Supreme Court Deals A Blow to Consumers In Case on Class Actions & Arbitration
Yesterday, the five members of the Supreme Court's conservative wing dealt a blow to consumers and workers in the fight over forced arbitration. In Stolt-Nielsen v. Animalfeeds, the Court ruled that "imposing class arbitration on parties who have not agreed to authorize class arbitration is inconsistent with the Federal Arbitration Act." The arbitration panel in the case, according Justice Alito's opinion for the Court, had "exceeded its powers" by adopting its own "policy choice" in favor of allowing class actions.
Public Citizen filed an amicus brief in the case. We argued that the case was not ripe for judicial review under the Federal Arbitration Act, which limits judicial review of arbitral decisions to final "awards." The arbitral panel had decided only a preliminary issue of contract interpretation, had not even certified a class, and had issued no "award" in anyone's favor, so review by the Supreme Court would be premature.
Justice Ginsburg's dissent closely echoed our arguments. She would have dismissed the case without deciding it. But even if Stolt-Nielsen's case were ripe, Justice Ginsburg said, the Court should have rejected it because the parties in the case had both "asked the arbitrators to decide whether the arbitration clause in their contracts permitted class proceedings" and "the panel did just what it was commissioned to do." Under those circumstances, there was no basis for a court to overturn the decision.
Stolt's implications for the larger debate over forced arbitration in consumer and employment cases are troubling-especially for the ongoing fight over class-action bans. But the impact of the decision is unclear at this point, and will have to be worked out by the lower courts.
Although today's decision will undoubtedly affect consumers and workers, the Stolt case itself involved claims brought by a group of large businesses, who alleged that a handful of shipping companies had engaged in a global price-fixing conspiracy. One major question that will have to be addressed is how the decision will apply in cases where consumers' claims are especially small and a class action is the only realistic means of redress. The decision also does not address the fairness defenses that are available to consumers under general state contract law.