Stolt-Nielsen S.A. v. Animalfeeds Int'l Corp.

Decision Date27 April 2010
Docket NumberNo. 08–1198.,08–1198.
Citation559 U.S. 662,176 L.Ed.2d 605,130 S.Ct. 1758
PartiesSTOLT–NIELSEN S.A. et al., Petitioners, v. ANIMALFEEDS INTERNATIONAL CORP.
CourtU.S. Supreme Court

Seth P. Waxman

, Washington, DC, for petitioners.

Cornelia T.L. Pillard, Washington, DC, for respondent.

Christopher M. Curran

, J. Mark Gidley, Peter J. Carney, Eric Grannon, Charles C. Moore, White & Case LLP, Washington, DC, for Stolt-Nielsen petitioners.

Seth P. Waxman

, Counsel of Record, Edward C. DuMont, Steven F. Cherry, Leon B. Greenfield, Christopher E. Babbitt, Daniel S. Volchok, Francesco Valentini, Wilmer Cutler Pickering, Hale and Dorr LLP, Washington, DC, for Odfjell petitioners.

Richard J. Rappaport

, Amy B. Manning, Tammy L. Adkins, Angelo M. Russo, McGuireWoods LLP, Chicago, IL, Richard L. Jarashow, McGuireWoods LLP, New York, NY, for Jo Tankers petitioners.

Richard C. Siefert

, Garvey Schubert Barer, Seattle, WA, Richard D. Gluck, Paul S. Hoff, Garvey Schubert Barer, Washington, DC, for petitioner Tokyo Marine Co., Ltd.

Bernard Persky

, Kellie Lerner, Labaton Sucharow LLP, New York, NY, Cornelia T.L. Pillard, Counsel of Record, c/o Georgetown University Law Center, Washington, DC, J. Douglas Richards, Benjamin D. Brown, Christopher J. Cormier, Cohen Milstein Sellers & Toll PLLC, Washington, DC, Michael J. Freed, Steven A. Kanner, William H. London, Michael E. Moskovitz, Freed Kanner London & Millen LLC, Bannockburn, IL, Michael D. Hausfeld, Hilary K. Ratway, Hausfeld LLP, Washington, DC, Solomon B. Cera, Thomas C. Bright, Gold Bennett Cera & Sidener LLP, San Francisco, CA, W. Joseph Bruckner, Lockridge Grindal Nauen LLP, Minneapolis, MN, Aaron F. Biber Gray, Plant, Mooty, Mooty & Bennett, PA, Minneapolis, MN, for respondent.Opinion

Justice ALITO

delivered the opinion of the Court.

We granted certiorari in this case to decide whether imposing class arbitration on parties whose arbitration clauses are “silent” on that issue is consistent with the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq.

I
A

Petitioners are shipping companies that serve a large share of the world market for parcel tankers—seagoing vessels with compartments that are separately chartered to customers wishing to ship liquids in small quantities. One of those customers is AnimalFeeds International Corp. (hereinafter AnimalFeeds), which supplies raw ingredients, such as fish oil, to animal-feed producers around the world. AnimalFeeds ships its goods pursuant to a standard contract known in the maritime trade as a charter party.1 Numerous charter parties are in regular use, and the charter party that AnimalFeeds uses is known as the “Vegoilvoy” charter party. Petitioners assert, without contradiction, that charterers like AnimalFeeds, or their agents—not the shipowners—typically select the particular charter party that governs their shipments. Accord, Trowbridge, Admiralty Law Institute: Symposium on Charter Parties: The History, Development, and Characteristics of the Charter Concept, 49 Tulane L.Rev. 743, 753 (1975) (“Voyage charter parties are highly standardized, with many commodities and charterers having their own specialized forms”).

Adopted in 1950, the Vegoilvoy charter party contains the following arbitration clause:

“Arbitration. 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 [i.e., the FAA], and a judgment of the Court shall be entered upon any award made by said arbitrator.” App. to Pet. for Cert. 69a.

In 2003, a Department of Justice criminal investigation revealed that petitioners were engaging in an illegal price-fixing conspiracy. When AnimalFeeds learned of this, it brought a putative class action against petitioners in the District Court for the Eastern District of Pennsylvania, asserting antitrust claims for supracompetitive prices that petitioners allegedly charged their customers over a period of several years.

Other charterers brought similar suits. In one of these, the District Court for the District of Connecticut held that the charterers' claims were not subject to arbitration under the applicable arbitration clause, but the Second Circuit reversed. See JLM Industries, Inc. v. Stolt–Nielsen S.A., 387 F.3d 163, 183 (2004)

. While that appeal was pending, the Judicial Panel on Multidistrict Litigation ordered the consolidation of then-pending actions against petitioners, including AnimalFeeds' action, in the District of Connecticut. See In re Parcel Tanker Shipping Services Antitrust Litigation, 296 F.Supp.2d 1370, 1371, and n. 1 (JPML 2003). The parties agree that as a consequence of these judgments and orders, AnimalFeeds and petitioners must arbitrate their antitrust dispute.

B

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 class of [a]ll direct purchasers of parcel tanker transportation services globally for bulk liquid chemicals, edible oils, acids, and other specialty liquids from [petitioners] at any time during the period from August 1, 1998, to November 30, 2002.” 548 F.3d 85, 87 (C.A.2 2008)

(internal quotation marks omitted). The parties entered into a supplemental agreement providing for the question of class arbitration to be submitted 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 (as effective Oct. 8, 2003).” App. to Pet. for Cert. 59a. These rules (hereinafter Class Rules) were developed by the American Arbitration Association (AAA) after our decision in Green Tree Financial Corp. v. Bazzle, 539 U.S. 444, 123 S.Ct. 2402, 156 L.Ed.2d 414 (2003), and Class Rule 3, in accordance with the plurality opinion in that case, requires an arbitrator, as a threshold matter, to determine “whether the applicable arbitration clause permits the arbitration to proceed on behalf of or against a class.” App. 56a.

The parties selected a panel of arbitrators and stipulated that the arbitration clause was “silent” with respect to class arbitration. Counsel for AnimalFeeds explained to the arbitration panel that the term “silent” did not simply mean that the clause made no express reference to class arbitration. Rather, he said, [a]ll the parties agree that when a contract is silent on an issue there's been no agreement that has been reached on that issue.” Id., at 77a.

After hearing argument and evidence, including testimony from petitioners' experts regarding arbitration customs and usage in the maritime trade, the arbitrators concluded that the arbitration clause allowed for class arbitration. They found persuasive the fact that other arbitrators ruling after Bazzle

had construed “a wide variety of clauses in a wide variety of settings as allowing for class arbitration,” but the panel acknowledged that none of these decisions was “exactly comparable” to the present dispute. See App. to Pet. for Cert. 49a–50a. Petitioners' expert evidence did not show an “inten[t] to preclude class arbitration,” the arbitrators reasoned, and petitioners' argument would leave “no basis for a class action absent express agreement among all parties and the putative class members.” Id., at 51a.

The arbitrators stayed the proceeding to allow the parties to seek judicial review, and petitioners filed an application to vacate the arbitrators' award in the District Court for the Southern District of New York. See 9 U.S.C. § 10(a)(4)

(authorizing a district court to “make an order vacating the award upon the application of any party to the arbitration ... where the arbitrators exceeded their powers”); Petition to Vacate Arbitration Award, No. 1:06–CV–00420–JSR (SDNY) in App. in No. 06–3474–cv (CA2), p. A–17, ¶ 16 (citing § 10(a)(4) as a ground for vacatur of the award); see also id., at A–15 to A–16, ¶ 9 (invoking the District Court's jurisdiction under 9 U.S.C. § 203 and 28 U.S.C. §§ 1331 and 1333). The District Court vacated the award, concluding that the arbitrators' decision was made in “manifest disregard” of the law insofar as the arbitrators failed to conduct a choice-of-law analysis. 435 F.Supp.2d 382, 384–385 (S.D.N.Y.2006). See Wilko v. Swan, 346 U.S. 427, 436–437, 74 S.Ct. 182, 98 L.Ed. 168 (1953) ([T]he interpretations of the law by the arbitrators in contrast to manifest disregard are not subject, in the federal courts, to judicial review for error in interpretation”); see also Petition to Vacate Arbitration Award, supra, at A–17, ¶ 17 (alleging that the arbitration panel “manifestly disregarded the law”). Had such an analysis been conducted, the District Court held, the arbitrators would have applied the rule of federal maritime law requiring that contracts be interpreted in light of custom and usage. 435 F.Supp.2d, at 385–386

.

AnimalFeeds appealed to the Court of Appeals, which reversed. See 9 U.S.C. § 16(a)(1)(E)

(“An appeal may be taken from ... an order ... vacating an award”). As an initial matter, the Court of Appeals held that the “manifest disregard” standard survived our decision in Hall Street Associates, L.L.C. v. Mattel, Inc., 552 U.S. 576, 128 S.Ct. 1396, 170 L.Ed.2d 254 (2008), as a “judicial gloss” on the enumerated grounds for vacatur of arbitration awards under 9 U.S.C. § 10. 548 F.3d, at 94. Nonetheless, the Court of Appeals concluded that, because petitioners had cited no authority applying a federal maritime rule of custom and usage against class arbitration, the arbitrators' decision was not in manifest disregard of federal maritime law. Id., at...

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