There has been renewed interest in whether the SEC should allow a U.S. company to conduct a registered initial public offering if its bylaws require shareholders to arbitrate federal securities claims. In April 2018, SEC Chair Jay Clayton said that resolving this knotty issue is not a priority for the Commission, but the Supreme Court’s May 2018 pro-arbitration decision in Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018), may embolden an IPO candidate to force the issue.

In Epic Systems, the Supreme Court held that the Federal Arbitration Act (FAA) requires a court to enforce an employment agreement that requires an employee to bring federal employment claims in a bilateral arbitration against the employer, and to dismiss a federal class action brought in violation of such an agreement. As the Supreme Court reaffirmed, a plaintiff faces a “stout uphill climb” to show that some other federal statute (in this case, the National Labor Relations Act) overrides the FAA and guarantees the right to litigate in court or to bring class claims in arbitration. Id. at 1264. Indeed, over the last thirty years, the Supreme Court has rejected “every” attempt to “conjure conflicts between the [FAA] and other federal statutes.”  Id. at 1627 (emphasis in original).