                            In the
 United States Court of Appeals
              For the Seventh Circuit
                         ____________

No. 02-3873
AVERY J. STONE, as Trustee of the Anita M. Stone Family
Trust and the Avery J. Stone Trust,
                                              Plaintiff-Appellee,
                               v.


DAVID J. DOERGE, et al.,
                                    Defendants-Appellants.
                         ____________
       Appeal from the United States District Court for the
         Northern District of Illinois, Eastern Division.
            No. 02 C 1450—Amy J. St. Eve, Judge.
                         ____________
       ARGUED APRIL 4, 2003—DECIDED MAY 2, 2003
                     ____________


 Before POSNER, EASTERBROOK, and ROVNER, Circuit
Judges.
  EASTERBROOK, Circuit Judge. Balis, Lewittes & Coleman,
Inc., a broker-dealer, handled securities transactions for
two trusts of which Avery Stone is the trustee. In some
of these transactions, Bear Stearns Securities Corp. served
as the clearing broker. In this suit under the federal
securities laws, Stone contends that Balis and David
Doerge (one of Balis’s employees, who served as investment
adviser to the trusts) committed fraud in connection with
several private placements. (We refer to the defendants
collectively as Balis.) Bear Stearns played no role in either
2                                               No. 02-3873

the advice given or the execution of the private placements.
Nonetheless, Balis contends that arbitration agreements
between Stone and Bear Stearns preclude Stone’s access
to federal court. When the district court declined to stay
the litigation pending arbitration, see 2002 U.S. Dist. LEXIS
19568 (N.D. Ill. Oct. 15, 2002), Balis filed an interlocutory
appeal on the authority of 9 U.S.C. §16(a)(1)(A).
  Before Bear Stearns undertook to clear any of the trusts’
purchases or sales of securities, it insisted that Stone
agree to arbitrate any ensuing dispute. The contract that
Stone signed with Bear Stearns commits the parties to
arbitrate any “controversies arising between [the trusts]
and any Bear Stearns entity or any broker for which Bear
Stearns acts as clearing agent”; a separate clause makes
entities such as Balis third-party beneficiaries of this
promise, so that arbitration will be comprehensive. (It
would make little sense to have disputes about a transac-
tion litigated between the customer and the introducing
broker in parallel with arbitration between the customer
and the clearing broker.) Balis observes that it is a “brok-
er for which Bear Stearns acts as clearing agent” and
contends that Stone therefore must arbitrate any contro-
versy the trusts may have with it, even if Bear Stearns
played no role in the transactions and will not participate
in the arbitration. The phrase “acts as clearing agent” is
incomplete, however. It could be completed with the words
“in any transaction” (Balis’s preferred reading) or with the
words “in the transaction subject to this dispute”; the
district judge chose the latter reading as more sensible
given the economic and linguistic context of the arbitra-
tion clause.
  When reaching this conclusion, the district judge re-
ferred to New York law, to which the contract itself points.
Balis nevertheless contends that any dispute about the
scope or meaning of an arbitration clause must be resolved
under federal law, starting with the text of the Federal
No. 02-3873                                                  3

Arbitration Act and continuing with federal common law
to the extent that the Act does not resolve a given con-
troversy. If this were so, however, then any demand for
arbitration would arise under federal law, supporting
jurisdiction under 28 U.S.C. §1331; yet it is settled that
federal courts have jurisdiction over suits seeking to compel
arbitration (or enforce awards) only if the parties are
of diverse citizenship, or some grant of jurisdiction other
than §1331 applies. See, e.g., Minor v. Prudential Securities,
Inc., 94 F.3d 1103, 1104-05 (7th Cir. 1996). Thus most
interpretive disputes must be resolved under state law.
Federal law does affect, however, the extent to which state
law may specify special rules for arbitration: any rule
of state law disfavoring or prohibiting arbitration for a
class of transactions is preempted, see Southland Corp. v.
Keating, 465 U.S. 1 (1984), “save upon such grounds as
exist at law or in equity for the revocation of any contract.”
9 U.S.C. §2. Thus generally applicable rules of New York
contract law govern, but any rules of state law that give
special treatment to arbitration agreements are inap-
plicable. Some of the state opinions to which the district
court referred read as if they state special rules for arbitra-
tion, and to that extent they must give way. Remaining
principles of New York law just tell courts to enforce the
parties’ bargain and need not be discussed separately.
  Stone does not contend that the agreement is invalid; he
argues only that as a matter of normal interpretive prin-
ciples it does not cover this dispute. Balis contends that
federal law supplies a strong presumption in favor of
arbitration, but as interpretive rules in contract cases
come from state law this is a non-starter. Nothing in the
Federal Arbitration Act overrides normal rules of con-
tractual interpretation; the Act’s goal was to put arbitra-
tion on a par with other contracts and eliminate any ves-
tige of old rules disfavoring arbitration. Arbitration de-
pends on agreement, see First Options of Chicago, Inc. v.
4                                               No. 02-3873

Kaplan, 514 U.S. 938, 943 (1995); AT&T Technologies, Inc.
v. Communications Workers, 475 U.S. 643, 648-49 (1986),
and nothing beats normal rules of contract law to deter-
mine what the parties’ agreement entails. There is no
denying that many decisions proclaim that federal policy
favors arbitration, but this differs from saying that courts
read contracts to foist arbitration on parties who have not
genuinely agreed to that device. What is more, most
decisions with pro-arbitration language arise from labor
relations, where federal common law applies under §301 of
the Labor-Management Relations Act, 29 U.S.C. §185, and
arbitration serves as a substitute for strikes, lockouts,
and other strife. For securities disputes, in contrast, until
recently arbitration was forbidden as a matter of federal
policy. See Wilko v. Swan, 346 U.S. 427 (1953). When Wilko
was overruled, and the primacy of contract restored, the
Justices analogized arbitration agreements to forum-
selection clauses. See Rodriguez de Quijas v. Shearson/
American Express, Inc., 490 U.S. 477, 482-83 (1989). As
there is no thumb on the scale in favor of one judicial forum
over another, there is no preference for arbitration over
adjudication either. Our job in a case such as this is to
implement the parties’ preferences between judicial and
arbitral forums, not to displace that choice with one of
our own.
  As a matter of ordinary contractual interpretation, this
is a simple dispute. The critical language—“acts as clear-
ing agent”—is ambiguous because it does not say wheth-
er it is essential that Bear Stearns have acted as clearing
agent in the transaction that gave rise to the dispute or
is instead enough that Bear Stearns has ever acted as
clearing agent for Balis. Both economic and linguistic
contexts point to the former answer. The linguistic context
(which is to say, the rest of the agreement between Stone
and Bear Stearns) shows that the function of the third-
party-beneficiary clause is to ensure that, if arbitration
No. 02-3873                                                 5

occurs between Bear Stearns and one of its customers, then
every other party to the dispute also will participate in
the arbitration so that one forum can provide complete
relief. Nothing in the agreement suggests that the refer-
ence to “any broker for which Bear Stearns acts as clear-
ing agent” has a broader application. The economic con-
text reinforces this reading. What sense would it make
for Stone and Bear Stearns to contract for how securities
disputes that had nothing to do with Bear Stearns would
be resolved? To see this, suppose that Stone dealt with
Balis only in connection with private placements, and that
as a consequence Bear Stearns had nothing to do with
any transaction between Stone and Balis. If Stone had no
other dealings with Bear Stearns, then any Stone-Balis
dispute would be litigated; yet on Balis’s view, if Stone had
some utterly unrelated dealings with Bear Stearns (if, for
example, Stone had opened an account at Bear Stearns),
then the Stone-Balis dispute must be arbitrated if, and only
if, Balis acts as an introducing broker for Bear Stearns on
some other customer’s account. Why in the world would
Stone and Bear Stearns adopt such a patchwork? The
district court’s reading of the agreement, by contrast, avoids
imputing to the parties a crazy-quilt framework.
  Ambiguous contracts should be read to make sense of the
parties’ economic relations. That rule of contract construc-
tion applies to arbitration agreements. See Foufas v. Dru,
319 F.3d 284 (7th Cir. 2003). The contract between Stone
and Bear Stearns makes sense if understood to consolidate,
into one arbitral forum, all parties and disputes arising
out of securities transactions handled by or through Bear
Stearns. It makes little sense, and has a potential for
erratic results, if read to cover transactions in which Bear
Stearns played no role. On Balis’s reading, if one of its
employees’ cars, carrying stock certificates, hit a vehicle
in which Stone was a passenger, then any negligence ac-
tion commenced by Stone must be arbitrated because of
6                                             No. 02-3873

the happenstance that (a) Stone has signed a securities
contract with Bear Stearns, and (b) Balis sometimes acts
as an introducing broker for Bear Stearns. Arbitration
would occur under the auspices of the New York Stock
Exchange or the National Association of Securities Deal-
ers; the customer may choose between the two, but neither
offers a sensible forum for tort litigation. This kind of
wacky result can be avoided by reading the contract as
requiring arbitration if, and only if, Bear Stearns cleared
the trades that gave rise to a securities dispute.
                                                AFFIRMED

A true Copy:
      Teste:

                       ________________________________
                       Clerk of the United States Court of
                         Appeals for the Seventh Circuit




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