## Facts

- Mary Koveleskie worked as a securities trader for SBC Capital Markets, Inc.
- As a condition of working in the securities industry, she registered with securities organizations and signed a Form U-4.
- Form U-4 required arbitration of any dispute required to be arbitrated under the rules of the registered securities organizations.
- The applicable exchange rules required arbitration of employment-related disputes between member firms and registered representatives.
- After resigning, Koveleskie filed an EEOC charge alleging sex discrimination under Title VII, obtained a right-to-sue letter, and sued in federal court.
- SBC moved to dismiss and compel arbitration under the Federal Arbitration Act (FAA) and the Form U-4 arbitration provision.
- The district court declined to compel arbitration and permitted discovery before deciding the arbitration issue.

## Issues

1. Whether the Form U-4 arbitration agreement covered Koveleskie’s Title VII employment discrimination claims against SBC.
2. Whether Title VII or public policy barred enforcement of a pre-dispute arbitration agreement requiring arbitration of Title VII claims.
3. Whether later regulatory and industry rule changes limiting mandatory arbitration of certain discrimination claims affected an earlier executed Form U-4 agreement.
4. Whether the Form U-4 agreement was unenforceable because it was required as a condition of employment, absent traditional contract defenses.

## Decision

- The Seventh Circuit reversed the order denying SBC’s motion to compel arbitration and remanded with instructions to compel arbitration.
- The court held that Koveleskie’s Form U-4 bound her to arbitrate employment-related disputes required by exchange rules, including her Title VII claims.
- The court concluded that Title VII claims are arbitrable absent clear congressional intent to preclude arbitration.
- The court rejected reliance on later regulatory amendments as a basis to invalidate a previously signed arbitration agreement.
- The court found that conditioning employment on signing a standard arbitration form did not, without fraud, duress, or similar defenses, render the agreement unenforceable.

## Legal Principles

- The FAA requires enforcement of arbitration agreements according to their terms unless a generally applicable contract defense justifies revocation.
- A Form U-4 arbitration clause can require arbitration of statutory employment discrimination claims when the relevant securities-organization rules mandate arbitration of such disputes.
- Title VII does not categorically bar arbitration of discrimination claims; congressional intent to preclude arbitration must be clear to override the FAA.
- Forward-looking regulatory or industry rule changes limiting arbitration do not retroactively negate valid arbitration agreements already in effect.
- Allegations that an arbitration agreement is a condition of employment or a standardized form are insufficient, without traditional contract defenses, to avoid arbitration.
- Compelling arbitration of an individual employee’s claim does not eliminate the EEOC’s independent authority to pursue public enforcement actions.

## Conclusion

The Seventh Circuit enforced the securities-industry Form U-4 arbitration agreement under the FAA and required arbitration of the employee’s Title VII sex discrimination claims, rejecting arguments based on later regulatory changes and the agreement’s status as a condition of employment.


Koveleskie v. SBC Cap. Mkts., Inc., 167 F.3d 361 (7th Cir. 1999)