The Court expressly overturns Wilko, and declares that “resort to arbitration does not inherently undermine [a] petitioner’s substantive rights” under a statute.

Relevant Facts: Customers of an investor firm sued for fraud under the Securities Act, inter alia, but were compelled into arbitration under an adhesive pre-printed “customer agreement” that contained an arbitration clause. Relying on Wilko, the district court ordered all but the Securities Act claim into arbitration. The appeals court reversed, in part, concluding that the Supreme Court’s subsequent rulings on the FAA had rendered its holding in Wilko obsolete.

Question Before The Court: Whether complex federal statutory claims may be compelled into arbitration, and what burden a party opposing arbitration must meet to successfully overcome a motion to compel arbitration when they are arguing a competing federal statute renders that claim nonarbitrable.

The Opinion: The Court agreed with the appellate court and fully overturned Wilko, holding that pre-dispute agreements to arbitrate claims under the Securities Act of 1933 are enforceable, and such claims are not required to be resolved exclusively in a judicial forum. In Wilko, the Court rejected the argument that “arbitration is merely a form of trial to be used in lieu of a trial at law.” Here, the Court provided that “to the extent that Wilko 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.

The Court found that Wilko was “incorrectly decided and inconsistent with the prevailing uniform construction of other federal statutes governing arbitration agreements in the setting of business transactions.” According to the Court, the FAA places the burden of proving congressional intent to waive judicial remedies on the party opposing arbitration; the party opposing arbitration carries the burden of showing that Congress intended in a separate statute to preclude a waiver of judicial remedies, or that such a waiver of judicial remedies inherently conflicts with the underlying purposes of that other statute. That burden was not met in this case. The Court brushed off the petitioners’ argument that the contracts in question were adhesive in nature, simply providing that “no factual showing” supported the suggestion.

In holding that a pre-dispute agreement to arbitrate federal securities disputes is enforceable, and that resolution of the complex claims in a judicial forum is not required, the Court established a new principle of law which it asserted “furthers the purpose and effect of the Arbitration Act without undermining those” of other federal statutes, and which “does not produce substantial inequitable results.” To support its position, the Court declared that “resort to arbitration does not inherently undermine any of petitioner’s substantive rights under [a statute].”

This case demonstrates the Court’s new willingness to sequester almost any type of federal statutory claim, regardless of its complexity, into arbitration, as well as their intolerance of objections by individuals roped into these agreements through contracts of adhesion.