Fact Pattern 3-2
Ellen contracts with James to be her stockbroker, making stock trades for Ellen's account. Ellen need not pre-approve the trades that James makes, only trades for more than $20,000. Ellen and James include a clause stating "that in case of any disputes arising out of this contract; the dispute shall be arbitrated using the rules of the New York Stock Exchange."
Ellen learns that since signing her contract with James, he has routinely been making trades worth more than $20,000 without her permission, and losing money.
-Refer to Fact Pattern 3-2. If Ellen takes her dispute to the local court, according to the Federal Arbitration Act, what should happen?
A) the court will hear the case
B) the court should dismiss the case
C) the court will hear the case, but only if both parties disagree as to the subject matter
D) the FAA will not apply here, because the dispute involves intangible property
E) none of the other choices

Question

Quizplus · Accepted Answer

The Federal Arbitration Act (FAA) requires that agreements to arbitrate disputes be enforced. Ellen and James included a clause in their contract stating that any disputes would be arbitrated using the rules of the New York Stock Exchange, so the court should dismiss the case and require arbitration according to the terms of their agreement.

Fact Pattern 3-2 Ellen Contracts with James to Be Her Stockbroker, Making Stock