth Circuit in fact that we are here before you today.

These facts basically are similar.

They involve a number of plaintiffs.

The basic allegation is fraudulent trades in the accounts of these individuals.

While a brief review of the facts indicates that they are sad facts, the remarkable thing about these cases are in fact that these cases are all too common.

The reality of America is that women outlive men, and the result is that at some point in a woman's life she finds herself with insurance proceeds or with liquidation of business proceeds, frequently lacking in business experience, and with a fear for future financial security.

These cases are about in fact all of us.

As we see this case, the critical issue here is whether or not this Court is going to overrule its decision rendered in Wilko 36 years ago.

The standard analysis that's been applied to all this Court's cases would appear to be that we look at the purposes, the legislative history, and the text of the Acts in question.

And of course, we're dealing here with the Federal Arbitration Act of 1925 and the Federal Securities Act of 1933.

In the Petitioners' view, the Federal Arbitration Act has been read much too broadly.

It would appear that the text of the Federal Arbitration Act expresses the intent to place arbitration contracts on exactly the same footing as other contracts.

And that is also what the legislative history would seem to indicate.

The key phrase here throughout the court cases that have reviewed the legislative history of that Act is that the intent was to place these contracts on the same footing as other contracts.

We do not see an elevated federal policy in the Federal Arbitration Act.

William H. Rehnquist:

Certainly we would have to reconsider some of our recent cases to adopt that view, wouldn't we, Mr. Downey?

Denis A. Downey:

Yes, that's unquestionably, unquestionably true.

Our purpose here is, rather than in the absolute sense, to try to create a better comparative balance between the Federal Arbitration Act and the 1933 Securities Act.

We see the Federal Arbitration Act as involving federal policies of considerably less importance than that of the 1933 Securities Act.

Sandra Day O'Connor:

Mr. Downey, is there any evidence that Congress meant to treat claims under Section 12(2) differently than claims under Section 10(b)?

Do we have anything in the legislative history to indicate that Congress intended them to be treated differently, even though they were not enacted at the same time?

Denis A. Downey:

Well, I would say that, first of all, the fact that the 10(b) action, the civil part of it, is an implied cause of action.

Although I understand there's a sensitivity that we shouldn't treat implied actions differently than express actions, I think there are some contexts where that fact would be true.

In this instance, this may well have been an instance where Congress intended that the area be left to the courts for general development.

I would also point out that there is a difference in 10(b) and 12(2) in the sense that 12(2) addresses... purports to protect purchasers of securities, whereas the 10(b) action is both purchasers and sellers.