Author: Hans Smit*
Published: December 2010
In the Bazzle case, the Supreme Court ruled that it was for the arbitrator to decide whether a class action could be brought in arbitration. However, this did not mean that the arbitrator had unlimited freedom in this respect. On the contrary, I had argued that arbitrators should not rule on issues of mandatory law in any form of arbitration. And I had serious misgivings about arbitrators deciding issues of class certification and settlement in opt-out class actions, because, in effect, the party-appointed arbitrators who would make these decisions would be more likely to rule in accord with the positions of the named parties than those of the unnamed parties. In other words: The checks by an independent court would be lacking. And that would be a significant lack of independent judicial control even when the class actions involved non-mandatory law. I had therefore argued that only an opt-in type of class action was permitted and then only in non-mandatory class action arbitrations.
That was also the view I espoused when the Supreme Court granted certiorari in the Stolt-Nielsen case. In that case, purchasers of global parcel tanker services had brought a class action in a U.S. court against owners of tanker vessels alleging that they had violated U.S. antitrust laws in charging for such services in international trade. The tanker owners invoked the arbitration clause in their contracts, and the U.S. Judicial Panel on Multidistrict Litigation, to which the action had been referred, ruled that the parties had to arbitrate their dispute. The arbitral panel then had to decide whether the case could be pursued as a class action. Although the arbitration clause was silent on the issue, the panel ruled that the case could be pursued as a class action, but it did not specify what type of class action would be appropriate. The parties did not seek a further arbitral…
*Stanley H. Fuld Professor of Law Emeritus, Columbia University. The author gratefully acknowledges the assistance of Parvan Parvanov, class of 2011, Columbia Law School, in the preparation of the footnotes.