The Arbitration Legacy of Justice Sandra Day O'Connor.

• Author: Lathrop, Mitchell L.

JUSTICE Sandra Day O'Connor's impact on arbitration cannot be overstated. From her appointment in 1981 by President Ronald Reagan as the first woman to sit on the United States Supreme Court, Justice O'Connor participated in landmark decisions that established the place of arbitration to today's society. Among these are such legendary cases as Moses H. Cone Memorial Hospital v. Mercury Construction Corp. (1983), (1) Southland Corp. v. Keating (1984), (2) Dean Witter Reynolds Inc. v. Byrd (1985), (3) Allied-Bruce Terminix Companies, Inc. v. Dobson (1995), (4) Mastrobuono v. Shearson Lehman Hutton, Inc. (1995), (5) Vimar Seguros y Reaseguros, S. A. v. M/V Sky Reefer (1995), (6)

Doctor's Associates v. Casarotto (1996), (7) Circuit City Stores, Inc. v. Adams (2000), (8) Green Tree Financial Corp. v. Randolph (2000), (9) Howsam v. Dean Witter Reynolds, Inc. (2002), (10) Citizens Bank v. Alafabco (2003), (11) and Green Tree Financial Corp. v. Bazzle (2003). (12) Through these decisions handed down during Justice O'Connor's 25 years on the high court, Justice O'Connor's positions cemented arbitration as a means of commercial dispute resolution in the United States. They also established the primacy of the Federal Arbitration Act in cases involving international or interstate arbitration. This article highlights Justice O'Connor's role in landmark arbitration decisions in recognition of the special relationship between The IADC Foundation and iCivics.

Spearheaded by the Honorable Sandra Day O'Connor, iCivics is a web-based education project designed to reinvigorate civics teaching and learning. iCivics features free lesson plans, interactive modules, and games. With these tools, iCivics empowers the first generation of 'digital natives' to become knowledgeable civic participants and leaders.

The IADC Foundation has supported iCivics for a decade and was one of its first supporters. The IADC Foundation is working with the assistance of IADC members to promote iCivics and bring it into classrooms across the United States. Lawyers interested in helping with iCivics should visit the iCivics website for more information and a guide for volunteering in the classroom.

1. Shearson/American Express Inc. v. McMahon

   One of Justice O'Connor's most significant opinions on arbitration was the 1987 holding in Shearson/American Express Inc. v. McMahon (Shearson). (13) This case arose when two customers of Shearson brought suit in the United States District Court for the Southern District of New York seeking damages for alleged violations of the antifraud provisions of the Securities Exchange Act of 1934 (the Exchange Act) (14) and the Racketeer Influenced and Corrupt Organizations Act (RICO). (15)

   The customers' agreement with Shearson contained an arbitration provision requiring arbitration of any controversy relating to the accounts. Shearson moved to compel arbitration of the claims pursuant to section 3 of the Federal Arbitration Act (FAA). (16)

   The customers advanced two specific arguments in opposition to arbitration. The first was that Section 29(a) of the Exchange Act (17) voided any agreement to waive compliance with any provision of the Exchange Act. Section 27 of the Exchange Act (18) confers exclusive jurisdiction over violations of the Exchange Act in the federal district courts. The customers argued that an arbitration agreement is necessarily unenforceable because it voids the jurisdictional requirement of Section 27. The customers' second argument was that public policy and RICO's treble damages provision (19) makes RICO claims unsuitable for arbitration and must be decided in federal courts.

   The District Court granted Shearson's motion in part, ruling that the Exchange Act claims were arbitrable but that the RICO claim was not. When the case reached the Second Circuit, the appellate court affirmed as to the RICO claim but reversed on the Exchange Act claims. It rejected the argument that any waiver of the jurisdictional provision of Section 27 prohibits arbitration of Exchange Act claims. The Supreme Court granted certiorari.

   Writing for the unanimous Court, Justice O'Connor expressed the view that claims under the Exchange Act are arbitrable under the provisions of the FAA in accordance with the terms of the arbitration agreements. Section 29(a) of the Exchange Act does not prohibit a waiver of Section 27, because Section 29(a) only prohibits a waiver of the substantive obligations imposed by the Exchange Act. The Court rejected assumptions made about the earlier case of Wilko v. Swan. (20) Wilko was...