Consolidation of arbitrations after Stolt-Nielsen.

• Author: Dotseth, Keith A.

This article originally appeared in the June 2011 Insurance and Reinsurance Committee Newsletter.

Last year, in Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp. (1) ("Stolt-Nielsen"), the Supreme Court considered whether an arbitration panel may order class arbitration where an arbitration clause is silent on that issue. In a five-to-three decision, the Court held that the Federal Arbitration Act (2) (FAA) does not permit imposing class arbitration unless there is a "contractual basis for concluding that the parties agreed to do so." (3) Since the decision was issued, there has been extensive commentary on the impact this decision will have on consolidated arbitrations. While it is clear that the effect of the decision will be widespread and varied--from who decides the issue to what contractual basis is necessary to find the parties agreed to consolidation--exactly how these changes will play out is not.

1. Background

   In Stolt-Nielsen, a group of liquid chemical manufacturers brought an antitrust lawsuit against Stolt-Nielsen, a major shipping company. After a court ordered arbitration pursuant to the arbitration clause, the parties submitted the issue of whether the arbitration clause permitted class arbitration to the arbitral panel. Importantly, the parties stipulated that the arbitration clause was "silent" as to class arbitration. The arbitration clause, in relevant part, provided: "Any dispute arising from the making, performance or termination of this Charter Party shall be settled ... [by] arbitration conducted in conformity with the provisions and procedure of ... [the FAA]." (4)

   After hearing arguments regarding the custom and usage of class arbitration in maritime trade, the arbitration panel ultimately determined the class arbitration could proceed, stating that petitioners had failed to show an "inten[t] to preclude class arbitration." (5) The panel emphasized the role public policy considerations played in its interpretation of the arbitration clause.

   The Supreme Court granted certiorari in June 2009. In its April 27, 2010 decision the Court held that the parties could not be compelled to submit the antitrust claims to class arbitration. Three conclusions were central to the Court's decision. First, the Court found that the arbitration panel had reached a decision based on its own policy choices, rather than "identifying and applying a rule of decision derived from the FAA or either maritime or New York law." (6) Emphasizing that judicial review of arbitration awards is extremely limited, the Court held that vacating the panel's judgment pursuant to section...