Opinion ID: 220200
Heading Depth: 2
Heading Rank: 1

Heading: Supreme Court's Decision in Stolt-Nielsen

Text: The dispute in Stolt-Nielsen arose out of a Department of Justice investigation that revealed the petitioner, a shipping company, was engaging in an illegal price-fixing conspiracy. Stolt-Nielsen, 130 S.Ct. at 1765. The respondent, a shipping customer, brought a putative class action asserting antitrust claims for supracompetitive prices that the shipping company had been charging its customers over the course of several years. Id. The Multidistrict Litigation Panel eventually consolidated that case with other similar cases; the parties agreed that, as a consequence of judgments and orders arising out of that MDL case, they had to arbitrate their antitrust dispute. Id. The respondent subsequently served the petitioner with a demand for class arbitration. Id. The parties then entered into a supplemental agreement that the question of class arbitration was to be submitted to a panel of three arbitrators. Id. The parties stipulated that the arbitration clause was silent with respect to class arbitration. Id. at 1766. After hearing argument and taking evidence from the parties, including expert testimony on the customs and usage in the maritime trade, the arbitration panel concluded that the arbitration clause allowed for class arbitration. Id. The arbitration panel stayed its decision to permit the parties to seek judicial review. The petitioners filed an application to vacate the award in the United States District Court for the Southern District of New York. Id. The district court vacated the award on the ground that the arbitrators had acted in manifest disregard of the law because they failed to conduct a choice-of-law analysis. Id. This court reversed, concluding that the decision was not in manifest disregard of the law because the petitioner had not cited any authority applying a federal maritime rule of custom and usage against class arbitration and because there was nothing in New York law that established a rule against class arbitration. Id. at 1766-67. The Supreme Court granted certiorari to decide the question whether imposing class arbitration on parties whose arbitration clauses are `silent' on that issue is consistent with the [FAA]. Id. at 1764. The five-member majority first noted that an arbitration decision may be vacated under § 10(a)(4) of the FAA on the ground that the arbitrator `exceeded his powers,' for the task of an arbitrator is to interpret and enforce a contract, not to make public policy. Id. at 1767. Of significance to the majority was that the arbitration panel appears to have rested its decision on [a] public policy argument. Id. at 1768. See also AT&T Mobility LLC v. Concepcion, ___ U.S. ___, 131 S.Ct. 1740, 1750, 179 L.Ed.2d 742 (2011) (noting that in Stolt-Nielsen we held that an arbitration panel exceeded its power under § 10(a)(4) of the FAA by imposing class procedures based on policy judgments rather than the arbitration agreement itself or some background principle of contract law that would affect its interpretation). The Stolt-Nielsen Court admonished that [b]ecause the parties agreed their agreement was `silent' in the sense that they had not reached any agreement on the issue of class arbitration, the arbitrators' proper task was to identify the rule of law that governs in that situation, hypothesizing that the FAA, federal maritime law, or New York would provide the governing rule. 130 S.Ct. at 1768. The Court reiterated that, in light of the parties' stipulation that they were in complete agreement regarding their intent, i.e., that their arbitration agreement contained no agreement on the issue of class arbitration, the only task left for the panel... was to identify the governing rule applicable in a case in which neither the language of the contract nor any other evidence established that the parties had reached any agreement on the question of class arbitration. Id. at 1768, 1770. Because the arbitration panel failed to follow this approach, the Supreme Court concluded that it had exceeded its powers when it imposed its own policy choice rather than engaging in its required task of interpret[ing] and enforc[ing] a contract, identifying and applying a rule of decision derived from the FAA or either maritime or New York law, and giv[ing] effect to the intent of the parties. Id. at 1767-68, 1770, 1774-75. The Court's interpretation of the parties' silence is key. Our dissenting colleague states that he believes the silence in Stolt-Nielsen was interpreted as simply reflect[ing] the fact each party recognized the arbitration clause neither specifically authorized nor specifically prohibited class arbitration. Dissenting Op. at 128 (citing Brief for Respondent at 26, Stolt-Nielsen, 2009 WL 3404244, at ). The dissent, however, fails to acknowledge that although that is the interpretation that the Respondent in Stolt-Nielsen wished the Court to adopt, that is not the interpretation that the Court did adopt. To the contrary, the Court interpreted the stipulated silence to mean that the parties agreed their agreement was `silent' in the sense that they had not reached any agreement on the issue of class arbitration. Stolt-Nielsen, 130 S.Ct. at 1768. See also id. at 1766 (The parties ... stipulated that the arbitration clause was `silent' with respect to class arbitration. Counsel for [the Respondent] explained to the arbitration panel that the term `silent' did not simply mean that the clause made no express reference to class arbitration. Rather, he said, `[a]ll the parties agree that when a contract is silent on an issue there's been no agreement that has been reached on the issue.'). The Court further noted that parties were in complete agreement regarding their intent. Id. at 1770. That is to say, according to the majority in Stolt-Nielsen, there was no express or implicit intent to submit to class arbitration. Indeed, the dissent in Stolt-Nielsen pointed out that the majority's interpretation of silence was incongruous with the Respondent's interpretation. Id. at 1781 (Ginsburg, J., dissenting ) (noting the majority's failure to acknowledge that counsel for the Respondent clarified his quoted statement to say that [i]t's also undisputed that the arbitration clause here contains broad language and this language should be interpreted to permit class arbitration). Although the dissent here appears to agree with Justice Ginsburg's interpretation of the parties' stipulated silence in Stolt-Nielsen, significantly for purposes of this case, that was not the interpretation adopted by the majority. Turning back to Stolt-Nielsen, the Court then took on the task of answering the question left open by Green Tree Financial Corp. v. Bazzle, 539 U.S. 444, 123 S.Ct. 2402, 156 L.Ed.2d 414 (2003): establish[ing] the rule to be applied in deciding whether class arbitration is permitted. Stolt-Nielsen, 130 S.Ct. at 1772. Acknowledging that although interpretation of an arbitration agreement is generally a matter of state law, the FAA imposes certain rules of fundamental importance, including the basic precept that arbitration `is a matter of consent, not coercion.' Id. at 1773 (quoting Volt Information Sciences, Inc. v. Bd. of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 479, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989)). The Court emphasized the consensual nature of private dispute resolution, noting that parties are generally free to structure their arbitration agreements as they see fit and that parties may specify with whom they choose to arbitrate their disputes. Id. at 1774 (internal quotation marks omitted) (emphasis in original). Accordingly, because the primary purpose when enforcing arbitration agreements is to give effect to the intent of the parties, the Court concluded that it follows that 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. Id. at 1775. Significantly, the Stolt-Nielsen Court was concerned that the arbitration panel had imposed class arbitration despite the parties' explicit stipulation that they had reached `no agreement' on that issue, i.e., that they had stipulated that the arbitration agreement contained neither an explicit nor implicit intent regarding class arbitration. Id. It is equally important to note that the Court declined to hold that an arbitration agreement must expressly state that the parties agree to class arbitration[w]e have no occasion to decide what contractual basis may support a finding that the parties agreed to authorize class arbitrationbecause in the case before them, the parties stipulated that there was `no agreement' on the issue of class-action arbitration. Id. at 1776 n. 10. The Court contemplated that an arbitration agreement may contain an implicit agreement to authorize class arbitration, but an implicit agreement to authorize class arbitration may not be infer[red] solely from the fact of the parties' agreement to arbitrate. Id. at 1775. In other words, simply agreeing to submit the dispute to an arbitrator does not equal an agreement to class-action arbitration. [M]ere silence on the issue of class arbitration, therefore, cannot give rise to consent to resolve ... disputes in class proceedings. Id. at 1776. Thus, the Court saw the question as being whether the parties agreed to authorize class arbitration and held that 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. Id. (emphasis in original).