STANLEY S. HARRIS, UNITED STATES DISTRICT JUDGE
This matter is before the Court on defendant's motion to compel arbitration and to dismiss, and plaintiffs' opposition thereto.
Plaintiffs contracted with defendant, a licensed securities brokerage firm, to represent them in the purchase and sale of options. Plaintiffs signed a standard option agreement with defendant in 1975, providing in part that "any controversy between [the parties] arising out of such option transactions or this agreement shall be settled by arbitration before the National Association of Securities Dealers, Incorporated, or the New York Stock Exchange, or the American Stock Exchange, only." Plaintiffs dealt with defendant without discord until the fall of 1987. In October of 1987, defendant allegedly allowed plaintiffs' account to fall between the cracks, resulting in substantial damages and ultimately this dispute. In spite of the options contract, plaintiffs filed this suit for redress instead of resolving the dispute by arbitration. Defendant requests that the Court compel arbitration in accordance with the contract and to dismiss this case. The Court grants defendant's motion to compel, but denies defendant's motion to dismiss.
Defendant argues that 9 U.S.C. § 4, read in compliance with Shearson/American Express v. McMahon, 482 U.S. 220, 107 S. Ct. 2332, 96 L. Ed. 2d 185 (1987), reh'g denied, 483 U.S. 1056, 108 S. Ct. 31, 97 L. Ed. 2d 819 (1987), requires the Court to compel arbitration. Plaintiffs, on the other hand, claim that Shearson does not apply and that the arbitration agreement is unenforceable. Plaintiffs make two arguments in support of their position. First, plaintiffs argue that since the 1975 contract was written at a time when such exclusive agreements to arbitrate were frowned upon by the courts and the SEC, the contract is unenforceable.
Second, plaintiffs claim that the arbitration agreement is unenforceable because it is in violation of the American Stock Exchange Constitution.
As pointed out in Shearson, the Court's holding in Wilko v. Swan, 346 U.S. 427, 98 L. Ed. 168, 74 S. Ct. 182 (1953), is tempered by the Court's series of cases that attempt to place arbitration agreements upon the same footing as other contracts and reverse judicial hostility to arbitration agreements.
These cases dispel the notion that Wilko prohibited agreements such as the agreement in this case. Thus, Wilko is limited to areas in which arbitration is inadequate to protect the substantive rights at issue. Id. at 2340; see also, Scherk v. Alberto-Culver Co., 417 U.S. 506, 41 L. Ed. 2d 270, 94 S. Ct. 2449 (1974).
Plaintiffs have not presented any evidence showing that arbitration would be inadequate to protect their rights. Furthermore, given the 1974 Scherk decision and the 1975 amendments to § 19 of the Exchange Act (giving the SEC expansive power to ensure the adequacy of the arbitration procedures employed by self-regulatory organizations), the Court finds unpersuasive plaintiffs' argument that their 1975 contract would be held invalid under the law at the time of contracting.
Plaintiffs' second argument, that the arbitration agreement is in violation of the American Stock Exchange (Amex) Constitution and thus is unenforceable, also fails to persuade the Court. Plaintiffs cite Section 2 of that Constitution, which states:
Arbitrations shall be conducted under the arbitration procedures of this Exchange, except as follows: . . . (c) if any of the parties to a controversy is a customer, the customer may elect to arbitrate before the American Arbitration Association in the City of New York, unless the customer has expressly agreed, in writing, to submit only the arbitration procedure of the Exchange.