Stolt-Nielsen S.A., a global shipping company, faced an enormous challenge. At the same time the US government was breaking its amnesty contract with Stolt-Nielsen (a dispute Stolt-Nielsen won in federal court in 2007), a customer, AnimalFeeds International Corp., sued Stolt-Nielsen and other tanker firms over alleged price-fixing, seeking relief not only for itself, but also for a proposed class of direct purchasers. Stolt-Nielsen moved to compel arbitration to avoid a jury trial and won a decision from the US Court of Appeals for the Second Circuit that sent the case to arbitration.

The arbitration panel held that the arbitration agreements allowed class action procedures—even though the agreements said nothing about a right to class arbitration. After several years of subsequent litigation, it was up to the US Supreme Court to decide ultimately whether a costly class arbitration could be imposed on Stolt-Nielsen.

White & Case had represented Stolt-Nielsen since the antitrust cases began in 2003. The US District Court in Manhattan threw out the arbitrators' decision permitting class arbitration, but the US Court of Appeals for the Second Circuit ruled that the arbitrators could impose class arbitration on Stolt-Nielsen. Unwilling to accept that decision, and backed by numerous groups including the US Chamber of Commerce, White & Case asked the US Supreme Court to consider the case, which the Court agreed to do.

Convincing the Court to overturn the imposition of class arbitration was no easy task—the dispute fell into the emerging nexus of arbitration and antitrust law. But the White & Case team, led by partners J. Mark Gidley and Christopher Curran in Washington, DC, with partners Peter Carney and Eric Grannon, made these strong arguments to the Court:

•  The Federal Arbitration Act (FAA) authorizes courts to enforce arbitration agreements only in accordance with their terms. And because the arbitration agreements were silent as to class arbitration, class procedures were not authorized by the FAA in this case.

•  There are great differences between bilateral arbitrations and class arbitrations, and there is a long history of maritime arbitrations being bilateral.

•  The arbitrators couldn’t presume that the contract's silence on the issue of class action arbitration amounted to Stolt-Nielsen's and AnimalFeeds' consent to resolve their disputes in class proceedings.

On April 27, 2010, the Supreme Court made its ruling—a total victory for Stolt-Nielsen and a sweeping endorsement of the arguments White & Case had made. The Court ruled that class arbitration could not be imposed on Stolt-Nielsen and that the arbitration panel had overstepped its authority in ruling that it could. In particular, the Court held that the FAA does not permit arbitrators to impose class arbitration on parties whose arbitration agreement is silent on the question of class arbitration. The arbitration panel's imposition of class arbitration was "fundamentally at war" with the principle that arbitration is a matter of consent, held the Court.

This was a momentous decision for Stolt-Nielsen. By eliminating the possibility of class arbitration, Stolt-Nielsen avoided potentially hundreds of millions of dollars of potential class action claims, and its customers would now have to pursue any alleged antitrust claims through individual arbitrations.

The US Supreme Court's precedent-setting decision was a tremendous victory for Stolt-Nielsen. Recognizing its significance, the Financial Times, in its inaugural "US Innovative Lawyers 2010" report, named White & Case one of the most innovative firms in the United States for its Stolt-Nielsen work.

But the decision reaches further than Stolt-Nielsen and antitrust law to all contract and securities disputes and far beyond, says partner J. Mark Gidley. "Class arbitration is one of the most hotly contested legal issues of the new decade. Our client's victory at the US Supreme Court is already being felt not only in antitrust arbitration cases, but in many other areas of substantive law."

In particular, notes Mark:

•  As a result of the decision, some 100 class action arbitrations are currently on review in courts and in arbitration proceedings throughout the United States. These involve not only antitrust law, but also contracts, securities law, employment law and many other legal areas.

•  Companies across the United States and worldwide are redrafting their contracts and their arbitration clauses to reflect the Supreme Court's decision on class arbitration.

•  Stolt-Nielsen v. AnimalFeeds will be the seminal case in implied class action arbitration for years to come.

 
 
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