Class Action Arbitration and Judicial Review

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In a recent ground-breaking case, Stolt-Nielsen S.A. v. Animalfeeds International Corp., No. 08-1198, the United States Supreme Court considered the question “whether imposing class arbitration on parties whose arbitration clauses are ‘silent’ on that issue is consistent with the Federal Arbitration Act.” The Court held that the arbitrators had exceeded their authority in permitting class arbitration. As a consequence, the Court took the unusual step of vacating the arbitration award. The Court further held that class arbitration was permitted under these facts and reversed the result. Stolt-Nielsen is a significant decision for corporations who rely on arbitration agreements in standard form contracts and who prefer to avoid class-action arbitrations. The case also breaks new ground on the issue of when and on what grounds courts in the U.S. may vacate arbitration awards and revisits the Court’s landmark ruling in Green Tree Financial Corp. v. Bazzle.

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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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