The US Supreme Court [official website; JURIST news archive] on Tuesday ruled [opinion, PDF] 5-3 in Stolt-Nielsen SA v. AnimalFeeds International [Cornell LII backgrounder; JURIST report] that imposing class arbitration on parties when that issue is silent in the parties' arbitration clauses is inconsistent with the Federal Arbitration Act (FAA) [9 USC Â§Â§ 1-14 text]. The US Court of Appeals for the Second Circuit had ruled [opinion, PDF] that construing the arbitration clause to permit class arbitration "did not manifestly disregard the law" because the parties specifically agreed that the arbitration panel would decide on the scope of the clause and, therefore, the panel did not exceed its authority. In reversing the decision below, Justice Samuel Alito wrote:
Contrary to the dissent, but consistent with our precedents emphasizing the consensual basis of arbitration, we see the question as being whether the parties agreed to authorize class arbitration. Here, where the parties stipulated that there was "no agreement" on this question, it follows that the parties cannot be compelled to submit their dispute to class arbitration.Justice Ruth Bader Ginsburg filed a dissenting opinion, joined by Justices John Paul Stevens and Stephen Breyer. Justice Sonia Sotomayor took no part in the consideration of the case.
The case arose when AnimalFeeds filed a class action lawsuit against four major shipping companies, including Stolt-Nielsen [corporate websites], alleging antitrust violations. The parties had a written contract, under which their case was referred to an arbitration panel. The contract was silent as to whether class arbitrations are permissible.