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Scherk v. Alberto-Culver Co.

United States Supreme Court
417 U.S. 506 (1974)


Facts

Alberto-Culver Company (plaintiff), an American company headquartered in Illinois, signed a contract with Fritz Scherk (defendant), a German citizen residing in Switzerland. Under the contract, Scherk sold his businesses to Alberto-Culver, along with all related trademarks. Scherk’s businesses were registered in Germany and Liechtenstein. The contract contained an arbitration clause stating that all disputes arising out of the contract would be sent for arbitration to the International Chamber of Commerce in Paris. Further, the contract stated that Illinois law would govern the contract. After the execution of the contract, Alberto-Culver discovered other claims to the trademarks. Alberto-Culver sued Scherk in United States federal district court, asserting a violation of § 10(b) of the Securities Exchange Act of 1934 (act). Scherk filed a motion to dismiss for lack of jurisdiction, or, alternatively a motion to compel arbitration. The district court denied the motion to dismiss and granted an injunction preventing arbitration. The district court relied on § 14 of the act, which voided any waiver of provisions of the act, including the ability to select a judicial forum. The United States Court of Appeals for the Seventh Circuit affirmed. The United States Supreme Court granted certiorari.

Rule of Law

Issue

Holding and Reasoning (Stewart, J.)

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