Source: https://www.law.cornell.edu/supct/html/08-1198.ZD.html
Timestamp: 2015-08-02 04:41:01
Document Index: 624150966

Matched Legal Cases: ['§1', '§10', '§1257', '§1291', '§16', '§9', '§10', '§10', '§10', '§10', '§10', '§10']

STOLT-NIELSEN S. A. v. ANIMALFEEDS INT’L CORP.
Were I to reach the merits, I would adhere to the strict limitations the Federal Arbitration Act (FAA), 9 U. S. C. §1 et seq.
, places on judicial review of arbitral awards. §10. Accordingly, I would affirm the judgment of the Second Circuit, which rejected petitioners’ plea for vacation of the arbitrators’ decision.
, at 2–6, this case was launched as a class action in federal court charging named ocean carriers (collectively, Stolt-Nielsen) with a conspiracy to extract supracompetitive prices from their customers (buyers of ocean-transportation services). That court action terminated when the Second Circuit held, first, that the parties’ transactions were governed by contracts (charter parties) with enforceable arbitration clauses, and second, that the antitrust claims were arbitrable. JLM Industries, Inc.
Stolt-Nielsen contested AnimalFeeds’ right to proceed on behalf of a class, but agreed to submission of that threshold dispute to a panel of arbitrators. Thus, the parties entered into a supplemental agreement to choose arbitrators and instruct them to “follow … Rul[e] 3 … of the American Arbitration Association’s Supplementary Rules for Class Arbitrations.” App. to Pet. for Cert. 59a. Rule 3, in turn, directed the panel to “determine … whether the applicable arbitration clause permits the arbitration to proceed on behalf of … a class.” App. 56a.
I consider, first, the fitness of the arbitrators’ clause-construction award for judicial review. The arbitrators decided the issue, in accord with the parties’ supplemental agreement, “as a threshold matter.” App. 56a. Their decision that the charter-party arbitration clause permitted class arbitration was abstract and highly interlocutory. The panel did not decide whether the particular claims AnimalFeeds advanced were suitable for class resolution, see App. to Pet. for Cert. 48a–49a; much less did it delineate any class or consider whether, “if a class is certified, … members of the putative class should be required to ‘opt in’ to th[e] proceeding,” id.
, 28 U. S. C. §1257 (providing for petitions for certiorari from “[f]inal judgments or decrees” of state courts); §1291 (providing for Court of Appeals review of district court “final decisions”); Catlin
(describing “final decision” generally as “one which ends the litigation on the merits and leaves nothing for the court to do but execute the judgment”).
We have equated to “final decisions” a slim set of “collateral orders” that share these characteristics: They “are conclusive, [they] resolve important questions separate from the merits, and [they] are effectively unreviewable on appeal from the final judgment in the underlying action.” Mohawk Industries, Inc.
, 558 U. S. ___, ___ (2009) (slip op., at 4–5) (quoting Swint
). “[O]rders relating to class certification” in federal court, it is settled, do not fit that bill. Coopers & Lybrand
Section 16 of the FAA, governing appellate review of district court arbitration orders, lists as an appealable disposition a district court decision “confirming or denying confirmation of an award or partial award.” 9 U. S. C. §16(a)(1)(D). Notably, the arbitrators in the matter at hand labeled their decision “Partial Final Clause Construction Award.” App. to Pet. for Cert. 45a. It cannot be true, however, that parties or arbitrators can gain instant review by slicing off a preliminary decision or a procedural order and declaring its resolution a “partial award.” Cf. Hall Street Associates, L. L. C.
(FAA §§9–11, which provide for expedited review to confirm, vacate, or modify arbitration awards, “substantiat[e] a national policy favoring arbitration with just the limited review needed to maintain arbitration’s essential virtue of resolving disputes straightaway.”).
Lacking this Court’s definitive guidance, some Courts of Appeals have reviewed arbitration awards “finally and definitely dispos[ing] of a separate independent claim.” E.g.
Others have considered “partial award[s]” that finally “determin[e] liability, but … not … damages.” E.g.
Another confirmed an interim ruling on a “separate, discrete, independent, severable issue.” Island Creek Coal Sales Co.
, 547 F. 3d 558 (CA6 2008) (arbitration panel’s preliminary ruling that contract did not bar class proceedings held not ripe for review; arbitrators had not yet determined that arbitration should
, 790 F. 2d, at 283, 285 (Feinberg, C. J., dissenting) (“[Piecemeal review] will make arbitration more like litigation, a result not to be desired. It would be better to minimize the number of occasions the parties to arbitration can come to court; on the whole, this benefits the parties, the arbitration process and the courts.”).
While lower court opinions are thus divided, this much is plain: No decision of this Court, until today, has ever approved immediate judicial review of an arbitrator’s decision as preliminary as the “partial award” made in this case.
, at 2. The panel did just what it was commissioned to do. It construed the broad arbitration clause (covering “[a]ny dispute arising from the making, performance or termination of this Charter Party,” App. to Pet. for Cert. 47a) and ruled, expressly and only, that the clause permitted class arbitration. The Court acts without warrant in allowing Stolt-Nielsen essentially to repudiate its submission of the contract-construction issue to the arbitration panel, and to gain, in place of the arbitrators’ judgment, this Court’s de novo
authorizes a court to vacate an arbitration panel’s decision “only in very unusual circumstances.” First Options of Chicago, Inc.
. The four grounds for vacatur codified in §10(a) restate the longstanding rule that, “[i]f [an arbitration] award is within the submission, and contains the honest decision of the arbitrators, after a full and fair hearing of the parties, a court … will not set [the award] aside for error, either in law or fact.” Burchell
The sole §10 ground Stolt-Nielsen invokes for vacating the arbitrators’ decision is §10(a)(4). The question under that provision is “whether the arbitrators had the power, based on the parties’ submissions or the arbitration agreement, to reach a certain issue, not whether the arbitrators correctly decided that issue.” DiRussa
, 760 F. 2d 138, 140 (CA7 1985). The parties’ supplemental agreement, referring the class-arbitration issue to an arbitration panel, undoubtedly empowered the arbitrators to render their clause-construction decision. That scarcely debatable point should resolve this case.
The Court’s characterization of the arbitration panel’s decision as resting on “policy,” not law, is hardly fair comment, for “policy” is not so much as mentioned in the arbitrators’ award. Instead, the panel tied its conclusion that the arbitration clause permitted class arbitration, App. to Pet. for Cert. 52a, to New York law, federal maritime law, and decisions made by other panels pursuant to Rule 3 of the American Arbitration Association’s Supplementary Rules for Class Arbitrations. Id.
, at 49a–50a.
At the outset of its explanation, the panel rejected the argument, proffered by AnimalFeeds, that this Court’s decision in Green Tree Financial Corp.
, settled the matter by “requir[ing] clear language that forbids
class arbitration in order to bar a class action.” App. to Pet. for Cert. 49a (emphasis added). Agreeing with Stolt-Nielsen in this regard, the panel said that the test it employed looked to the language of the particular agreement to gauge whether the parties “intended to permit or to preclude class action[s].” Ibid.
Concentrating on the wording of the arbitration clause, the panel observed, is “consistent with New York law as articulated by the [New York] Court of Appeals … and with federal maritime law.” Ibid.
Emphasizing the breadth of the clause in question—“ ‘any dispute arising from the making, performance or termination of this Charter Party’ shall be put to arbitration,” id.
, at 50a—the panel noted that numerous other partial awards had relied on language similarly comprehensive to permit class proceedings “in a wide variety of settings.” Id.
, at 49a–50a. The panel further noted “that many of the other panels [had] rejected arguments similar to those advanced by [Stolt-Nielsen].” Id.
The Court features a statement counsel for AnimalFeeds made at the hearing before the arbitration panel, and maintains that it belies any argument that the clause in question permits class arbitration: “All the parties agree that when a contract is silent on an issue there’s been no agreement that has been reached on that issue.” Ante
, at 8, 11–12, 20, 23, and n. 10. The sentence quoted from the hearing transcript concluded: “therefore there has been no agreement to bar class arbitrations
.” App. 77a (emphasis added). Counsel quickly clarified his position: “It’s also undisputed that the arbitration clause here contains broad language and this language should be interpreted to permit class arbitrations.” Id.
, at 80a (noting consistent recognition by arbitration panels that “a silent broadly worded arbitration clause, just like the one at issue here, should be construed to permit class arbitration”); id.
, at 88a (“[B]road … language … silent as to class proceedings should be interpreted to permit a class proceeding.”).
The question properly before the Court is not whether the arbitrators’ ruling was erroneous, but whether the arbitrators “exceeded their powers.” §10(a)(4). The arbitrators decided a threshold issue, explicitly committed to them, see supra
, at 2, about the procedural mode available for presentation of AnimalFeeds’ antitrust claims. Cf. Shady Grove Orthopedic Associates, P. A.
, 559 U. S. ___, ___ (2010) (plurality opinion) (slip op., at 13–14) (“[R]ules allowing multiple claims (and claims by or against multiple parties) to be litigated together … neither change plaintiffs’ separate entitlements to relief nor abridge defendants’ rights; they alter only how the claims are processed.”). That the arbitrators endeavored to perform their assigned task honestly is not contested. “Courts … do not sit to hear claims of factual or legal error by an arbitrator as an appellate court does in reviewing decisions of lower courts.” Paperworkers
. The arbitrators here not merely “arguably,” but certainly, “constru[ed] … the contract” with fidelity to their commission. Ibid. This Court, therefore, may not disturb the arbitrators’ judgment, even if convinced that “serious error” infected the panel’s award. Ibid.
The Court not only intrudes on a decision the parties referred to arbitrators. It compounds the intrusion by according the arbitrators no opportunity to clarify their decision and thereby to cure the error the Court perceives. Section 10(b), the Court asserts, invests in this tribunal authority to “decide the question that was originally referred to the panel.” Ante
, at 12. The controlling provision, however, says nothing of the kind. Section 10(b) reads, in full: “If an award is vacated and the time within which the agreement required the award to be made has not expired, the court may, in its discretion,
.” (Emphasis added.) Just as §10(a)(4) provides no justification for the Court’s disposition, see supra
, at 6–9 and this page,
so, too, §10(b) provides no grounding for the Court’s peremptory action.
, at 20 (“[A] party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed
to do so.”); ante
, at 20–23.
The Court ties the requirement of affirmative authorization to “the basic precept that arbitration ‘is a matter of consent, not coercion.’ ” Ante
). Parties may “specify with whom
they choose to arbitrate,” the Court observes, just as they may “limit the issues they choose to arbitrate.” Ante
, at 19. But arbitrators, in delineating an appropriate class, need not, and should not, disregard such contractual constraints. In this case, for example, AnimalFeeds proposes to pursue, on behalf of a class, only “claims … arising out of any [charter party agreement] … that provides for arbitration
.” App. to Pet. for Cert. 56a (emphasis added). Should the arbitrators certify the proposed class, they would adjudicate only the rights of persons “with whom” Stolt-Nielsen agreed to arbitrate, and only “issues” subject to arbitration. Ante
The Court also links its affirmative-authorization requirement to the parties’ right to stipulate rules under which arbitration may proceed. See ibid.
for resolution of “any dispute” involving a contract for ocean carriage of goods. There is little question that the designated court, state or federal, would have authority to conduct claims like AnimalFeeds’ on a class basis. Why should the class-action prospect vanish when the “any dispute” clause is contained in an arbitration agreement? Cf. Connecticut General Life Ins. Co.
, 210 F. 3d 771, 774–776 (CA7 2000) (reading contract’s authorization to arbitrate “[a]ny dispute” to permit consolidation of arbitrations). If the Court is right that arbitrators ordinarily are not equipped to manage class proceedings, see ante
, at 21–22, then the claimant should retain its right to proceed in that format in court.
When adjudication is costly and individual claims are no more than modest in size, class proceedings may be “the thing,” i.e.
v. Household Int’l, Inc.
, 376 F. 3d 656, 661 (CA7 2004) (“The realistic
alternative to a class action is not 17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30.”). Mindful that disallowance of class proceedings severely shrinks the dimensions of the case or controversy a claimant can mount, I note some stopping points in the Court’s decision.
First, the Court does not insist on express consent to class arbitration. Class arbitration may be ordered if “there is a contractual basis for concluding that the part[ies] agreed
” “to submit to class arbitration”. Ante
, at 23, n. 10 (“We have no occasion to decide what contractual basis may support a finding that the parties agreed to authorize class-action arbitration.”). Second, by observing that “the parties [here] are sophisticated business entities,” and “that it is customary for the shipper to choose the charter party that is used for a particular shipment,” the Court apparently spares from its affirmative-authorization requirement contracts of adhesion presented on a take-it-or-leave-it basis. Ante
, at 20. While these qualifications limit the scope of the Court’s decision, I remain persuaded that the arbitrators’ judgment should not have been disturbed.
The parties agreed that the arbitrators would issue a “partial final award,” and then “stay all proceedings … to permit any party to move a court of competent jurisdiction to confirm or to vacate” the award. App. 56a. But an arbitration agreement, we have held, cannot “expand judicial review” available under the FAA. Hall Street Associates, L. L. C. v. Mattel, Inc., 552 U. S. 576, 587 (2008)