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International Institute for Conflict Prevention and Resolution Newsletter Features Philip J. Loree Jr. Cover Story on Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp.

June 6th, 2010 Arbitration Practice and Procedure, Authority of Arbitrators, Awards, Class Action Arbitration, Class Action Waivers, Consolidation of Arbitration Proceedings, Grounds for Vacatur, United States Supreme Court 2 Comments »

The June 2010 issue of Alternatives to the High Cost of Litigation, the excellent newsletter of the International Institute for Conflict Prevention and Resolution (”CPR”), featured as its cover story an article I wrote on the United States Supreme Court’s decision in Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp. The article is entitled “Stolt-Nielsen Delivers a New FAA Rule – And then Federalizes the Law of Contracts,” 28 Alternatives 124 (June 2010).

In it I argue that the Stolt-Nielsen decision is both inexplicably broad and inexplicably narrow in scope, and may provide fodder for those who assert that Congress should enact the Fairness in Arbitration Act of 2009. I also deconstruct the reasoning of the decision and explore some of its other practical and legal implications.

Alternatives to the High Cost of Litigation is a subscription-only publication. Subscription information is available at this page, as well as at the publisher’s, John Wiley & Sons’s, website here.

I would like once again to take this opportunity to thank CPR, and Russ Bleemer, Editor of Alternatives, for their kind assistance and support in featuring my article. As I have said before, Russ is a keen, intelligent and professional editor with whom it is a pleasure to work.

How Will Stolt-Nielsen, S.A. v. Animalfeeds Int’l Corp. Change Reinsurance Arbitration Practice?

May 25th, 2010 Arbitrability, Arbitration Practice and Procedure, Authority of Arbitrators, Awards, Class Action Arbitration, Class Action Waivers, Consolidation of Arbitration Proceedings, Grounds for Vacatur, Practice and Procedure, Reinsurance Arbitration, United States Court of Appeals for the Second Circuit, United States Supreme Court 6 Comments »

Part I

A. Introduction

Shortly before the United States Supreme Court decided Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., ___ U.S. ___, slip op. (April 27, 2010), we wrote about the implications the case might have on reinsurance arbitration practice. (See our post here.) But since then, you have not heard much from us, other than our brief report (here) about the Supreme Court vacating and remanding to the United States Court of Appeals for the Second Circuit the American Express Merchants’ Litigation judgment for further consideration in light of Stolt-Nielsen. One — but by no means the only — reason is that after Stolt-Nielsen was decided, we wrote a comprehensive article on it, which will be published in a subscription-only publication in June.

But that article – while comprehensive in scope – is directed at folks interested in the Federal Arbitration Act in general, not necessarily those interested in reinsurance arbitration in particular. And that’s what we want to cover in this multi-part series: Stolt-Nielsen’s implications on reinsurance arbitration practice.

Stolt-Nielsen affects reinsurance arbitration in two very important ways. First, it has set a fairly liberal standard of review that now applies to commercial arbitration awards in cases where a party asserts that the arbitrators exceeded their powers under Federal Arbitration Act Section 10(a)(4) because of the award’s outcome. That, as we shall see, has all sorts of implications for persons involved in reinsurance arbitrations.

Second, it has changed the rules applicable to consolidated-reinsurance-arbitration practice – or at least it requires a wholesale reevaluation of those rules. That, too, has a number of important implications for reinsurance-arbitration practice.

This Part I of the series explains why the standard for challenging an award based on its outcome is important in reinsurance arbitration practice. And, after briefly reviewing pre-Stolt-Nielsen law on outcome-based standards of review, it explains how Stolt-Nielsen has established for the lower courts a fairly searching standard of review. Part II (here) will delve into what the implications of that standard of review will likely be.

Part III (here) will provide the background necessary to understand how Stolt-Nielsen affects the law applicable to consolidated reinsurance arbitration. Part IV (here) will delve into the details of how Stolt-Nielsen changes – or at least requires reconsideration of – the legal status quo in this area. And Part V will discuss the implications of all of this.

We do not set out to discuss the background of Stolt-Nielsen in any detail or to provide a play-by-play of how the Court decided the case. If you are a regular reader you probably already know the background in detail, and our upcoming article does a pretty good job of mapping out the Court’s reasoning. Instead, we focus our attention on the aspects of the decision that are relevant to the two key subjects of discussion.

But before we delve into what Stolt-Nielsen has to say about the standard of review, we pause briefly to address why the standard of review applicable to an outcome-based challenge is so important in reinsurance and other forms of commercial arbitration. Continue Reading »

United States Supreme Court Vacates Judgment in American Express Merchants’ Litigation

May 12th, 2010 Arbitration Practice and Procedure, Authority of Arbitrators, Class Action Arbitration, Class Action Waivers, Consolidation of Arbitration Proceedings, United States Court of Appeals for the Second Circuit, United States Supreme Court 1 Comment »

The Supreme Court has issued a summary order in the American Express Merchants’ Litigation that suggests that it believes that Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 559 U.S. ___ , slip op. (2010) renders class arbitration waivers enforceable despite public policy and other challenges. Readers may recall that on May 29, 2009 American Express filed a petition for a writ of certiorari in the American Express Merchants’ Litigation, in which the United States Court of Appeals for the Second Circuit held that a provision in an arbitration agreement forbidding class action arbitration was invalid and unenforceable under federal public policy grounds in the circumstances presented by the case. See Re American Express Merchants’ Litigation, 554 F.3d 300 (2d Cir. 2009), vacated and remanded sub. nom., American Express Co. v. Italian Colors Restaurant, No. 08-1473 (May 3, 2010).

On May 3, 2010 the United States Supreme Court issued a summary order in American Express Co. v. Italian Colors Restaurant, No. 08-1473 granting certiorari, summarily vacating the judgment of the United States Court of Appeals for the Second Circuit, and remanding it “for further consideration in light of” Stolt-Nielsen. Justice Sonia M. Sotomayor “took no part in the consideration or decision” of the petition. Italian Colors, No. 08-1473 (May 3, 2010) (summary disposition).

It will be interesting to see what the Second Circuit does with the case on remand.

Stolt-Nielsen Oral Argument Analysis, Part V: Should Class or Consolidated Arbitration be Imposed if the Contract is Silent?

February 16th, 2010 Arbitrability, Authority of Arbitrators, Awards, Class Action Arbitration, Class Action Waivers, Consolidation of Arbitration Proceedings, Practice and Procedure, United States Supreme Court No Comments »

I. Introduction

This is the final installment of our five-part series on the Stolt-Nielsen oral argument. It addresses the fourth issue identified in Part I (here): what the import of the agreements’ silence is or should be. It assumes the Court reaches the merits; as explained in Parts III and IV (here and here), the United States Supreme Court may take another “pass” on the question presented (the first pass was taken in Bazzle), and hold that the predicate for granting certiorari was not established because the arbitrators ruled that the agreement was not silent on class arbitration.

Part I identified two loose “coalitions” of Justices – the “Breyer Coalition” consisting of Associate Justices John Paul Stevens, Stephen G. Breyer, and Ruth Bader Ginsburg, and the “Roberts Coalition,” consisting of Chief Justice John G. Roberts and Associate Justices Antonin G. Scalia and Samuel A. Alito, Jr. The Breyer Coalition appears to be leaning toward either taking a pass or affirming the decision of the United States Court of Appeals for the Second Circuit, which upheld the arbitrators’ award imposing class arbitration, while the Roberts Coalition appears to be leaning toward reversal. We explore the import of the charter-party agreements’ silence on class arbitration from the standpoint of both coalitions. Continue Reading »

Stolt-Nielsen Oral Argument Analysis: Part IV

January 6th, 2010 Authority of Arbitrators, Awards, Class Action Arbitration, Class Action Waivers, Consolidation of Arbitration Proceedings, Practice and Procedure, United States Supreme Court 1 Comment »

Introduction

Stolt-Nielsen turns on the allocation of power between courts and arbitrators. No matter how thoroughly and neatly you parse the issues, the question that repeatedly and continuously begs for an answer is: who decides? Answer that question as it relates to one issue and it pops up again in relation to the next.

Up until Bazzle the Supreme Court did an admirable job of delineating the bounds of arbitral versus judicial authority. The lines were blurred in Bazzle, where under the peculiar facts there was a question whether the agreement precluded class arbitration. (See our Disputing guest post here.) The question required interpretation of ambiguous contract language – a task arbitrators have both the authority and the competence to perform – so it was remanded to the arbitrators. The four-Justice plurality said the question was not one of arbitrability, but concerned the “kind” of arbitration to which the parties agreed.

But many of the lower courts — including the United States Court of Appeals for the Second Circuit — read Bazzle to mean that arbitrators have the authority under a broad arbitration agreement to determine whether the parties agreed to class arbitration when their agreements say nothing about class or consolidated arbitration. That is a very different question from whether an arbitration agreement precludes class arbitration, and it is not one that the parties in Stolt-Nielsen clearly and unmistakably submitted to the arbitrators.

Stolt-Nielsen presents the United States Supreme Court with a unique opportunity to draw a sharper and stronger line between the arbitrable and non-arbitrable in cases concerning class or consolidated arbitration. Whether or not the Court will seize it is an open question, because, as explained in Part III, AnimalFeeds has articulated a plausible argument that Stolt-Nielsen has not established the predicate for the Court’s grant of certiorari: that the parties’ agreements were silent on class arbitration. If at least five justices are satisfied with the (we believe, unsatisfactory) status quo concerning class arbitration, or otherwise believe that the best course is to allow class arbitration to continue (and even flourish), then AnimalFeed’s argument may provide an interpretive path for a ruling that the case is not properly before the Court.

Today we explain why accepting AnimaFeeds’ argument would contravene the letter and spirit of the Federal Arbitration Agreement, breed further litigation, and undermine confidence in arbitration as an effective alternative dispute resolution mechanism. More to the point, we discuss why and how the Court can reach the merits of Stolt-Nielsen consistently with how Stolt-Nielsen presented the question. Continue Reading »

Stolt-Nielsen Oral Argument Analysis: Part III

December 23rd, 2009 Arbitrability, Authority of Arbitrators, Awards, Class Action Arbitration, Class Action Waivers, Consolidation of Arbitration Proceedings, United States Supreme Court 2 Comments »

On December 9, 2009 the United States Supreme Court held oral argument in Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 548 F.3d 85 (2d Cir. 2009), petition for cert. granted June 15, 2009 (No. 08-1198) (oral argument transcript here). Stolt-Nielsen concerns whether class or consolidated arbitration may be imposed on parties whose contracts are silent on that point, and we have written extensively on it, including an ongoing series of guest-post articles for our friend Karl Bayer’s Disputing blog. (Posts available here, here, here, here, here, here, here, here and here.)

On December 16, 2009 we posted Part II of our analysis of the oral argument (Parts I, here, Part II, here). In this Part III we focus on what transpired with respect to the second of four key interrelated issues raised at oral argument and identified in Part I: What exactly did the arbitrators decide? Continue Reading »

Stolt-Nielsen Oral Argument Analysis: Part II

December 16th, 2009 Arbitrability, Authority of Arbitrators, Class Action Arbitration, Class Action Waivers, Consolidation of Arbitration Proceedings, United States Supreme Court 3 Comments »

Introduction

On December 9, 2009 the United States Supreme Court held oral argument in Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 548 F.3d 85 (2d Cir. 2009), petition for cert. granted June 15, 2009 (No. 08-1198) (oral argument transcript here). Stolt-Nielsen concerns whether class or consolidated arbitration may be imposed on parties whose contracts are silent on that point, and we have written extensively on it, including a series of guest-post articles for the Disputing blog. (Posts available here, here, here, here, here, here, here, here and here.)

Former Solicitor General Seth Waxman, a partner of the prestigious law firm of Wilmer Cutler Pickering Hale & Dorr LLP, and Chair of the firm’s Appellate and Supreme Court Litigation Practice Group, represented the Stolt-Nielsen petitioners before the Court (Mr. Waxman’s bio is here). Georgetown University Law Center Professor Cornelia T.L. Pillard represented respondent AnimalFeeds. (Professor Pillard also represented the Bazzle respondents in Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (2003)). Both attorneys did a very admirable job of presenting their cases on behalf of their clients.

On December 13, 2009 we posted Part I of our analysis of the oral argument (Part I here). In this Part II we focus on what transpired with respect to the first of the four key, interrelated issues raised by the Justices and identified in Part I: The scope of the submission and the corresponding scope of the arbitrators’ authority. We shall address the remaining three in one or more future posts. Continue Reading »

Stolt-Nielsen Oral Argument Analysis: Part I

December 13th, 2009 Authority of Arbitrators, Awards, Class Action Arbitration, Class Action Waivers, Consolidation of Arbitration Proceedings, Practice and Procedure, United States Supreme Court 6 Comments »

On December 9, 2009 the United States Supreme Court heard oral argument in the one Federal Arbitration Act case it has agreed to review this Term: Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 548 F.3d 85 (2d Cir. 2009), petition for cert. granted June 15, 2009 (No. 08-1198) (oral argument transcript here). Stolt-Nielsen concerns whether class or consolidated arbitration may be imposed on parties whose contracts are silent on that point, and we have written extensively about the case, including a series of guest-post articles for the Disputing blog. (Posts available here, here, here, here, here, here, here, here and here.)

This multi-part post considers what transpired at oral argument and provides our take on it. Familiarity with the background facts is presumed and, if necessary, can be gleaned here, here, and here. Continue Reading »

Update on Federal Arbitration Act Cases Pending in the United States Supreme Court

September 29th, 2009 Awards, Class Action Arbitration, Class Action Waivers, Consolidation of Arbitration Proceedings, United States Court of Appeals for the Ninth Circuit 1 Comment »

Today the United States Supreme Court is considering whether to grant certiorari in three cases that concern whether manifest disregard of the law remains a viable ground for vacating or modifying an arbitration award after Hall Street Assoc., L.L.C. v. Mattel , Inc, 552 U.S. ___, slip op. (March 25, 2008). The first is The Coffee Beanery, Ltd. v. WW, LLC, 300 Fed. Appx. 415 (6th Cir. 2008), petition for cert. filed May 11, 2009 (08-1396), in which the United States Court of Appeals for the Sixth Circuit held that manifest disregard survived Hall Street as an independent ground for vacatur, and that an award in favor of a franchisor must be vacated because the arbitrator manifestly disregarded Maryland franchise law requiring franchisors to disclose certain types of prior criminal convictions. The Sixth Circuit also found that the franchisor’s failure to disclose the conviction vitiated the arbitration clause contained in the franchise contract, a holding that seems questionable in light of Buckeye Check Cashing v. Cardegna, 546 U.S. 440, 449 (2006).

The second case is Grain v. Trinity Health, 551 F.3d 374 (6th Cir. 2008), petition for cert. filed May 19, 2009 (08-1446), in which the Sixth Circuit held that the arbitrators’ failure to enforce the parties’ choice of Michigan law as respects the issue of costs and attorney fees — characterized as manifest disregard of the law — was not a valid ground for modifying an arbitration award under Federal Arbitration Act Section 11.

The third is Improv West Associates v. Comedy Club, Inc., 553 F.3d 1277 (9th Cir. ), petition for cert. filed June 8, 2009 (08-1529), in which the United States Court of Appeals for the Ninth Circuit held that manifest disregard of the law remained viable after Hall Street because it fell within the ambit of Federal Arbitration Act Section 10(a)(4), and vacated an award on the ground that the arbitrator’s interpretation of applicable state law was “fundamentally incorrect,” albeit made in good faith.

The briefs in support of and in opposition to both petitions, as well as the lower court decisions, can be obtained by visiting one of our favorite blogs, the SCOTUSblog, here and here. It will be interesting to see whether the United States Supreme Court decides to grant certiorari in any or all of these cases.

On a related matter, Petitioners’ and amici merits briefs in Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 548 F.3d 85 (2d Cir. 2009), petition for cert. granted June 15, 2009 (No. 08-1198) can be accessed via the American Bar Association’s website, here. Respondent’s briefs are due later in October and oral argument has been scheduled for December 9, 2009. (See Russ Kunkel’s LawMemo Arbitration Blog here). We have written extensively on Stolt-Nielsen, which concerns whether class arbitration may be imposed on parties whose contracts are silent on that point. (Posts available here, here, here, here, here, here, here, here and here.)

Finally, we are following the petition for certiorari filed in the American Express Merchants’ Litigation (blogged here), which has not yet come up for conference. The Amex Merchants’ Litigation concerns whether class arbitration waivers comport with federal antitrust policy.

We shall keep readers apprised of developments as and when they occur. . . .

Disputing Publishes Part IVB of our Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp. Guest Post

September 21st, 2009 Arbitrability, Authority of Arbitrators, Class Action Arbitration, Class Action Waivers, Consolidation of Arbitration Proceedings, Guest Posts, Practice and Procedure, United States Court of Appeals for the Second Circuit, United States Supreme Court 2 Comments »

On September 1, 2009 Disputing published Part IVA of our four-part guest post on Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 548 F.3d 85 (2d Cir. 2009), petition for cert. granted June 15, 2009 (No. 08-1198). In Part IVA (here) we considered whether the question in Stolt-Nielsen was one for the court or the arbitrators to decide, and predicted that at least five Justices of the United States Supreme Court will hold that the court must decide it. If we are correct, then the Supreme Court will consider on a de novo basis whether the arbitration panel had the authority to impose class arbitration on the Stolt-Nielsen parties.

Today, Disputing published Part IVB of our guest post (here) in which we consider how the Supreme Court might rule on the merits of the question. We believe that at least five Justices will rule that the arbitrators should not, in the face of the agreements’ silence, have imposed class arbitration where, as here, there is no basis in the Federal Arbitration Act, New York state law or federal maritime law for implying consent to class arbitration.

The Supreme Court’s decision in Stolt-Nielsen may have some important ramifications for both commercial and consumer arbitration. So for advance coverage, tune into Disputing….