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Disputing Guest Post: Class And Consolidated Arbitration Under the Federal Arbitration Act: What Issues Will The United States Supreme Court Confront in Stolt-Nielsen, S.A. V. AnimalFeeds Int’l Co.?

August 6th, 2009 Arbitrability, Authority of Arbitrators, Consolidation of Arbitration Proceedings, Guest Posts, United States Court of Appeals for the Second Circuit, United States Supreme Court 3 Comments » By Philip J. Loree Jr.

 The Loree Reinsurance and Arbitration Law Forum is delighted to guest post once again on Karl Bayer’s and Victoria VanBuren’s wonderful ADR blog, Disputing.  Because Victoria and I have both written fairly extensively about Hall Street Assoc. v. Mattel, Inc, 128 S. Ct. 1396 (2008), and about two of the most frequently cited cases construing Hall Street’s dictum on manifest disregard of the law — Citigroup Global Markets, Inc. v. Bacon, 562 F.3d 349 (5th Cir. 2009) and 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) –  and because the United States Supreme Court has granted certiorari in Stolt-Nielsen, we thought that our joint-readership might appreciate an analysis of the issues that the Supreme Court will likely address – or at least face — in that case.  That’s what we have set out to do in a four-part guest post, Part I of which was published today.  (Check it out  here.)

As readers may already know, the issue before the United States Supreme Court is whether it is consistent with the Federal Arbitration Act to impose class arbitration on parties whose arbitration agreement is silent on that point.  This is the same issue that the Supreme Court set out to decide in Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (2003), but ultimately never did because a plurality of the Court ruled that there was a disputed issue of contract interpretation as to whether the agreements in that case were, in fact, silent on class arbitration, which resulted in a remand to the arbitrator.  But in Stolt-Nielsen the panel ruled, and the parties agreed, that the contracts are silent on this key point, so the Supreme Court will presumably confront the issue head on. 

The Supreme Court’s decision next Term may have some important ramifications for both commercial and consumer arbitration.  And soon-to-be Justice Sotomayor may provide the swing vote in the case.  So for some advance coverage, tune into Disputing….


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3 Responses to “Disputing Guest Post: Class And Consolidated Arbitration Under the Federal Arbitration Act: What Issues Will The United States Supreme Court Confront in Stolt-Nielsen, S.A. V. AnimalFeeds Int’l Co.?”

  1. Alan Rau says:

    I ‘m afraid I just can’t understand all this talk about “silence,” and I could use some help here.

    Contracts very often expressly address a problem—in which case courts have the task of “interpreting” just what they said. But often there will be no express provision—perhaps through oversight, perhaps because the parties preferred to let sleeping dogs lie. But if party intention is nevertheless relevant—if we care about what the parties intended—then whoever is construing the contract will have to tease out what was implicitly intended, even if nothing was actually said. And party intention should be critical on any question of arbitral procedure.

    It is often hard to tease out intention when the parties give us no guidance. That’s why courts have to devise “default rules,” which are presumptions of probable intent in the absence of some expression to the contrary.

    The usual “default rule” in consolidation or class arbitration cases, was that no consolidation should be allowed unless the parties expressly provided for it—this is the “UK v. Boeing case.” [In other words, “they said nothing” was equivalent to an intention, “no consolidation.”] Of course, the contrary “default rule” would be perfectly possible—that is, one could presume that consolidation should be permitted unless the parties expressly negated any such procedure.[In other words, “they said nothing” was equivalent to an intention, “sure, consolidation is fine.”] Some state and national laws in fact have such a default rule, and I argued for one in an earlier article, “Tradition and Innovation in International Arbitration Procedure,” 30 Tex. Int’l L.J. 89 (1995).

    Now the Supreme Court in Bazzle came up with its own, quite different default rule: “leave it to the arbitrators.” That is, if nothing is said one way or another, it is presumed that the arbitrators have the power to decide whether consolidation or classwide proceedings are permitted. If they don’t want the arbitrators to have that power, they have to expressly negate arbitral power. Justice Stevens agreed with that—that the interpretation of the agreement is for the arbitrator—and that is what Bazzle held. And this is Stolt Nielsen.

    Of course, if the contract contains an explicit provision that says, “no classwide arbitration,” and the arbitrators somehow “construe” this to mean that classwide arbitration is permitted, their “construction” will be challenged—and may be reversed for an “excess of powers” if not “manifest disregard of the contract.” That would be unlikely, given the extraordinary deference given to arbitral awards—but in any event, that is simply not Stolt Nielsen, where the arbitrators’ decision did not run afoul of any express provision.

    So what is all the kerfuffle about? I’m not being coy here, I’m really puzzled.

  2. […] imposed on parties whose contracts are silent on that point.  (Posts available here,  here, here, here, here, here, here, here and […]

  3. […] a series of guest-post articles for the Disputing blog.  (Posts available here,  here, here, here, here, here, here, […]