The United States Supreme Court Rules That Class Arbitration Is Improper When Parties To An Arbitration Agreement Have Not Explicitly Authorized Class Arbitration

On April 27, 2010, in a closely watched antitrust case with the potential for broad impacts on class action arbitrations, the United States Supreme Court considered the issue “whether imposing class arbitration on parties whose arbitration clauses are "silent? on that issue is consistent with the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq.” Slip op. at 1. See Stolt-Nielsen S.A. et al. v. AnimalFeeds International Corp., 559 U.S. ---, No. 08-1198 (April 27, 2010) (“Stolt-Nielson”).

As explained below, the Supreme Court held by a 5–3 vote (Justice Sotomayor recused herself) 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 20 (emphasis in original). The Supreme Court reasoned that imposing class arbitration on parties that haven't voluntarily consented to class arbitration conflicted with the FAA.

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Published In: Alternative Dispute Resolution (ADR) Updates, Antitrust & Trade Regulation Updates, Civil Remedies Updates, General Business Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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