Labor & Employment Law

US Supreme Ct argument on class action arbitration

The US Supreme Court announced today the schedule for oral arguments in Stolt-Nielsen S.A., et al. v. AnimalFeeds International Corp. - December 9 at 10:00 a.m. Eastern time.

The parties in this case are parties to international maritime contracts that contain arbitration clauses. The contracts are silent as to whether arbitration is permissible on behalf of a class of contracting parties. A panel of arbitrators, tasked with deciding whether that silence permitted or precluded class arbitration, received evidence and briefing from both sides. The arbitrators issued an award deciding that the contracts permit class arbitration.

Stolt-Nielsen petitioned the United States District Court to vacate the award. That court did vacate the award on the ground that the award was made in manifest disregard of the law.

The 2nd Circuit reversed. The 2nd Circuit applied the rule that courts vacate arbitration awards in the rare instances in which "the arbitrator knew of the relevant [legal] principle, appreciated that this principle controlled the outcome of the disputed issue, and nonetheless willfully flouted the governing law by refusing to apply it." Using this principle, the court found that the arbitration panel did not manifestly disregard a rule of federal maritime law, and did not manifestly disregard New York State law.

The official "Question Presented" is:

In Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (2003), this Court granted certiorari to decide a question that had divided the lower courts: whether the Federal Arbitration Act permits the imposition of class arbitration when the parties? agreement is silent regarding class arbitration. The Court was unable to reach that question, however, because a plurality concluded that the arbitrator first needed to address whether the agreement there was in fact "silent." That threshold obstacle is not present in this case, and the question presented here--which continues to divide the lower courts--is the same one presented in Bazzle:

Whether imposing class arbitration on parties whose arbitration clauses are silent on that issue is consistent with the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq.

The briefs are collected here.

Full post as published by Arbitration Blog on September 28, 2009 (boomark / email).