April 29, 2010

Sternlight on Stolt-Nielsen v. AnimalFeeds

By Art Hinshaw

Jean Sternlight often sends us post worthy info.  Here’s her response to Kirgis’ take on Stolt-Nielsen v. AnimalFeeds.

As Paul Kirgis says, Stolt-Nielsen is a fascinating case.  

Likely it will mean the end, almost immediately, of classwide arbitrations in all contexts.  Then the big question on that front is whether courts or arbitrators will find some arbitration clauses unconscionable on the ground that they eliminate plaintiffs’ opportunity to proceed by way of class actions in either court or arbitration. (Rent-a-Center will soon tell us who gets to make this call).  Companies will now try to use Stolt- Nielsen to argue that the FAA preempts the claim that eliminating class actions is unconscionable.  I think this argument is wrong but I suspect some courts will buy it.

The Court’s take on court review of arbitral awards is perhaps an even more important aspect of this case.  The Court explicitly blends the labor and commercial arbitration standards of review, and states that arbitral awards can be reversed for abuse of discretion if, rather than interpreting the contract, the arbitrators base their decision on public policy.  I agree with Paul that this opinion could encourage lots more losing parties to try to get arbitral awards vacated.  While the Supreme Court itself will likely rely on this rationale only rarely (cynically, I say, in cases where it finds arbitrators’ conclusions not to their liking) perhaps some lower courts will take this as a license to vacate more awards in a variety of contexts.  Time will tell, …      

Jean R. Sternlight

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