130 S. Ct. 1758, 1765 (2010)
Petitioners are shipping companies that operate a large share of the world market for parcel tankers.1
AnimalFeeds International Corp. supplies raw ingredients to animal-feed producers around the world.2 AnimalFeeds ships its goods pursuant to the standard Vegoilvoy charter party.3
The Vegoilvoy charter party contains an arbitration clause requiring disputes to be settled in New York by merchant or broker arbitrators or an admiralty lawyer.4 The arbitration must be conducted under the United States Arbitration Act.5 In 2003 a Department of Justice criminal investigation revealed that petitioners were engaging in an illegal price-fixing conspiracy.6
When AnimalFeeds learned of the conspiracy it brought a putative class action against petitioners in the Eastern District of Pennsylvania.7 The suit asserted antitrust claims for supracompetitive prices charged over several years.8 Other charterers filed similar suits.9 While one appeal was pending the Judicial Panel on Multidistrict Litigation consolidated the actions in the District of Connecticut.10 The Second Circuit held that the claims were subject to arbitration.11
In 2005 AnimalFeeds served petitioners with a demand for class arbitration.12 The demand designated New York City as the place of arbitration.13 It sought to represent a global class of direct purchasers of parcel tanker transportation services from August 1 1998 to November 30 2002.14 The parties entered a supplemental agreement submitting the class arbitration question to a panel of three arbitrators bound by Rules 3 through 7 of the American Arbitration Association's Supplementary Rules for Class Arbitrations.15
The parties stipulated that the arbitration clause was silent with respect to class arbitration.16 They agreed this meant they had reached no agreement on the issue.17 After receiving written submissions hearing argument and taking testimony from petitioners' experts the panel concluded that the clause permitted class arbitration.18 The panel relied on other post-Bazzle arbitral decisions construing a variety of clauses as allowing class proceedings.19 Petitioners applied to vacate the award in the Southern District of New York.20 The district court vacated the award.21 The Second Circuit reversed.22 The Supreme Court granted certiorari.23
Whether imposing class arbitration on parties whose arbitration clauses are silent on that issue is consistent with the Federal Arbitration Act?24
No. Petitioners are shipping companies that operate a large share of the world market for parcel tankers.27 AnimalFeeds International Corp. supplies raw ingredients to animal-feed producers around the world. AnimalFeeds ships its goods pursuant to the standard Vegoilvoy charter party which contains an arbitration clause requiring disputes to be settled in New York by merchant or broker arbitrators or an admiralty lawyer conducted under the United States Arbitration Act.28
In 2003 a Department of Justice criminal investigation revealed that petitioners were engaging in an illegal price-fixing conspiracy. When AnimalFeeds learned of the conspiracy it brought a putative class action against petitioners in the Eastern District of Pennsylvania asserting antitrust claims for supracompetitive prices charged over several years.29 Other charterers filed similar suits. While one appeal was pending the Judicial Panel on Multidistrict Litigation consolidated the actions in the District of Connecticut. The Second Circuit held that the claims were subject to arbitration.
In 2005 AnimalFeeds served petitioners with a demand for class arbitration designating New York City as the place of arbitration and seeking to represent a global class of direct purchasers of parcel tanker transportation services from August 1 1998 to November 30 2002.30 The parties entered a supplemental agreement submitting the question of class arbitration to a panel of three arbitrators who were to follow and be bound by Rules 3 through 7 of the American Arbitration Association's Supplementary Rules for Class Arbitrations.31 The parties stipulated that the arbitration clause was silent with respect to class arbitration meaning they had reached no agreement on the issue.32 After receiving written submissions hearing argument and taking testimony from petitioners' experts on maritime arbitration customs the panel concluded that the clause permitted class arbitration relying on other post-Bazzle arbitral decisions that had construed a variety of clauses as allowing class proceedings.33 Petitioners applied to vacate the award in the Southern District of New York. The district court vacated the award. The Court of Appeals for the Second Circuit reversed.34 The Supreme Court granted certiorari.
The arbitration panel exceeded its powers because the parties had stipulated there was no agreement on class arbitration and the panel imposed its own policy preference rather than identifying a governing rule from the FAA maritime law or New York law.35 Class arbitration fundamentally changes the nature of arbitration by resolving many disputes among hundreds or thousands of parties adjudicating rights of absent parties and eliminating the presumption of privacy and confidentiality.36 These differences are too great to presume consent from mere silence on the issue.37
Imposing class arbitration on parties whose arbitration clauses are silent on that issue is not consistent with the Federal Arbitration Act.38
Related opinions on this issue
Joined by Justice Stevens And Justice Breyer
Justice Ginsburg joined by Justices Stevens and Breyer dissented on the ground that the Court prematurely addressed an issue not ripe for judicial review.39 She argued that the arbitrators' clause-construction award was abstract and highly interlocutory as the panel had not yet decided whether the claims were suitable for class resolution or delineated any class.40 Ginsburg would have dismissed the petition as improvidently granted or on the merits affirmed the Second Circuit because the arbitrators did not exceed their powers under 9 U.S.C. § 10(a)(4).41
The panel had been expressly commissioned to decide whether the arbitration clause permitted class arbitration and it construed the broad clause in light of New York law federal maritime law and other arbitral decisions.42 She emphasized that courts do not sit to hear claims of factual or legal error by an arbitrator as an appellate court does in reviewing decisions of lower courts.43 The arbitrators here certainly construed the contract with fidelity to their commission and this Court therefore may not disturb the arbitrators' judgment even if convinced that serious error infected the panel's award.44
Whether an arbitration panel exceeds its powers under the Federal Arbitration Act when it orders class arbitration after the parties stipulated that their clause was silent on the subject and supplied no other evidence of agreement?45
An arbitration decision may be vacated under 9 U.S.C. § 10(a)(4) when the arbitrator exceeds his powers by imposing his own view of sound policy rather than interpreting and enforcing the parties' agreement.46
Yes. The parties stipulated that the arbitration clause was silent meaning they had reached no agreement on the issue of class arbitration.47 The arbitration panel did not consider whether the FAA maritime law or New York law supplied a default rule but instead relied on post-Bazzle arbitral decisions and imposed its own conception of sound policy.48 This action exceeded the panel's powers under the FAA because the task of an arbitrator is to interpret and enforce a contract not to make public policy.49
An arbitration panel exceeds its powers under the Federal Arbitration Act when it orders class arbitration after the parties stipulated that their clause was silent on the subject and supplied no other evidence of agreement.