main image

Posts Tagged ‘Consolidated Arbitration’

« Older Entries

Res Judicata and Consolidated Arbitration: the Sixth Circuit puts the Kibosh on the “Contagion Theory of Arbitration”

September 17th, 2014 Appellate Practice, Arbitrability, Arbitration Agreements, Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Authority of Arbitrators, Awards, Confirmation of Awards, Consolidation of Arbitration Proceedings, Construction Industry Arbitration, Contract Interpretation, Drafting Arbitration Agreements, Existence of Arbitration Agreement, Final Awards, Judicial Review of Arbitration Awards, Michigan State Courts, Practice and Procedure, Preclusive Effect of Awards, Res Judicata or Claim Preclusion, State Courts, United States Court of Appeals for the Sixth Circuit, United States Supreme Court Comments Off on Res Judicata and Consolidated Arbitration: the Sixth Circuit puts the Kibosh on the “Contagion Theory of Arbitration”

Res judicata—Latin for a “matter” or “thing” “decided”—is the legal principle under which a final judgment in one action bars the same parties from relitigating in another, successive action matters that were or could have been asserted in that  first action. Also known as “claim preclusion”, it is designed to promote finality and judicial economy, and to protect persons from vexatious litigation. See, generally, Taylor v. Sturgell, 553 U.S. 880, 891 (2008).

But can an unconfirmed arbitration  award preclude a party from maintaining a court action to resolve a matter that it did not submit or agree to submit to arbitration? Suppose:

  1. A has an arbitration agreement with B (the “AB Agreement”);
  2. B has an arbitration agreement with C (the “BC Agreement”);
  3. A and C did not agree to arbitrate any disputes between them;
  4. The AB Agreement contemplates the parties arbitrating their claims against each other in a consolidated arbitration that may involve factually-related disputes that B has agreed to arbitrate with C or other third parties, provided those third parties consent to consolidated arbitration;
  5. The AB Agreement does not purport to require A or B to arbitrate any disputes between (a) A or B or both; and (b) C or any other non-party;
  6. The BC Agreement does not purport to require B or C to arbitrate any disputes between (a) B or C or both; and (b) A or any other third party;
  7. A dispute arises between A and B, and A demands arbitration against B;
  8. B, in turn, demands arbitration against C, seeking indemnity from C for any liability B may have to A;
  9. The AB and BC arbitrations are consolidated over A’s objection;
  10. A knows it has a legal and factual basis for asserting a tort claim against C arising out of the same transactions and occurrences at issue in the consolidated arbitration, but does not submit (or attempt to submit) that claim to arbitration;
  11. The arbitration proceeds, and the arbitrator issues a final award finding that B is liable to A for $X in damages and that C is not obligated to indemnify B;
  12. Nobody seeks to confirm, vacate, modify or correct the award; and
  13. A subsequently brings an action in court against C, which seeks damages from C allegedly caused by C’s negligent conduct with respect to the same transactions and occurrences that were the subject of the consolidated arbitration.

Is A’s lawsuit barred by res judicata?

On August 28, 2014, in O’Neil v. Shepley, No. 13-2320, slip op. (6th Cir. Aug. 28, 2014),  the U.S. Court of Appeals for the Sixth Circuit, in a 2-1 decision, said the answer was “no,” and that the answer would have been the same had the AB/BC award been confirmed. See slip op. at 10-11.

The two-judge majority opinion—authored by Chief Circuit Court Judge R. Guy Cole, and joined by Circuit (and former Chief) Judge Danny Julian Boggs—minced no words when it said that to bar A’s lawsuit based on res judicata would be to endorse a “contagion theory of arbitration” that “has no basis in law or the relevant contracts[:]”

Simply put: the premise of arbitration is consent and [A] did not consent to arbitrate the present claims [against C]. Our judicial doctrines do not force it to do so now.

Slip op. at 10-11.

Circuit Court Judge David William McKeague dissented, arguing that the “court does not need to infect [A] with a ‘contagion theory of arbitration’ to bar his claims with res judicata. It merely needs to hold him to the basic terms of his contract. Any infection that [A] O’Neil has acquired is its own doing.” That was so, claimed the dissent, because:

[The AB arbitration was] eventually expanded to include [C]. Moreover, in [subcontractor A’s] contract with [construction manager B], [A] agreed to arbitrate his grievances with [B] and further agreed in a standard ‘flowthrough’ provision to be ‘bound by the procedures, decision and determinations resulting from any dispute resolution process’ in the contract between [B] and [the owner].  The contract between [B] and the [owner] required all disputes, among all contractors, to be submitted to binding arbitration.

Slip op. at 13 (emphasis in original) (McKeague, J., dissenting).

All three judges appeared to agree that res judicata does not turn on whether the first proceeding would have barred the second had the first been a plenary court proceeding. The difference of opinion between the majority and dissent was that the dissent was prepared to find A’s agreement to consolidated arbitration was the functional equivalent of an agreement arbitrate its claims against any person who might consent to join such a consolidated arbitration, even if A had no contractual relationship with that person, let alone a written agreement to arbitrate.

We think the majority’s read of the relevant contractual provisions gave effect to the parties expressed intent, whereas the dissent’s view of what the parties agreed did not. But to appreciate why, you’ll need to take a closer look at the Sheply facts, which in substance are much like (but not identical to) those in our hypothetical. Continue Reading »

Oxford Health Plans LLC v. Sutter—SCOTUS Reaffirms FAA Section 10(a)(4) Manifest Disregard of the Agreement Outcome Review Standard and Elaborates on Its Scope: Part II.C

August 19th, 2013 Arbitrability, Arbitration Agreements, Arbitration Practice and Procedure, Authority of Arbitrators, Awards, Class Action Arbitration, Class Action Waivers, Consolidation of Arbitration Proceedings, Contract Interpretation, Grounds for Vacatur, Judicial Review of Arbitration Awards, Practice and Procedure, Unconscionability, United States Supreme Court Comments Off on Oxford Health Plans LLC v. Sutter—SCOTUS Reaffirms FAA Section 10(a)(4) Manifest Disregard of the Agreement Outcome Review Standard and Elaborates on Its Scope: Part II.C

Part II.C

Does Oxford Portend Judicial Reconsideration of

Whether Class-Arbitration Consent is a Question of Arbitrability?      

In Stolt-Nielsen and Oxford the parties voluntarily submitted the class-arbitration-consent question to arbitrators because a four-Justice plurality ruled in Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (2003), that the class-arbitration-consent issue was not a question of arbitrability for the court to decide.   While “courts assume that the parties intended courts, not arbitrators” to decide certain “gateway matters, such as whether the parties have a valid arbitration agreement at all or whether a concededly binding arbitration clause applies to a certain type of controversy,” the Court found that the issue did not fall into “this narrow exception.” 539 U.S. at 452 (citations omitted).  According to the Court, “the relevant question . . . is what kind of arbitration proceeding the parties agreed to:”

That question does not concern a state statute or judicial procedures. It concerns contract interpretation and arbitration procedures. Arbitrators are well situated to answer that question. Given these considerations, along with the arbitration contracts’ sweeping language concerning the scope of the questions committed to arbitration, this matter of contract interpretation should be for the arbitrator, not the courts, to decide.

539 U.S. at 452-53 (citations omitted).

Bazzle was well received by the lower courts, and even though it was only a plurality opinion, many courts, parties and practitioners apparently thought that the arbitrability of consent-to-class-arbitration was a foregone conclusion after Bazzle even though the plurality’s rationale was endorsed by only four justices – a hat-tip to Associate Justice Stephen G. Breyer’s clearly and persuasively written plurality opinion. Some also apparently thought that Associate Justice John Paul Stevens’ concurring opinion was, for all intents and purposes, an endorsement of the plurality’s rationale, and that accordingly, Bazzle established precedent binding on the lower courts.

In 2003, prompted in part by Bazzle, the American Arbitration Association promulgated its Supplementary Rules for Class Arbitrations, Rule 3 of which directs the arbitrator or panel to “determine as a threshold matter, in a reasoned, partial, final award on the construction of the arbitration clause, whether the applicable arbitration clause permits the arbitration to proceed on behalf of or against a class.  .  .  .”  AAA Supplementary Rules, Rule 3.  The “Clause Construction” awards in Stolt-Nielsen and Oxford were made under Rule 3 of the AAA Supplementary Rules.

In light of Bazzle and the AAA Supplementary Rules, class-arbitration-consent-related disputes in cases where the relevant arbitration agreements did not expressly prohibit class arbitration – e.g., cases not involving class-arbitration waivers – were generally submitted to arbitration, usually pursuant to the AAA Supplementary Rules.  Most of the class-arbitration-related litigation concerned challenges to class arbitration waivers, rather than the arbitrability of class-arbitration-consent-related issues.

But Stolt-Nielsen explained that Bazzle did not establish binding precedent on any issue—including class-arbitration-consent arbitrability—because it “did not yield a majority decision.  .  .  .” See Stolt-Nielsen, 130 S. Ct. at 1772.  The Court said that “[u]nfortunately the opinions in Bazzle appear to have baffled the parties in this case at the time of the arbitration proceeding[,]” because “[f]or one thing, the parties appear to have believed that the judgment in Bazzle requires an arbitrator, not a court, to decide whether a contract permits class arbitration.”  Stolt-Nielsen, 130 S. Ct. at 1772 (citation omitted).  The Court did “not revisit that [allocation of decision-making power] question [in Stolt-Nielsen] because the parties’ supplemental agreement expressly assigned this issue to the arbitration panel, and no party argues that this assignment was impermissible.”  Id.

The Court underscored that same point in Oxford, noting that it “would face a different issue if Oxford had argued below that the availability of class arbitration is a so-called ‘question of arbitrability,’” an issue “Stolt-Nielsen made clear that [the Supreme Court] has not yet decided.  .  .  .”  Oxford, Slip op. at 4 n.2.    But Oxford gave the Court “no opportunity to do so because Oxford agreed that the arbitrator should determine whether its contract with Sutter authorized class procedures.”  Id.   Oxford submitted the issue to arbitration “not once but twice—and the second time after Stolt-Nielsen flagged that it might be a question of arbitrability.”  Id. Continue Reading »

Oxford Health Plans LLC v. Sutter—SCOTUS Reaffirms FAA Section 10(a)(4) Manifest Disregard of the Agreement Outcome Review Standard and Elaborates on Its Scope: Part I

July 19th, 2013 Arbitrability, Arbitration Agreements, Arbitration Practice and Procedure, Authority of Arbitrators, Awards, Class Action Arbitration, Consolidation of Arbitration Proceedings, Contract Interpretation, Grounds for Vacatur, Judicial Review of Arbitration Awards, Labor Arbitration, United States Supreme Court Comments Off on Oxford Health Plans LLC v. Sutter—SCOTUS Reaffirms FAA Section 10(a)(4) Manifest Disregard of the Agreement Outcome Review Standard and Elaborates on Its Scope: Part I

On June 10, 2013 the U.S. Supreme Court in Oxford Health Plans LLC v. Sutter, No. 12-135, slip op. at 4-5 (U.S. June 10, 2013) (Kagan, J.), unanimously reaffirmed that Section 10(a)(4) of the FAA authorizes courts to vacate awards that are not even arguably based on an interpretation of the parties’ agreement.

While the Court broke no new ground, Associate Justice Elena Kagan’s well-written opinion—together with Associate Justice Samuel A. Alito’s opinion in Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758 (2010)—defines in fairly clear terms the scope of contract-based judicial review Section 10(a)(4) authorizes. Justice Kagan’s opinion raises not only some issues specific to class and consolidated arbitration, but also some relevant to Federal Arbitration Act (“FAA”)-governed arbitration in general. Continue Reading »

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

July 20th, 2010 Arbitration Practice and Procedure, Consolidation of Arbitration Proceedings, Practice and Procedure, Reinsurance Arbitration, United States Supreme Court Comments Off on How Will Stolt-Nielsen, S.A. v. Animalfeeds Int’l Corp. Change Reinsurance Arbitration Practice?

Part V.C

A.   Introduction

As was evident from Parts V.A and V.B (here and here), Stolt-Nielsen has dramatically changed the legal landscape on consolidated arbitration.  In this Part V.C. we explore the practical and strategic implications of that change.

B.   Reinsurers Will Likely Regain the Tactical Advantage They Had Pre-Bazzle   

For the last several years since Bazzle, cedents and reinsurers have treated consolidation of arbitration proceedings largely as a given.  Courts would usually delegate the consolidation question to the arbitrators, and, in turn, arbitrators would usually order consolidation.  After a while, consolidation became something that the parties frequently agreed upon, because in most cases there was little or no point in opposing it.  (See Part III, here.) 

The advent of large, consolidated proceedings redounded mostly to the cedents’ benefit.   In the consumer-class-arbitration context, the theme is usually the many against the one — the consumers versus the company.  But in reinsurance arbitration the tables are turned, and the theme is usually the one against the many – the cedent versus the reinsurers participating in one or more treaties.   

Consolidated arbitration allowed a cedent to, among other things, aggregate its claims against several reinsurers participating in a multi-year treaty program.  Without consolidated arbitration the dollar amounts associated with each claim might be too small to warrant a serious collection effort.  But the ability to aggregate ensured that even relatively small balances could be pursued. 

Collections were fairly straightforward, and reinsurers who might otherwise have multiple chances before multiple panels to assert certain defenses were forced to make their arguments before a single arbitration panel.    The ability of cedents to compel consolidated arbitration probably contributed to reinsurers settling certain claims that they might otherwise have disputed. 

Now that courts may be the gatekeepers when a party demands consolidated arbitration, and now that the Supreme Court has imposed some fairly strict standards for establishing consent to class or consolidated arbitration, reinsurers probably have regained the tactical advantage.  And the strategy adapted may well be of the “divide and conquer” variety – reinsurers may in appropriate cases force the cedent to commence multiple proceedings and, among other things, obtain multiple bites at the apple on their defenses before multiple panels.  Continue Reading »

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

July 14th, 2010 Arbitrability, Arbitration Practice and Procedure, Authority of Arbitrators, Class Action Arbitration, Consolidation of Arbitration Proceedings, Reinsurance Arbitration, United States Supreme Court Comments Off on How Will Stolt-Nielsen, S.A. v. Animalfeeds Int’l Corp. Change Reinsurance Arbitration Practice?

Part V.B

A.   Introduction

In Part V.A of our Stolt-Nielsen reinsurance-arbitration practice series (here), we said that after Stolt-Nielsen courts will likely get to decide in the first instance whether the parties consented to consolidated arbitration.  If we are correct, that will be a fundamental change because courts will presumably construe the terms of the parties’ contracts more strictly than many arbitrators might, and those constructions will be subject to appellate review. 

In this Part V.B we consider what a party will likely need to show to persuade a court to consolidate arbitrations, and explain why we believe that courts will not frequently order consolidation.  In Part V.C. we shall explain the strategic and practical implications of the changes that Stolt-Nielsen will likely bring about in consolidated reinsurance-arbitration practice.      Continue Reading »

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

June 18th, 2010 Arbitrability, Arbitration Practice and Procedure, Authority of Arbitrators, Class Action Arbitration, Consolidation of Arbitration Proceedings, Practice and Procedure, United States Supreme Court Comments Off on How Will Stolt-Nielsen, S.A. v. Animalfeeds Int’l Corp. Change Reinsurance Arbitration Practice?

Part V.A

A.   Introduction

In this Part V.A of our consolidated-reinsurance-arbitration series, we delve into Stolt-Nielsen’s legal implications on consolidated reinsurance-arbitration practice, focusing on how courts are likely to decide the allocation-of-power question:  Who gets to decide whether the parties consented to consolidated arbitration?  In Part V.B we shall examine Stolt-Nielsen’s other specific legal and practical implications, focusing on what a party will likely need to show to obtain consolidated arbitration and how frequently consolidated arbitration is likely to be granted after Stolt-Nielsen.    

B.   Who Gets to Decide Whether the Parties Consented to Consolidated Arbitration?

Readers will recall from Part III (here) that courts interpreted Bazzle  as governing the allocation-of-power issue.  Now that the Court has said Bazzle never commanded a majority on that issue, and that it remains open, courts must reconsider it not only in the class-, but in the consolidated-arbitration context.   

Consolidated arbitrations, like class arbitrations, raise two types of questions:  Common-dispute and party-consent questions.  We think that courts will likely conclude that both are questions of arbitrability for the court to decide in the first instance, unless the parties clearly and unmistakably agree otherwise.   Arbitrators may play a role in resolving contractual ambiguities identified by the court.  

1.      Who Gets to Decide Common-Dispute Questions?

All consolidated-arbitration questions concern whether at least one arbitration agreement encompasses not only disputes concerning one, but all other contracts at issue.  We call this the “common-dispute” question.    

In some consolidated-arbitration disputes the “common dispute” question is the only one presented.  Suppose reinsurer R  enters into two treaties with cedent C, Contracts A and B, each of which incept on the same date and are in force for one year.  Contract A’s limits are $1 million per occurrence excess a $500,000 retention.  Contract B has per occurrence limits of $2 million excess of $1.5 million.  Both contain broad arbitration clauses under which the parties agreed to arbitrate “any dispute arising out of or relating to this contract.” Continue Reading »

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

June 8th, 2010 Arbitrability, Arbitration Practice and Procedure, Authority of Arbitrators, Class Action Arbitration, Consolidation of Arbitration Proceedings, Practice and Procedure, Reinsurance Arbitration, United States Supreme Court Comments Off on How Will Stolt-Nielsen, S.A. v. Animalfeeds Int’l Corp. Change Reinsurance Arbitration Practice?

Part IV

A.   Introduction

In Part I (here) we explained 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, we explained how the Court has established for itself and the lower courts a fairly searching standard of review.  Part II (here) explored the legal and practical implications of that standard of review.    

Part III (here) turned to the other key area that will likely change because of Stolt-Nielsen — consolidated reinsurance-arbitration practice — and discussed the state of consolidation law pre-Stolt-Nielsen.  This Part IV discusses Stolt-Nielsen’s rationale for finding that imposing class arbitration on parties whose agreements are silent on that point is inconsistent with the Federal Arbitration Act, and explores how the Court’s ruling may affect consolidated reinsurance-arbitration practice in general. 

B.   The Supreme Court’s Decides that Imposing Class Arbitration on Parties whose Contracts are Silent on that Score is Inconsistent with the Federal Arbitration Act

When we last left Stolt-Nielsen, the Court had determined  that the arbitrators exceeded their authority by issuing an award that was based on their own notions of public policy gleaned from other arbitral decisions imposing class arbitration in the face of silence.  When a court vacates an award it has to decide whether to remand the matter to the arbitrators, for Section 10(b) of the Federal Arbitration Act authorizes a court to “direct a rehearing by the arbitrators.”  The Court decided not to remand, because “there can be only one possible outcome on the facts,” that is, where the parties’ contracts are undisputedly silent on class arbitration, save for the parties’ agreement to a broad arbitration clause.   The Court then set about to explain why that was so.  Continue Reading »

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

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 »

The United States Supreme Court Decides Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp.!

April 27th, 2010 Arbitrability, Authority of Arbitrators, Class Action Arbitration, Consolidation of Arbitration Proceedings, Grounds for Vacatur, United States Supreme Court Comments Off on The United States Supreme Court Decides Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp.!

As we predicted in prior posts, the United States Supreme Court reversed the judgment of the United States Court of Appeals for the Second Circuit in Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., holding (5-3) that it was inconsistent with the Federal Arbitration Act to impose class arbitration on parties whose agreements were concededly silent on that point.  We are in the process of analyzing the decision (copy here), and intend to post a comprehensive, critical analysis soon.

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 »

« Older Entries