559 U.S. 662, 672 n.3 (2010)
Petitioners Stolt-Nielsen S.A. and other shipping companies serve a large share of the world market for parcel tankers.1 They charter these vessels to customers such as respondent AnimalFeeds International Corp. under standard Vegoilvoy charter parties.2 The charter parties contain an arbitration clause calling for arbitration in New York under the FAA.3
In 2003, a Department of Justice criminal investigation revealed that petitioners were engaging in an illegal price-fixing conspiracy.4 AnimalFeeds learned of this and filed a putative class action antitrust suit in the Eastern District of Pennsylvania asserting claims for supracompetitive prices charged over several years.5 Other charterers brought similar suits.6 These were consolidated with AnimalFeeds' action in the District of Connecticut after the Second Circuit held in a related case that the charterers' claims were subject to arbitration.7 As a result, the parties agree that they must arbitrate their antitrust dispute.8
In 2005, AnimalFeeds served petitioners with a demand for class arbitration seeking to represent a class of all direct purchasers of parcel tanker transportation services globally during the period from August 1, 1998, to November 30, 2002, and designating New York City as the place of arbitration.9 The parties entered into a supplemental agreement submitting the question whether the arbitration clause permitted class arbitration to a panel of three arbitrators bound by the American Arbitration Association's Supplementary Rules for Class Arbitrations.10 They stipulated that the arbitration clause was silent on the class arbitration issue in that they had reached no agreement on it.11
After hearing argument and evidence including testimony from petitioners' experts on arbitration customs and usage in the maritime trade, the arbitrators concluded that the clause allowed class arbitration.12 Petitioners filed an application to vacate the award in the Southern District of New York on the ground that the arbitrators exceeded their powers.13 The District Court vacated the award.14 AnimalFeeds appealed to the Court of Appeals, which reversed.15 The Supreme Court granted certiorari to decide the question presented.16
Whether imposing class arbitration on parties whose arbitration clauses are silent on that issue is consistent with the Federal Arbitration Act?17
No. The parties stipulated that the arbitration clause was silent on the class arbitration issue in that they had reached no agreement on it.20 The arbitration panel imposed class arbitration despite this stipulation.21 The differences between bilateral and class arbitration are too great for such a presumption of consent from mere silence or an agreement to arbitrate.22 Here sophisticated shipping companies and AnimalFeeds had no tradition of class arbitration under maritime law, and the panel's decision cannot stand under the FAA's consent requirement.23
Imposing class arbitration on parties who have not agreed to authorize class arbitration is inconsistent with the FAA.24
Related opinions on this issue
Joined by Justice Stevens And Justice Breyer
Justice Ginsburg dissented and would have dismissed the petition as improvidently granted or affirmed the Second Circuit.25 She argued that the Court prematurely took up the question of class arbitration on a silent clause and substituted its judgment for that of the arbitrators chosen by the parties.26
The controlling FAA prescription authorizes a court to vacate an award only in very unusual circumstances.27 The sole ground invoked was that the arbitrators exceeded their powers.28 The parties' supplemental agreement referring the class-arbitration issue to the panel undoubtedly empowered the arbitrators to render their clause-construction decision.29
The arbitrators decided a threshold issue explicitly committed to them about the procedural mode available for presentation of AnimalFeeds' antitrust claims.30 The Court may not disturb that judgment even if convinced that serious error infected the award.31
Whether the arbitration panel exceeded its powers by imposing class arbitration based on its own policy choice rather than identifying and applying a rule of decision derived from the FAA or applicable maritime or New York law?32
An arbitration decision may be vacated under FAA §10(a)(4) on the ground that the arbitrator exceeded his powers.33 This occurs only when the arbitrator strays from interpretation and application of the agreement and effectively dispenses his own brand of industrial justice.34 An arbitrator's task is to interpret and enforce a contract, not to make public policy.35
Yes. The arbitration panel exceeded its powers by imposing its own policy choice instead of identifying and applying a rule of decision derived from the FAA or from maritime or New York law.36 Because the parties agreed that their agreement was silent on the class arbitration issue, the arbitrators' proper task was to identify the rule of law governing in that situation.37
Instead the panel based its decision on post-Bazzle arbitral decisions without mentioning whether they were based on a rule derived from the FAA or on maritime or New York law.38 Rather than inquiring whether those bodies of law contained a default rule permitting an arbitration clause to allow class arbitration absent express consent. The panel proceeded as if it had a common-law court's authority to develop what it viewed as the best rule for such a situation.39
Finding no reason to depart from its perception of a post-Bazzle consensus among arbitrators that class arbitration was beneficial in numerous settings, the panel simply imposed its own conception of sound policy and permitted class arbitration.40
The arbitration panel exceeded its powers by imposing class arbitration based on its own policy choice.41
Whether Green Tree Financial Corp. v. Bazzle established the standard to be applied in determining whether an arbitration clause permits class arbitration?42
No single rationale commanded a majority in Bazzle, which concerned contracts between a commercial lender and its customers that had an arbitration clause that did not expressly mention class arbitration.43 The plurality decided only the question whether the court or arbitrator should decide whether the contracts were silent on the class arbitration issue.44 Justice Stevens' opinion bypassed that question, resting instead on his resolution of the questions of what standard the appropriate decisionmaker should apply in determining whether a contract allows class arbitration, and whether class arbitration had been properly ordered in the case at hand.45
No. Bazzle did not control resolution of the question whether the instant charter party permits arbitration to proceed on behalf of this class.46 The Bazzle opinions appear to have baffled these parties at their arbitration proceeding.47
Both the parties and the arbitration panel also seem to have misunderstood Bazzle as establishing the standard to be applied in deciding whether class arbitration is permitted.48 However, Bazzle left that question open.49
Bazzle did not establish the standard to be applied in determining whether an arbitration clause permits class arbitration.50