|HOWSAM V. DEAN WITTER REYNOLDS, INC. (01-800) 537 U.S. 79 (2002)
261 F.3d 956, reversed.
[ Breyer ]
[ Thomas ]
KAREN HOWSAM, etc., PETITIONER v. DEAN
WITTER REYNOLDS, INC.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE TENTH CIRCUIT
[December 10, 2002]
Justice Breyer delivered the opinion of the Court.
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 Agreements arbitration clause, which provides:
concerning or arising from
, any transaction
the construction, performance or breach of
agreement between us
shall be determined by arbitration before any self-regulatory organization or exchange of which Dean Witter is a member. App.
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 NASDs Uniform Submission Agreement. That agreement specified that the present matter in controversy was submitted for arbitration in accordance with the NASDs 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 disputes 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) (holding 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) (holding that NASD §15, currently §10304, is presumptively for the arbitrator); Smith Barney Shearson, Inc. v. Boone, 47 F.3d 750 (CA5 1995) (same). We granted Howsams 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 942943. 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, 2425 (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 Courts 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 arbitrator would do so, and, consequently, where reference of the gateway dispute to the court avoids the risk of forcing parties to arbitrate a matter that they may well not have agreed to arbitrate.
Thus, a gateway dispute about whether the parties are bound by a given arbitration clause raises a question of arbitrability for a court to decide. See id., at 943946 (holding that a court should decide whether the arbitration contract bound parties who did not sign the agreement); John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 546547 (1964) (holding that a court should decide whether an arbitration agreement survived a corporate merger and bound the resulting corporation). Similarly, a disagreement about whether an arbitration clause in a concededly binding contract applies to a particular type of controversy is for the court. See, e.g., AT&T Technologies, supra, at 651652 (holding that a court should decide whether a labor-management layoff controversy falls within the arbitration clause of a collective-bargaining agreement); Atkinson v. Sinclair Refining Co., 370 U.S. 238, 241243 (1962) (holding that a court should decide whether a clause providing for arbitration of various grievances covers claims for damages for breach of a no-strike agreement).
At the same time the Court has found the phrase question of arbitrability not applicable in other kinds of general circumstance where parties would likely expect that an arbitrator would decide the gateway matter. Thus
Following this precedent, we find that the applicability of the NASD time limit rule is a matter presumptively for the arbitrator, not for the judge. The time limit rule closely resembles the gateway questions that this Court has found not to be questions of arbitrability. E.g., Moses H. Cone Memorial Hospital, supra, at 2425 (referring to waiver, delay, or a like defense). Such a dispute seems an aspec[t] of the [controversy] which called the grievance procedures into play. John Wiley, supra, at 559.
Moreover, the NASD arbitrators, comparatively more expert about the meaning of their own rule, 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. Cf. First Options, supra, at 944945. And for the law to assume an expectation that aligns (1) decisionmaker with (2) comparative expertise will help better to secure a fair and expeditious resolution of the underlying controversya goal of arbitration systems and judicial systems alike.
We consequently conclude that the NASDs time limit rule falls within the class of gateway procedural disputes that do not present what our cases have called questions of arbitrability. And the strong pro-court presumption as to the parties likely intent does not apply.
Dean Witter argues that, in any event, i.e., even without an antiarbitration presumption, we should interpret the contracts between the parties here as calling for judicial determination of the time limit matter. Howsams execution of a Uniform Submission Agreement with the NASD in 1997 effectively incorporated the NASD Code into the parties agreement. Dean Witter notes the Codes time limit rule uses the word eligible. That word, in Dean Witters view, indicates the parties intent for the time limit rule to be resolved by the court prior to arbitration.
We do not see how that is so. For the reasons stated in Part II, supra, 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 appearance of the word eligible in the NASD Code rule is counterbalanced by a different NASD rule; that rule states that arbitrators shall be empowered to interpret and determine the applicability of all provisions under this Code. NASD Code §10324.
Consequently, without the help of a special arbitration-disfavoring presumption, we cannot conclude that the parties intended to have a court, rather than an arbitrator, interpret and apply the NASD time limit rule. And as we held in Part II, supra, that presumption does not apply.
For these reasons, the judgment of the Tenth Circuit is
Justice OConnor took no part in the consideration or decision of this case.