Revisiting its 2003 opinion, the Court begins stating a new preference for bilateral arbitration and holds that class arbitration is not permissible under an arbitration clause that is silent on the issue.

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Stolt-Nielsen v. AnimalFeeds International Corp., 559 U.S. 662 (2010)

Relevant Facts: Petitioner shipping company entered into a contract with the respondent company, AnimalFeeds, that contained an arbitration clause. Later, AnimalFeeds brought a class action antitrust suit alleging price fixing. With no dispute over whether the claims would be resolved in arbitration, the only question was whether bringing the case as a class was permissible under the contract. Acknowledging that the contract was silent on the issue, the parties agreed to submit the question of whether the arbitration clause allowed for class arbitration to an arbitrator, and selected an arbitration panel. The panel determined that the agreement allowed for class arbitration. However, the district court vacated the award, claiming the arbitrators’ award was made in “manifest disregard” of the law. The appeals court reversed.


Question Before The Court: Whether class arbitration proceedings are permissible under an arbitration agreement that is silent on the matter.


The Opinion: The Court returned to its ruling in Bazzle in order to limit its effect on the ability of arbitrators to permit class arbitration. Noting that only a plurality, not a majority, asserted the position allowing an arbitrator, not a court, to decide whether a contract permits class arbitration, the Court explained, “Bazzle did not establish the rule to be applied in deciding whether class arbitration is permitted.”


The Court clarified that, because arbitration is a product of agreement by the parties arising out of a written contract, it is impermissible to require one party to submit to class arbitration if it didn’t agree to do so in the contract: “In bilateral arbitration, parties forgo the procedural rigor and appellate review of the courts in order to realize the benefits of private dispute resolution: lower costs, greater efficiency and speed, and the ability to choose expert adjudicators to resolve specialized disputes. . . But the relative benefits of class action arbitration are much less assured, giving reason to doubt the parties’ mutual consent to resolve disputes through class-wide arbitration.” The Court concluded, “We think that the differences between bilateral and class-action arbitration are too great for arbitrators to presume, consistent with their limited powers under the FAA, that the parties’ mere silence on the issue of class-action arbitration constitutes consent to resolve their disputes in class proceedings.” The Court concluded that when the contract is silent on whether class arbitration is permissible, the arbitrator must determine the proper rule of law in the situation, but they cannot base their decision on the propriety of class arbitration on public policy.


Observers have noted that the Court’s reasoning regarding the effect of an arbitration clause’s silence here is the inverse of the Court’s view in its Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc. decision. There, the Court embraced the presumption that arbitration clauses that are silent on whether a particular statutory claim is arbitrable should be assumed to be so. The result of the Court’s contrasting approach here leaves companies free to draft broad nonspecific arbitration clauses in order to force employees to arbitrate all statutory claims, which (by virtue of remaining silent on the type of arbitral proceeding) may also force any harmed employees to go it alone against their more-powerful employers.


In sum, this holding made it substantially more difficult for people bound by forced arbitration clauses to hold companies accountable as it effectively siloes each prospective claimant unless their contract expressly provides that class arbitration is permissible. Moreover, since most forced arbitration clauses actually foreclose class actions in a judicial forum, if they speak to the issue at all, this leaves many plaintiffs unable to access class proceedings in any forum. In her dissent, Justice Ginsberg addressed this injustice, averring, “If the Court is right that arbitrators ordinarily are not equipped to manage class proceedings . . . then the claimant should retain the right to proceed in that format in court.”

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