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Abstract

The arbitrability of pendent state claims in federal securities cases has become a problematic issue. This issue arises out of federal courts' efforts to recognize the conflicting policies of two federal statutes in the context of investor-broker disputes. 2 Since 1953 federal courts have chosen sides in this controversy3 between the pro-investor Securities Acts' (hereinafter Securities Act, 1933 Act, or 1934 Act) and the pro-broker Federal Arbitration Act 5 (hereinafter Arbitration Act). Ineffectual attempts to reconcile the two competing policies were exemplified in a recent dispute between a retired dentist and his investment company, where the issue was settled by the United States Supreme Court in Dean Witter Reynolds, Inc. v. Byrd.6 The Court held that district courts have no discretion to direct parties to arbitrate an issue encompassed in an arbitration agreement because the Arbitration Act mandates that district courts shall direct the parties to proceed to arbitration in those controversies involving both arbitrable and nonarbitrable claims. 7 In so holding, the Court stamped the resulting bifurcated proceedings with the federal seal of approval and placed judicial economy in the back seat.'

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