Supreme Court Releases Important Decision in Arbitration Case

The Supreme Court, in a 5–3 ruling, reversed and remanded the Second Circuit Court of Appeal’s ruling that an arbitral tribunal had not exceeded its powers in finding that an arbitration clause allowed for class arbitration. At issue was whether an arbitration provision in a standardized and specialized shipping contract allowed for class arbitration for a group of shipping customers, despite that the arbitration clause was silent as to class arbitration.

The Court found that the arbitrators should have looked to controlling federal law rather than their own policy concerns, and that the law in this case did not allow for class arbitration, especially where the arbitration agreement was silent on the issue. Accordingly, the Court agreed with the Southern District of New York’s ruling, which vacated the arbitral decision under Section 10(a)(4) of the Federal Arbitration Act. Stolt-Nielsen S.A., et al. v. Animalfeeds Int’l Corp., No. 08-1198.