There may not be much interest among the general readership in today’s opinion in Stolt-Nielsen SA v. AnimalFeeds International Corp., but it’s an important decision for businesses. The Court held by a 5-3 vote (with Justice Sotomayor recusing herself), along the familiar ideological lines, that the Federal Arbitration Act does not permit imposition of class arbitration on parties who have not agreed to authorize class arbitration.
The case was somewhat unusual in that (1) the parties had stipulated that the maritime charter agreement at issue contained “no agreement” about class arbitration (slip op. 23 & n.10); and (2) the parties had, by supplemental agreement, “expressly assigned” to the arbitrators the decision whether the charter agreement permitted class arbitration “and no party argues that this assignment was impermissible.” Slip op. 16.
1. The Court explicitly stated it had “no occasion to decide what contractual basis may support a finding that the parties agreed to authorize class-action arbitration” and emphasized the stipulation of the parties that there “was ‘no agreement’ on the issue of class-action arbitration.'” Slip op. 23. n.10. But the Court gives some hints about what sorts of things a decisionmaker may look to in determining whether an agreement authorizes class-action arbitration. The Court notes that “[u]nder both New York law and general maritime law, evidence of ‘custom and usage'” (there, discussing evidence “that it is customary in the shipping business for parties to resolve their disputes through bilateral arbitration”) “is relevant to determining the parties’ intent when an express agreement is ambiguous.” Slip op. 9-10 & n. 6. Thus, where a contract’s silence is “ambiguous,” the Court hints that evidence of custom and usage may support the conclusion that the parties did (or did not) intend to permit class arbitration. Given the Court’s statements about the [...]