Stolt-Nielsen Sa v. Animalfeeds Intern. Corp.

• Decision Date: 04 November 2008
• Docket Number: Docket No. 06-3474-cv.
• Citation: 548 F.3d 85
• Parties: STOLT-NIELSEN SA, Stolt-Nielsen Transportation Group Ltd., a Odfjell ASA, Odfjell Seachem AS, Odfjell USA, Inc., Jo Tankers BV, Jo Tankers, Inc., and Tokyo Marine Co. Ltd., Petitioners-Appellees, v. ANIMALFEEDS INTERNATIONAL CORP., Respondent-Appellant, KP Chemical Corp., Respondent.<SMALL><SUP>*</SUP></SMALL>
• Court: U.S. Court of Appeals — Second Circuit

548 F.3d 85

STOLT-NIELSEN SA, Stolt-Nielsen Transportation Group Ltd., a Odfjell ASA, Odfjell Seachem AS, Odfjell USA, Inc., Jo Tankers BV, Jo Tankers, Inc., and Tokyo Marine Co. Ltd., Petitioners-Appellees, v. ANIMALFEEDS INTERNATIONAL CORP., Respondent-Appellant, KP Chemical Corp., Respondent.^*

Docket No. 06-3474-cv.

United States Court of Appeals, Second Circuit.

Argued: May 30, 2008.

Decided: November 4, 2008.

Steven F. Cherry, Wilmer Cutler Pickering Hale and Dorr LLP (William J. Kolasky, Leon B. Greenfield, and David F. Olsky, Wilmer Cutler Pickering Hale and Dorr LLP, Washington, DC, of counsel), McLean, VA, for Petitioners-Appellees

Odfjell ASA, Odfjell Seachem AS, and Odfjell USA, Inc.

Christopher Curran, White & Case LLP (Francis A. Vasquez, Jr., Peter J. Carney, Eric Grannon, Kristen McAhren, and Charles C. Moore, of counsel), Washington, DC, for Petitioners-Appellees Stolt-Nielsen SA and Stolt-Nielsen Transportation Group Ltd.

Richard J. Rappaport, Amy B. Manning, and Tammy L. Adkins, McGuireWoods LLP, Chicago, IL; and Richard J. Jarashow, McGuireWoods LLP, New York, NY, for Petitioners-Appellees Jo Tankers BV and Jo Tankers, Inc.

Keith S. Dubanevich, Garvey Schubert Barer, Portland, OR, for Petitioner-Appellee Tokyo Marine Co. Ltd.

Bernard Persky, Labaton Sucharow LLP (Steven A. Kanner, Much Shelist Freed Denenberg Ament & Rubenstein, P.C., Chicago, IL; Michael D. Hausfeld, Cohen, Milstein, Hausfeld & Toll, P.L.L.C., Washington, DC; Solomon B. Cera, Gold Bennet Cera & Sidener LLP, San Francisco, CA; J. Douglas Richards, Milberg Weiss Bershad & Schulman LLP, New York, NY; W. Joseph Bruckner, Lockridge Grindal Nauen P.L.L.P., Minneapolis, MN; and Aaron F. Biber, Gray, Plant, Mooty, Mooty & Bennett, P.A., Minneapolis, MN, of counsel), New York, NY, for Respondent-Appellant.

Before: KEARSE, SACK, and LIVINGSTON, Circuit Judges.

SACK, Circuit Judge:

The parties to this litigation are also parties to international maritime contracts that contain arbitration clauses. The contracts are silent as to whether arbitration is permissible on behalf of a class of contracting parties. The question presented on this appeal is whether the arbitration panel, in issuing a clause construction award construing that silence to permit class arbitration, acted in manifest disregard of the law. The United States District Court for the Southern District of New York (Jed S. Rakoff, Judge) answered that question in the affirmative and therefore vacated the award. We conclude to the contrary that the demanding "manifest disregard" standard has not been met. The judgment of the district court is therefore reversed and the cause remanded with instructions to deny the petition to vacate.

BACKGROUND

Respondent-Appellant AnimalFeeds International Corp. ("AnimalFeeds") alleges that Petitioners-Appellees Stolt-Nielsen SA, Stolt-Nielsen Transportation Group Ltd., Odfjell ASA, Odfjell Seachem AS, Odfjell USA, Inc., Jo Tankers BV, Jo Tankers, Inc., and Tokyo Marine Co. Ltd. (collectively "Stolt-Nielsen") are engaged in a "global conspiracy to restrain competition in the world market for parcel tanker shipping services in violation of federal antitrust laws." Appellant's Br. 4. AnimalFeeds seeks to proceed on behalf of a class of "[a]ll direct purchasers of parcel tanker transportation services globally for bulk liquid chemicals, edible oils, acids, and other specialty liquids from [Stolt-Nielsen] at any time during the period from August 1, 1998, to November 30, 2002." Claimants' Consolidated Demand for Class Arbitration, May 19, 2005, at 4.

AnimalFeeds initially filed suit in the United States District Court for the Eastern District of Pennsylvania on September 4, 2003. That action was transferred to the District of Connecticut pursuant to an order of the Judicial Panel on Multidistrict Litigation, see 28 U.S.C. § 1407 (2000), consolidating "actions shar[ing] factual questions relating to the existence, scope and effect of an alleged conspiracy to fix the price of international shipments of liquid chemicals in the United States," In re Parcel Tanker Shipping Servs. Antitrust Litig., 296 F.Supp.2d 1370, 1371 (2003). In the District of Connecticut, Stolt-Nielsen moved to compel arbitration. The district court denied the motion but we reversed, holding that the parties' transactions were governed by contracts with enforceable agreements to arbitrate and that the antitrust claims were arbitrable. JLM Indus., Inc. v. Stolt-Nielsen SA, 387 F.3d 163, 183 (2d Cir.2004).¹

The parties then entered into an agreement stating, among other things, that the arbitrators "shall follow and be bound by Rules 3 through 7 of the American Arbitration Association's Supplementary Rules for Class Arbitrations (as effective Oct. 8, 2003)." Agreement Regarding New York Arbitration Procedures for Putative Class Action Plaintiffs in Parcel Tanker Services Antitrust Matter ("Class Arbitration Agreement") 3.

Rule 3 provides:

Upon appointment, the arbitrator shall determine as a threshold matter, in a reasoned, partial final award on the construction of the arbitration clause, whether the applicable arbitration clause permits the arbitration to proceed on behalf of or against a class (the "Clause Construction Award"). The arbitrator shall 16 stay all proceedings following the issuance of the Clause Construction Award for a period of at least 30 days to permit any party to move a court of competent jurisdiction to confirm or to vacate the Clause Construction Award....

In construing the applicable arbitration clause, the arbitrator shall not consider the existence of these Supplementary Rules, or any other AAA rules, to be a factor either in favor of or against permitting the arbitration to proceed on a class basis.²

American Arbitration Ass'n, Supplementary Rules for Class Arbitrations (2003) ("Supplementary Rules"), available at http://www.adr.org/sp.asp?id=21936 (last visited October 17, 2008). Pursuant to the Class Arbitration Agreement, AnimalFeeds, together with several co-plaintiffs not parties to this appeal, filed a demand for class arbitration. An arbitration panel was appointed to decide the Clause Construction Award.

The arbitration panel was required to consider the arbitration clauses in two standard-form agreements known as the Vegoilvoy charter party and the Asbatankvoy charter party.³ The Vegoilvoy agreement, which governs all transactions between AnimalFeeds and Stolt-Nielsen relevant to this appeal, contains the following broadly worded arbitration clause:

Any dispute arising from the making, performance or termination of this Charter Party shall be settled in New York, Owner and Charterer each appointing an arbitrator, who shall be a merchant, broker or individual experienced in the shipping business; the two thus chosen, if they cannot agree, shall nominate a third arbitrator who shall be an Admiralty lawyer. Such arbitration shall be conducted in conformity with the provisions and procedure of the United States Arbitration Act, and a judgment of the Court shall be entered upon any award made by said arbitrator. Nothing in this clause shall be deemed to waive Owner's right to lien on the cargo for freight, dead freight or demurrage.

The Asbatankvoy agreement, which governs some relevant transactions between Stolt-Nielsen and other putative class members not parties to this appeal, contains a similar broadly worded arbitration clause.⁴ Both agreements unambiguously mandate arbitration but are silent as to whether arbitration may proceed on behalf of a class.

The arbitration panel, tasked with deciding whether that silence permitted or precluded class arbitration, received evidence and briefing from both sides. AnimalFeeds and its co-plaintiffs argued that because the arbitration clauses were silent, arbitration on behalf of a class could proceed. They cited published clause construction awards under Rule 3 of the Supplementary Rules permitting class arbitration awards where the arbitration clause was silent. They also argued that public policy favored class arbitration and that the contracts' arbitration clauses would be unconscionable and unenforceable if they forbade class arbitration.

Stolt-Nielsen's position was that because the arbitration clauses were silent, the parties intended not to permit class arbitration. It cited several federal cases and arbitration decisions denying consolidation and class treatment of claims where the arbitration clause was silent. Stolt-Nielsen also argued that arbitration decisions cited by AnimalFeeds were inapposite because they were not made in the context of international maritime agreements, where parties have no expectation that arbitration will proceed on behalf of a class. In addition, Stolt-Nielsen offered extrinsic evidence regarding "the negotiating history and the context" of the arbitration agreements to "reinforce the conclusion that the parties did not intend ... to authorize class arbitration." Respondents' Opposition to Claimants' Motion for Clause Construction Award Permitting Class Arbitration ("Stolt-Nielsen's Arbitration Br.") 16. At oral argument before the arbitration panel, Stolt-Nielsen acknowledged that the interpretation of the contracts at issue here was a question of first impression.

On December 20, 2005, the arbitration panel issued a Clause Construction Award deciding that the agreements permit class arbitration.⁵ The panel based its decision largely on the fact that in all twenty-one published clause construction awards issued under Rule 3 of the Supplementary Rules, the arbitrators had interpreted silent arbitration clauses to permit class arbitration. The panel acknowledged that none of those cases was decided in the context of an international maritime contract. It said that it was nonetheless persuaded to follow those clause construction awards because the contract language in the cited cases was similar to the language used in the charter parties,...