## Facts

- A. Lamar Byrd opened an investment account with Dean Witter Reynolds, Inc. after selling his dental practice and invested about $160,000.
- Byrd’s customer agreement contained an arbitration clause requiring arbitration of “any controversy” arising out of the account.
- After significant losses, Byrd sued in federal court alleging mismanagement and “churning.”
- Byrd asserted federal claims under the Securities Exchange Act of 1934 and pendent state-law claims.
- Dean Witter moved to compel arbitration of the state-law claims under the Federal Arbitration Act (FAA) and sought to stay arbitration while the federal securities claims proceeded in court.
- The district court denied the motion to compel arbitration; the Ninth Circuit affirmed.

## Issues

1. Whether the FAA requires a federal court to compel arbitration of pendent, arbitrable state-law claims when the same action also includes non-arbitrable federal securities claims, even if doing so results in parallel proceedings in different forums.

## Decision

- The Supreme Court unanimously reversed the Ninth Circuit.
- The Court held that the FAA requires district courts to compel arbitration of arbitrable pendent state-law claims when a party moves to compel, notwithstanding the possibility of inefficient, split proceedings.
- The case was remanded for further proceedings consistent with the Court’s interpretation of the FAA.

## Legal Principles

- When the FAA’s statutory prerequisites are met, a district court lacks discretion to refuse arbitration of claims covered by a valid arbitration agreement.
- The FAA’s principal purpose is to ensure judicial enforcement of private arbitration agreements, not to maximize efficiency or consolidate disputes in a single forum.
- Concerns that arbitration might affect federal adjudication (including possible preclusion effects) are addressed through collateral estoppel doctrine, not by denying arbitration.
- Pendent jurisdiction does not authorize a federal court to disregard the FAA’s mandate to enforce arbitration agreements.
- A separate concurrence noted uncertainty in then-existing assumptions about the non-arbitrability of federal securities claims, though that question was not decided.

## Conclusion

The Court required enforcement of the parties’ arbitration agreement as to the arbitrable state-law claims, holding that the FAA mandates compelling arbitration even if related federal securities claims remain in court and the result is bifurcated proceedings.


Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213 (1985)