JUSTICE KENNEDY delivered the opinion of the Court.
The question here is whether a predispute agreement to arbitrate claims under the Securities Act of 1933 is unenforceable, requiring resolution of the claims only in a judicial forum.
Petitioners are individuals who invested about $400,000 in securities. They signed a standard customer agreement with the broker, which included a clause stating that the parties agreed to settle any controversies "relating to [the] accounts" through binding arbitration that complies with specified procedures. The agreement to arbitrate these controversies is unqualified, unless it is found to be unenforceable under federal or state law. Customer's Agreement ¶ 13. The investments turned sour, and petitioners eventually sued respondent and its broker-agent in charge of the accounts, alleging that their money was lost in unauthorized and fraudulent transactions. In their complaint they
The District Court ordered all the claims to be submitted to arbitration except for those raised under § 12(2) of the Securities Act. It held that the latter claims must proceed in the court action under our clear holding on the point in Wilko v. Swan, 346 U.S. 427 (1953). The District Court reaffirmed its ruling upon reconsideration and also entered a default judgment against the broker, who is no longer in the case. The Court of Appeals reversed, concluding that the arbitration agreement is enforceable because this Court's subsequent decisions have reduced Wilko to "obsolescence." Rodriguez de Quijas v. Shearson/Lehman Bros., Inc., 845 F.2d 1296, 1299 (CA5 1988). We granted certiorari, 488 U.S. 954 (1988).
The Wilko case, decided in 1953, required the Court to determine whether an agreement to arbitrate future controversies constitutes a binding stipulation "to waive compliance with any provision" of the Securities Act, which is nullified by § 14 of the Act. 15 U. S. C. § 77n. The Court considered the language, purposes, and legislative history of the Securities Act and concluded that the agreement to arbitrate was void under § 14.
It has been recognized that Wilko was not obviously correct, for "the language prohibiting waiver of `compliance with any provision of this title' could easily have been read to relate to substantive provisions of the Act without including the remedy provisions." Alberto-Culver Co. v. Scherk, 484 F.2d 611, 618, n. 7 (CA7 1973) (Stevens, J., dissenting), rev'd, 417 U.S. 506 (1974). The Court did not read the language this way in Wilko, however, and gave two reasons. First, the Court rejected the argument that "arbitration is merely a form of trial to be used in lieu of a trial at law." 346 U. S., at 433. The Court found instead that § 14 does not permit waiver of "the right to select the judicial forum" in favor of arbitration, id., at 435, because "arbitration lacks the certainty of a suit at law under the Act to enforce [the buyer's] rights," id., at 432. Second, the Court concluded that the Securities Act was intended to protect buyers of securities, who often do not deal at arm's length and on equal terms with sellers, by offering them "a wider choice of courts and venue" than is enjoyed by participants in other business transactions, making "the right to select the judicial forum" a particularly valuable feature of the Securities Act. Id., at 435.
We do not think these reasons justify an interpretation of § 14 that prohibits agreements to arbitrate future disputes relating to the purchase of securities. The Court's characterization of the arbitration process in Wilko is pervaded by what Judge Jerome Frank called "the old judicial hostility to arbitration." Kulukundis Shipping Co. v. Amtorg Trading Corp., 126 F.2d 978, 985 (CA2 1942). That view has been steadily eroded over the years, beginning in the lower courts. See Scherk, supra, at 616 (Stevens, J., dissenting) (citing cases). The erosion intensified in our most recent decisions upholding agreements to arbitrate federal claims raised under the Securities Exchange Act of 1934, see Shearson/American
Once the outmoded presumption of disfavoring arbitration proceedings is set to one side, it becomes clear that the right to select the judicial forum and the wider choice of courts are not such essential features of the Securities Act that § 14 is properly construed to bar any waiver of these provisions. Nor are they so critical that they cannot be waived under the rationale that the Securities Act was intended to place buyers of securities on an equal footing with sellers. Wilko identified two different kinds of provisions in the Securities Act that would advance this objective. Some are substantive, such as the provision placing on the seller the burden of proving lack of scienter when a buyer alleges fraud. See 346 U. S., at 431, citing 15 U. S. C. § 77l(2). Others are procedural. The specific procedural improvements highlighted in
There is no sound basis for construing the prohibition in § 14 on waiving "compliance with any provision" of the Securities Act to apply to these procedural provisions. Although the first three measures do facilitate suits by buyers of securities, the grant of concurrent jurisdiction constitutes explicit authorization for complainants to waive those protections by filing suit in state court without possibility of removal to federal court. These measures, moreover, are present in other federal statutes which have not been interpreted to prohibit enforcement of predispute agreements to arbitrate. See Shearson/American Express Inc. v. McMahon, supra (construing the Securities Exchange Act of 1934; see 15 U. S. C. § 78aa); ibid. (construing the RICO statutes; see 18 U. S. C. § 1965); Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., supra (construing the antitrust laws; see 15 U. S. C. § 15).
Indeed, in McMahon the Court declined to read § 29(a) of the Securities Exchange Act of 1934, the language of which is in every respect the same as that in § 14 of the 1933 Act, compare 15 U. S. C. § 77v(a) with § 78aa, to prohibit enforcement of predispute agreements to arbitrate. The only conceivable distinction in this regard between the Securities Act and the Securities Exchange Act is that the former statute allows concurrent federal-state jurisdiction over causes of action and the latter statute provides for exclusive federal jurisdiction. But even if this distinction were thought to make any difference at all, it would suggest that arbitration agreements,
Finally, in McMahon we stressed the strong language of the Arbitration Act, which declares as a matter of federal law that arbitration agreements "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U. S. C. § 2. Under that statute, 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. 482 U. S., at 226-227. But as Justice Frankfurter said in dissent in Wilko, so it is true in this case: "There is nothing in the record before us, nor in the facts of which we can take judicial notice, to indicate that the arbitral system . . . would not afford the plaintiff the rights to which he is entitled." 346 U. S., at 439. Petitioners have not carried their burden of showing that arbitration agreements are not enforceable under the Securities Act.
The language quoted above from § 2 of the Arbitration Act also allows the courts to give relief where the party opposing arbitration presents "well-supported claims that the agreement to arbitrate resulted from the sort of fraud or overwhelming
We do not suggest that the Court of Appeals on its own authority should have taken the step of renouncing Wilko. If a precedent of this Court has direct application in a case, yet appears to rest on reasons rejected in some other line of decisions, the Court of Appeals should follow the case which directly controls, leaving to this Court the prerogative of overruling its own decisions. We now conclude that Wilko was incorrectly decided and is inconsistent with the prevailing uniform construction of other federal statutes governing arbitration agreements in the setting of business transactions. Although we are normally and properly reluctant to overturn our decisions construing statutes, we have done so to achieve a uniform interpretation of similar statutory language, Commissioner v. Estate of Church, 335 U.S. 632, 649-650 (1949), and to correct a seriously erroneous interpretation of statutory language that would undermine congressional policy as expressed in other legislation, see, e. g., Boys Markets, Inc. v. Retail Clerks, 398 U.S. 235, 240-241 (1970) (overruling Sinclair Refining Co. v. Atkinson, 370 U.S. 195 (1962)). Both purposes would be served here by overruling the Wilko decision.
It also would be undesirable for the decisions in Wilko and McMahon to continue to exist side by side. Their inconsistency is at odds with the principle that the 1933 and 1934 Acts should be construed harmoniously because they "constitute
Petitioners argue finally that if the Court overrules Wilko, it should not apply its ruling retroactively to the facts of this case. We disagree. The general rule of long standing is that the law announced in the Court's decision controls the case at bar. See, e. g., Saint Francis College v. Al-Khazraji, 481 U.S. 604, 608 (1987); United States v. Schooner Peggy, 1 Cranch 103, 109 (1801). In some civil cases, the Court has restricted its rulings to have prospective application only, where specific circumstances are present. Chevron Oil v. Huson, 404 U.S. 97, 106-107 (1971). Under the Chevron approach, the customary rule of retroactive application is appropriate here. Although our decision to overrule Wilko establishes a new principle of law for arbitration agreements under the Securities Act, this ruling furthers the purposes and effect of the Arbitration Act without undermining those of the Securities Act. Today's ruling, moreover, does not produce "substantial inequitable results," 404 U. S., at 107, for petitioners do not make any serious allegation that they agreed to arbitrate future disputes relating to their investment contracts in reliance on Wilko's holding that such agreements would be held unenforceable by the courts. Our
The judgment of the Court of Appeals is
JUSTICE STEVENS, with whom JUSTICE BRENNAN, JUSTICE MARSHALL, and JUSTICE BLACKMUN join, dissenting.
The Court of Appeals refused to follow Wilko v. Swan, 346 U.S. 427 (1953), a controlling precedent of this Court. As the majority correctly acknowledges, ante, at 484, the Court of Appeals therefore engaged in an indefensible brand of judicial activism.
I respectfully dissent.