By S.I. Strong
Interestingly, it is the dissent, rather than the majority, that takes Stolt-Nielsen’s lesson of intent fully into account. Thus, Justice Breyer states that earlier Supreme Court precedent “cautioned against thinking that Congress’ primary objective was to guarantee . . . particular procedural advantages. Rather, that primary objective [of the FAA] was to secure the ‘enforcement’ of agreements to arbitrate.” AT&T, 131 S.Ct. at 1758 (Breyer, J., dissenting).
Justice Scalia sidesteps the issue of intent to a large degree because he does not consider class arbitrationto be “arbitration.” Instead, he replaces a discussion of intent with a litany of attributes that he finds to be inconsistent with his definition of arbitration, claiming that these characteristics could not have been in the contemplation of the parties at the time of contracting because the various elements (formality of proceedings, amount in dispute, etc.) are allegedly so atypical of arbitration.
Justice Scalia, unfortunately, is factually incorrect on this point. As discussed in the First Principles article coming out in the Harvard NLR, many of the attributes that Justice Scalia finds most disturbing are already common features in multiparty arbitration, a point that is also made by Justice Breyer. See id. at 1758-60 (Breyer, J., dissenting). Furthermore, class arbitration has been in existence for approximately thirty years and cannot come as a surprise to the parties. See id. at 1758 (Breyer, J., dissenting) (noting that “class arbitration is consistent with the use of arbitration” and “is a form of arbitration that is well known in California and followed elsewhere”).
This is not to say that concerns such as the ones expressed by Justice Scalia have never been raised. However, they are perhaps more reflective of the kind of vestigial judicial hostility to arbitration that was recently condemned by the Supreme Court in 14 Penn Plaza LLC v. Pyett, 129 S.Ct. 1456, 1470-72 (2009). Furthermore, many of the majority’s specific worries were addressed in the mid-1980s, when Mitsubishi rejected the view that “antitrust issues, prone to complication, require sophisticated legal and economic analysis, and thus are ‘ill-adapted to strengths of the arbitral process, i.e., expedition, minimal requirements of written rationale, simplicity, resort to basic concepts of common sense and simple equity.’” Mitsubishi Motors, 473 U.S. at 633 (noting also that “potential complexity alone does not persuade us that an arbitral tribunal could not properly handle an antitrust matter”); see also id. at 626-27 (stating “we are well past the time when judicial suspicion of the desirability of arbitration and of the competence of arbitral tribunals inhibited the development of arbitration as an alternative means of dispute resolution” (quoted also in Pyett, 129 S.Ct. at 1470))
Justice Scalia also indicated that he found it “at the very least odd to think that an arbitrator would be entrusted with ensuring that third parties’ due process rights are satisfied.” AT&T, 131 S.Ct. 1752. However, the Supreme Court has had several opportunities to strike class arbitration as being inherently improper and has refused to do so on every occasion. See Stolt-Nielsen, 130 S.Ct. at 1768-69, 1774-75 (suggesting no problems with class arbitration arise in cases of express consent and dealing only with issues involving silence or ambiguity regarding class treatment); Green Tree Financial Corporation v. Bazzle, 539 U.S. 444, 454-55 (2003) (Stevens, J., concurring) (stating the “Supreme Court of South Carolina has held as a matter of state law that class-action arbitrations are permissible if not prohibited by the applicable arbitration agreement, and that the agreement between these parties is silent on the issue. There is nothing in the Federal Arbitration Act that precludes either of these determinations by the Supreme Court of South Carolina”) (citations omitted); see also id. at 452-53 (Breyer, J.) (stating “the relevant question here is what kind of arbitration proceeding the parties agreed to. That question does not concern a state statute or judicial procedures. It concerns contract interpretation and arbitration procedures. Arbitrators are well situated to answer that question”) (citation omitted; emphasis in original); Southland Corp. v. Keating, 465 U.S. 1, 9, 17 (1984) (declining to address the class arbitration issue under federal law).
Thus the suggestion that there is something inappropriate or odd about class arbitration is contrary to U.S. law and policy. Indeed, the Supreme Court itself has stated that courts that agree to allow certain complex claims to go to arbitration pursuant to the parties’ express agreement cannot later claim that those matters are “inherently insusceptible to resolution by arbitration.” See Mitsubishi, 473 U.S. at 633. Since the Supreme Court has indicated that it has no problems with class arbitration in cases involving explicit consent, it cannot object to the procedure as a general matter now.
In some ways, the immediate effect of AT&T Mobility is quite easy to predict: corporations will increase the use of class waivers in certain types of arbitration agreements. However, these efforts will not eliminate class arbitration, nor will they limit litigation in this area of law. To the contrary, more suits will likely end up in court as parties test the outer boundaries of permissible waivers.
Furthermore, a recent decision out of the Second Circuit suggests that class waivers may still be struck on grounds other than unconscionability. See In re American Express Merchants’ Litigation, 634 F.3d 187, 194, 199 (2d Cir. 2011) (stating that “Stolt-Nielsen states that parties cannot be forced to engage in a class arbitration absent a contractual agreement to do so. It does not follo
w, as Amex urges, that a contractual clause barring class arbitration is per se enforceable” and concluding that the waiver was void for public policy as a matter of federal law). This suggests that future class arbitrations may still arise after a waiver has been struck. There will also likely be additional class arbitrations in cases where parties have failed to adopt a waiver.
Thus, the business community’s perceived victory in AT&T may be narrower and more short-lived than might appear at first glance. For example, in addition to the limitations within the opinion itself, AT&T may have the effect of providing legislators with the political incentive to pass certain arbitration reforms. See Press Release, Sen. Al Franken Website, Sens. Franken, Blumenthal, Rep. Hank Johnson Announce Legislation Giving Consumers More Power in Courts Against Corporations, available here.
Interestingly, the United States appears to be attempting to restrict large-scale arbitration just at a time when other jurisdictions have begun to embrace it. Germany, in particular, has made significant strides in this regard, having creating a new form of collective arbitration for use in shareholder disputes. See S.I. Strong, Collective Arbitration Under the DIS Supplementary Rules for Corporate Law Disputes: A European Form of Class Arbitration? 29 ASA Bull. 145 (2011). Other jurisdictions have also considered use of a class or class-type device in arbitration. See S.I. Strong, From Class to Collective: The De-Americanization of Class Arbitration, 26 Arb. Int’l 493 (2010). All of this suggests that class and collective is by no means fading away. Instead, the device is simply evolving into a more mature form.
S.I. Strong is currently Associate Professor of Law at the University of Missouriand Senior Fellow at the award-winning Center for the Study of Dispute Resolution, having previously taught law at the University of Cambridge and the University of Oxford in the United Kingdom. Prior to joining the faculty at Missouri, Dr Strong was Counsel specializing in international dispute resolution at Baker & McKenzie LLP and a dual-qualified practitioner (U.S.-England) in the New Yorkand London offices of Weil, Gotshal & Manges LLP. Dr Strong has acted in arbitral proceedings under a wide range of institutional rules and is listed as a neutral on various national and international rosters. Dr Strong is the author of numerous works on international arbitration, including the award-winning article, The Sounds of Silence: Are U.S. Arbitrators Creating Internationally Enforceable Awards When Ordering Class Arbitration in Cases of Contractual Silence or Ambiguity? 30 Michigan Journal of International Law 1017 (2009), as well as the books Research and Practice in International Commercial Arbitration: Sources and Strategies (2009) and Class Arbitration and Collective Arbitration: Mass Claims in the National and International Sphere (forthcoming), both from Oxford University Press. Dr Strong, who is qualified as a lawyer at the New York and Illinois bars and as a solicitor of the Supreme Court of England and Wales, holds a Ph.D. in law from the University of Cambridge, a D.Phil. from the University of Oxford, a J.D. from Duke University, an M.P.W. from the University of Southern California and a B.A. from the University of California.