Article by John M. Townsend1

First published in AAA Yearbook on Arbitration & the Law 2010

Class arbitration is a useful procedural device in need of a friend. It is the first choice of almost no one as a means of resolving disputes involving large numbers of claimants or respondents. Rather, it is primarily a creature of the courts: The Supreme Court called it into existence in its Bazzle decision in 2003, and effectively disowned it in its Stolt-Nielsen decision in 2010.2 Nevertheless, it has real advantages to offer as a method of dispute resolution, if the adversaries in the ongoing battle over class actions would stop shooting at each other long enough to consider them.

Class arbitration is, in its origins, a reaction to a reaction to a reaction: A reaction of the courts to the reactions of class action lawyers to the reactions of corporations to class actions. The first reaction was of large corporations that do business with significant numbers of customers or employees against class actions, as that procedural device is used in American courts. Many corporations came to feel that class actions, used to aggregate claims of individuals for damages in small amounts that would not individually make it economical to retain a lawyer, were used primarily to enrich the lawyers who brought the class actions. They point to a history of such actions being settled after a class action was certified, when the risk of an adverse decision became great enough to persuade the defendant to agree to a settlement that would pay a large fee to the class action lawyer, but would only pay such a small amount to each class member that many class members never claimed their shares.3

Such corporations discovered that, by inserting arbitration clauses in contracts, they could often convince courts that an agreement to arbitrate any dispute was inconsistent with the resolution of disputes on a class basis, even though the individual claim of the class representative might be for such a small amount that he or she would be unable to pursue the claim on an individual basis.4 This was the approach taken for many years by the federal courts, which found an agreement to arbitrate to preclude a class action, and which also concluded that Section 4 of the Federal Arbitration Act forbids a court to order class arbitration where the parties' contract is silent on the question of whether arbitration may proceed on a class basis.5 Because the corporations using these contracts were usually engaged in interstate commerce, these arbitration clauses were enforceable under the Federal Arbitration Act, and were thus immune from anti-arbitration legislation that has sometimes been devised by state legislatures.6

The reaction to that reaction was that representatives of consumers and employees who wished to bring class actions in the face of contracts with arbitration clauses in them began to try to persuade courts that, if arbitration clauses had the effect of making the remedy of a class action unavailable, they must be unconscionable and could be set aside on that basis.7 Because unconscionability is a ground that "exist[s] at law or in equity for the revocation of any contract," federal law permits a state or federal court to set aside an unconscionable arbitration clause, or the entire contract in which it appears.8

The reaction of the courts to the reaction of the class action bar to the reaction of the corporations was to find a way to have it both ways -- to have both arbitration and class proceedings. This reaction did not originate in the federal courts, which were generally reluctant to find arbitration agreements unconscionable.9 Rather, the reaction began in state court in California, where many novel ideas originate.10 The California Court of Appeals was probably the first to arrive at the conclusion that the way to give effect to an agreement to arbitrate, while preserving to the plaintiff the ability to bring his claim on behalf of a class, was to order the case to "arbitration on a class-wide basis."11

The concept that state courts could certify class actions and then refer the class claims to arbitration spread to other states.12 One of those was South Carolina, where the case that was to result in the Supreme Court's first pronouncement on the subject originated. In the Bazzle case, plaintiffs challenging the legality of a home improvement loan contract had brought a class action in South Carolina state court.13 The defendant moved to stay the action and to compel arbitration on the basis of an arbitration clause in the underlying contract. The South Carolina court certified a class action, as requested by the plaintiff, and then granted the defendant's motion to compel arbitration by ordering the class action so certified to arbitration pursuant to the arbitration clause in the representative plaintiff's contract. The same arbitrator to whom that arbitration was assigned subsequently certified, without a court order, a second class arbitration brought by a different plaintiff against the same defendant involving a similar challenge to the legality of a mobile home purchase contract. Substantial awards in favor of both classes were subsequently confirmed by the South Carolina trial court and upheld by the Supreme Court of South Carolina.14 The United States Supreme Court granted certiorari to hear both cases.

The Supreme Court's decision in the Bazzle case is fragmented into four opinions, none of which commanded a majority of the Court. The plurality decision by Justice Breyer, for four justices, held that the South Carolina courts should have allowed the arbitrator to make the threshold determination of whether the arbitration clause in each contract permitted arbitration on a class basis, rather than deciding themselves that the arbitration clauses permitted class arbitration.15 Justice Stevens would have affirmed the South Carolina Supreme Court's decision, but concurred in the judgment in order to provide a majority decision.16 Chief Justice Rehnquist, writing for himself and two other justices, concluded that courts should make the threshold determination of whether class treatment is permitted by arbitration agreements, but that the South Carolina courts had erred in their reading of the contracts involved.17 On remand, the South Carolina Supreme Court, as instructed, put that question to the arbitrator. Unsurprisingly, he concluded that the contracts did in fact permit class arbitration.18

The practical effect of the Bazzle decision was prompt and far-reaching. Shortly after the decision came out, the American Arbitration Association (AAA) realized that the Supreme Court had opened the door for arbitrators to certify class proceedings without specific judicial direction, and concluded that new rules would be needed to handle what amounted to a new type of proceeding. The AAA accordingly drafted and issued Supplementary Rules for Class Arbitration in October 2003.19 The need for such rules was not underestimated. Within six years, 283 requests for class arbitration had been filed with and administered by the AAA under its new rules.20

Remarkably absent from all of the opinions of the Supreme Court in the Bazzle case was any expression of concern about the due process implications of allowing an arbitrator, empowered only by the agreement of the named parties, to make decisions binding on absent class members. But that concern was very much on the mind of the AAA's committee that drafted the Supplementary Rules for Class Arbitration. First, mindful that arbitrators do not have the status or powers of federal or state judges, and also mindful of the economic burden that any class proceeding puts on the respondent, the Supplementary Rules built automatic stays into the class arbitration process to allow any party to seek judicial review of the arbitrator's decisions at two critical points prior to the final award.21 The first such automatic stay follows the completion of the first step in the process, a partial final award (the "Clause Construction Award") in which the arbitrator is directed by the Supplementary Rules to address the question that Bazzle puts to the arbitrator: whether the arbitration agreement permits the arbitration to proceed as a class arbitration.22 Of the 283 cases filed with the AAA as class arbitrations, 135 had resulted in Clause Construction Awards by September 2009.23 No statistics are available concerning the number of Clause Construction Awards that have been the subject of applications to the courts for confirmation or vacatur, but there have been decisions both ways.24 In addition, at least one decision found a Clause Construction Award not ripe for judicial review.25

The second automatic stay, reached only if the arbitrator answers the first question in the affirmative, follows any decision by the arbitrator to certify or refusing to certify an arbitration as a class arbitration (the "Class Determination Award").26 The Supplementary Rules closely track Rule 23 of the Federal Rules of Civil Procedure with respect to the circumstances under which it is appropriate to certify a class proceeding, with the additional requirement that each class member must have entered into an agreement containing a similar arbitration clause.27 As of September 2009, arbitrators sitting in cases under the AAA's Supplementary Rules had entered 48 Class Determination Awards, half of which granted class certification, 38% of which denied class certification, and six of which embodied stipulations to certify a class.28 In the only reported decision so far concerning a Class Determination Award, the district court found that an application to confirm a decision denying class certification lacked the element of ripeness required for judicial review, and a majority of the Sixth Circuit agreed, concluding that the prevailing party could not show any hardship requiring interim review.29 The Sixth Circuit explicitly left open the possibility that the party against which a Class Determination Award was entered might be able to meet the ripeness requirement, however.30

In addition to imposing the automatic stays to permit court review, the AAA's Supplementary Rules demonstrate concern for the due process rights of absent class members by departing dramatically from the general rule that arbitration proceedings are not public. Because class arbitration proceedings have the potential to affect large numbers of absent class members, whose identities may be difficult to ascertain, the AAA decided that proceedings conducted under the Supplementary Rules should be open to unprecedented public scrutiny. The Supplementary Rules thus provide that:

"The presumption of privacy and confidentiality in arbitration proceedings shall not apply in class arbitrations. All class arbitration hearings and filings may be made public, subject to the authority of the arbitrator to provide otherwise in special circumstances."31

The Supplementary Rules further provide that "[t]he AAA shall maintain on its Web site a Class Arbitration Docket of arbitrations filed as class arbitrations," on which key information about cases filed as class arbitrations is now made available to the public.32 In addition, all awards entered in class arbitrations administered under the Supplementary Rules are to be made available to the public.33

After the Bazzle decision, the antagonists in the underlying class action controversy reacted in different ways. Many class action lawyers embraced the new forum, and filed demands for class arbitration in large numbers.34 But many corporations that had, before Bazzle, simply used arbitration clauses to ward off class actions, refused to accept the inevitability of class procedures. One might have expected such corporations to have concluded that they would benefit from having class claims considered by experienced arbitrators, rather than by juries, and some did.35 Nevertheless, most continued to resist class treatment of any description. Their reaction to the Bazzle decision was to begin to incorporate explicit class action waivers into their contracts with consumers and employees.36

These class action waivers became the next battleground. As noted above, the Federal Arbitration Act leaves open the possibility that any contract, including an agreement to arbitrate, may be challenged as unconscionable. Arbitration clauses themselves have sometimes been found unconscionable, when the court found the clause to frustrate fundamental rights, but such decisions have been rare, especially in federal court.37 Class action waivers, however, have not fared so well. For example, the First Circuit found such a waiver (along with a waiver of treble damages) to be unenforceable in an antitrust action, and (after severing the waiver) ordered that "arbitration must proceed on a class or consolidated basis."38

A 2010 decision by Judge Kearse, writing for the Second Circuit in Fensterstock v. Education Financial Partners, surveyed the state and federal cases dealing with class action waivers, and found a class action waiver in an arbitration clause unconscionable under California law, and therefore unenforceable:39

"The Note is a standardized consumer contract of adhesion drafted by a party that had superior bargaining power; the disputes ... predictably involve small amounts of damages; and it is alleged that [the defendants] are deliberately carrying out a scheme to cheat large numbers of borrowers out of individually small sums of money. We conclude that the district court properly ruled that the Note's class action and class arbitration waiver clause is unconscionable."40

One might have thought that such reasoning, by a well-respected court, would have marked the end of attempts to use arbitration clauses to fend off class actions. It did not, however, because the 2010 decision of the Supreme Court in Stolt-Nielsen had altered the class arbitration landscape before it was handed down.41

The Stolt-Nielsen case arose out of a conspiracy to fix shipping prices prosecuted by the Department of Justice.42 AnimalFeeds International Corp., a shipper of fish oil and other products, brought a class action in federal court against Stolt-Nielsen S.A., an international shipper implicated by the Department of Justice in the price-fixing conspiracy, to recover overcharges alleged to have been collected as a result of the conspiracy. That suit was consolidated with suits by other shippers, and then ordered to arbitration under arbitration agreements in the charter party agreements between Stolt-Nielsen and the various shippers.43

In 2005, AnimalFeeds served Stolt-Nielsen with a demand for class arbitration. The parties then entered into a supplemental agreement, under which they agreed to submit "the question of class arbitration" to a panel of three arbitrators.44 The supplemental agreement provided that the three arbitrators were to "follow and be bound by Rules 3 through 7 of the American Arbitration Association's Supplementary Rules for Class Arbitrations," even though the arbitration proceedings were not administered by the AAA.45 The parties stipulated that the charter party agreement was "silent" on the question of class arbitration, and selected three distinguished arbitrators to decide whether the case could proceed as a class arbitration. As the Supreme Court put it:

"After hearing argument and evidence, including testimony from petitioners' experts regarding arbitration customs and usage in the maritime trade, the arbitrators concluded that the arbitration clause allowed for class arbitration."46

The arbitrators "stayed the proceeding to allow the parties to seek judicial review," as provided by Rule 3 of the AAA's Supplementary Rules.47 The District Court for the Southern District of New York vacated the award, concluding that the arbitrators' decision was "made in 'manifest disregard' of the law insofar as the arbitrators failed to conduct a choice-of-law analysis."48 The Second Circuit reversed,49 and the Supreme Court granted certiorari.

To understand the Supreme Court's decision in Stolt-Nielsen requires a short excursion into the doctrine called "manifest disregard of the law." When the Federal Arbitration Act was enacted in 1925, it specified in Section 10 only four grounds upon which a court might, on application, vacate an arbitration award, none of which was an error of law.50 In 1953, in a regrettable decision called Wilko v. Swan, the Supreme Court stated, in what is universally acknowledged to have been dictum, that "interpretations of the law by the arbitrators in contrast to manifest disregard are not subject, in the federal courts, to judicial review for error in interpretation."51 For many years, courts and lawyers have wrestled with what that statement means, and whether it adds a non-statutory ground to those enumerated in Section 10 of the Federal Arbitration Act or is merely a gloss on the grounds enumerated in the statute.

That question was put squarely to the Supreme Court for the first time since Wilko in the Hall Street Associates case in 2008, but the Court left the question unanswered.52 The question directly before the Court in Hall Street was whether parties to an arbitration clause may expand the scope of judicial review provided for in Section 10 of the Federal Arbitration Act, in that case by agreeing that a court could modify or vacate any award "where the arbitrator's conclusions of law are erroneous."53 The Court concluded that the grounds provided by the statute were exclusive, and could not be expanded by agreement.54 Presented with conflicting arguments about the meaning of "manifest disregard" as used in Wilko v. Swan and later decisions relying on it, the Court rejected the use of Wilko to support the right of parties to expand judicial review, but -- in a discussion that can fairly be characterized as maddening -- avoided committing itself to what "manifest disregard" should be understood to mean:

"... Hall Street overlooks the fact that the statement it relies on expressly rejects just what Hall Street asks for here, general review for an arbitrator's legal errors. Then there is the vagueness of Wilko's phrasing. Maybe the term 'manifest disregard' was meant to name a new ground for review, but maybe it merely referred to the §10 grounds collectively, rather than adding to them. Or, as some courts have thought, 'manifest disregard' may have been shorthand for §10(a)(3) or §10(a)(4), the paragraphs authorizing vacatur when the arbitrators were 'guilty of misconduct' or 'exceeded their powers.'"55

Nothing in the balance of the Hall Street decision resolved any of these uncertainties. Nor did the Court clarify the doctrine of manifest disregard when it returned to the question in Stolt-Nielsen:

"We do not decide whether 'manifest disregard' survives our decision in Hall Street Associates L.L.C. v. Mattel, Inc. as an independent ground for review or as a judicial gloss on the enumerated grounds for vacatur set forth at 9 U.S.C. §10. . . . Assuming, arguendo, that such a standard applies, we find it satisfied for the reasons that follow."56

Turning to the Second Circuit's decision in Stolt-Nielsen, the Supreme Court found that the Second Circuit had erred, because the Second Circuit had read Bazzle to require that the arbitrators, rather than the court, should decide if a silent arbitration clause permits an arbitration to go forward as a class arbitration.57 That may have been what the plurality in Bazzle decided, the Stolt-Nielsen court said, but that was not the decision of a majority of the Court.58 Where an arbitration clause is silent on a question, the Stolt-Nielsen court went on, an arbitrator must find and identify a rule of law to supply the answer to that question.59

The Stolt-Nielsen Court concluded that the arbitrators had, instead, answered the question based on their own view of public policy, and found such a determination inconsistent with the rule that "courts and arbitrators must 'give effect to the contractual rights and expectations of the parties.'"60 "The panel's conclusion," the Court went on, "is fundamentally at war with the foundational FAA principle that arbitration is a matter of consent."61 The Court explained:

"An implicit agreement to authorize class-action arbitration, however, is not a term that the arbitrator may infer solely from the fact of the parties' agreement to arbitrate. This is so because class-action arbitration changes the nature of arbitration to such a degree that it cannot be presumed the parties consented to it by simply agreeing to submit their disputes to an arbitrator."62

The Court then spent two pages enumerating why class-action arbitration differs from "bilateral arbitration," including "the commercial stakes of class-action arbitration" being "comparable to those of class-action litigation."63 "[T]he FAA requires more," the Court said:

"we see the question as being whether the parties agreed to authorize class arbitration. Here, where the parties stipulated that there was 'no agreement' on this question, it follows that the parties cannot be compelled to submit their dispute to class arbitration."64

The nub of the issue, in other words, is that class arbitration is as bad as class-action litigation, in the Court's view, and that parties should not be required to engage in it unless they have agreed explicitly to do so. That is the only explanation for the Court's decision. The Court's express rationale fails, for the simple reason that the parties in Stolt-Nielsen had empowered the arbitrators to decide precisely the question to which the Court provided a different answer. The parties' supplemental agreement provided for the question of class arbitration to be submitted to three arbitrators, in accordance with Rules 3 through 7 of the AAA's Supplementary Rules.65 Those rules entrusted to the arbitrators, without restriction, the question "whether the applicable arbitration clause permits the arbitration to proceed on behalf of or against a class."66

The Supreme Court simply felt that the arbitrators got the answer wrong, but the statute provides no basis for a court to correct a mere error on the part of arbitrators. As the Court itself noted in Hall Street, neither the Federal Arbitration Act nor any precedent permits a court to conduct a "general review for an arbitrator's legal errors."67 The arbitrators in Stolt-Nielsen had decided precisely the question they were asked to decide, so they can hardly be described as having "exceeded their powers."68 The only basis on which a court may possibly, with any regard for precedent or statute, set aside an award perceived to be legally erroneous is manifest disregard of the law. That doctrine should have been discredited years ago. The Court appears to recognize that it provides a very shaky basis for a decision in the third footnote to the Stolt-Nielsen decision (quoted at footnote 56, above), in which it declined to decide whether the doctrine survived Hall Street. But manifest disregard clearly has not only survived, but thrives, for the Supreme Court has relied on that doctrine in everything but name in reversing the Second Circuit's decision in Stolt-Nielsen.

Where the Stolt-Nielsen decision leaves class arbitration is apparent from the Second Circuit's decision in Fensterstock. After finding the class action waiver at issue in that case to be unenforceable, the Second Circuit turned to whether the class action waiver was severable from the rest of the arbitration clause. After a careful analysis of the Stolt-Nielsen decision, the Second Circuit read Stolt-Nielsen "to foreclose an order compelling arbitration on a classwide basis in this case."69 As understood by the Second Circuit, the Stolt-Nielsen court "concluded that since there was no agreement on arbitration on a class basis, the courts had no authority to compel arbitration on that basis."70 In Fensterstock:

"the parties plainly did not agree that arbitration may be conducted on a classwide basis, and we do not see that an order for classwide arbitration can be premised on the Note's severability provision * * *. [E]xcising the Note's class action and class arbitration waiver clause leaves the Note silent as to the permissibility of class-based arbitration, and under Stolt-Nielsen we have no authority to order class-based arbitration."71

The Second Circuit therefore affirmed the district court's denial of an order to compel arbitration. This presumably permitted the case to go forward as a class action in district court, because the class action waiver had been found to be unenforceable.

The Stolt-Nielsen decision has thus brought us back to where we were before Bazzle. The Bazzle court directed an arbitrator to decide whether a silent arbitration clause permitted an arbitration to go forward on a class basis. The Stolt-Nielsen court has reversed direction, albeit without quite admitting that it is doing so. It will be very difficult after that decision to persuade either an arbitrator or a court that a silent clause permits class treatment. Unless corporations give up on class action waivers (which after Fensterstock will be difficult to enforce), and begin to provide explicitly for class arbitration as preferable to trying a class action to a jury, the class arbitration device is likely to wither away when the current docket of cases is concluded.72 The process devised by the AAA in response to the Bazzle decision is a fair and workable one, but neither side of the confrontation over class actions is likely to give enough ground to reach agreement on such a reasonable solution.

Footnotes

1. John M. Townsend is a partner in the Washington, DC office of Hughes Hubbard & Reed LLP and chairs that firm's Arbitration and ADR Practice Group. He served successively as Chairman of the Law Committee, Chairman of the Executive Committee, and Chairman of the Board of Directors of the American Arbitration Association, and helped to draft the AAA's Supplementary Rules for Class Arbitration. The author would like to thank Benjamin Grillot for his help with this article.

2. Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444 (2003); Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 130 S. Ct. 1758 (2010).

3. "The policy at the very core of the class action mechanism is to overcome the problem that small recoveries do not provide the incentive for any individual to bring a solo action prosecuting his or her rights." Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 617 (1997) (internal citation omitted).

4. S.I. Strong, From Class to Collective: The De-Americanization of Class Arbitration, 26 Arb. Int'l 493, 498 (2010).

5. The leading case for many years was Champ v. Siegel Trading Co., Inc., 55 F.3d 269, 275 (7th Cir. 1995) ("The parties' arbitration agreement makes no mention of class arbitration. For a federal court to read such a term into the parties' agreement would 'disrupt the negotiated risk/benefit allocation and direct the parties to proceed with a different sort of arbitration.'") (internal citation omitted). Other circuits reached the same conclusion. See e.g. Dominium Austin Partners, LLC v. Emerson, 248 F.3d 720, 728-29 (8th Cir. 2001); Johnson v. W. Suburban Bank, 225 F.3d 366, 373 (3d Cir. 2000).

6. Section 2 of the Federal Arbitration Act provides that: "A written provision in . . . a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contact or transaction . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. §2. See e.g., Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 56 (2003) ("involving commerce" equivalent to "affecting commerce"); Doctor's Assocs, Inc. v Casarotto, 517 U.S. 681, 687 (1996) ("Courts may not, however, invalidate arbitration agreements under state laws applicable only to arbitration provisions").

7. See, e.g,. Discover Bank v. Superior Court, 113 P.3d 1100, 1110 (Cal. 2005); Ting v. AT&T, 319 F.3d 1126, 1150 (9th Cir. 2003); Szetela v. Discover Bank, 118 Cal. Rptr. 2d 862, 867-68 (Cal. App. 2002).

8. 9 U.S.C. § 2. See Rent-A-Center, W., Inc. v. Jackson, 130 S. Ct. 2772, 2778 (2010); Doctor's Assocs, 517 U.S. at 686-87; Kristian v. Comcast Corp., 446 F.3d 25, 63 (1st Cir. 2006).

9. See Champ, 55 F.3d at 275; Dominium Austin Partners, 248 F.3d at 728-29; Johnson, 225 F.3d at 373.

10. Mark Twain is said to have observed that "America is built on a tilt and everything loose slides to California." 

11. Keating v. Superior Court, 167 Cal. Rptr. 481, 492 (Cal. Ct. App. 1980). See, generally, S. I. Strong, Enforcing Class Arbitration in the International Sphere: Due Process and Public Policy Concerns, 30 U. Pa. J. Int'l L. 1, 29, 34 (2008).

12. E.g. Dickler v. Shearson Lehman Hutton, Inc., 596 A.2d 860, 866-67 (Pa. Super. Ct. 1991).

13. Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 449 (2003).

14. Bazzle v. Green Tree Fin. Corp., 569 S.E.2d 349, 351-52 (S.C. 2002); vacated, 539 U.S. 444 (2003).

15. Bazzle, 539 U.S. at 453-454 (2003).

16. Justice Stevens's concurring and dissenting opinion is at 539 U.S. 454-455.

17. 539 U.S. at 455-460. Justice Thomas adhered, alone, to his view that the Federal Arbitration Act does not apply to proceedings in state court. 539 U.S. at 460.

18. Bazzle v. Green Tree Fin. Corp., No. 00-CP-18-443 (S.C. Feb. 20, 2004) (order remanding issue to arbitrator).  After the arbitrator's finding, Green Tree's successor in interest (Green Tree having filed for bankruptcy protection) filed a petition for a writ of mandamus with the Supreme Court, which was denied.  In re Green Tree Fin. Corp., 541 U.S.1029 (2004).

19. American Arbitration Association, Supplementary Rules for Class Arbitration ("Supplementary Rules") (2003), http://www.adr.org/sp.asp?id=21936. Other organizations, notably JAMS, subsequently issued rules for class arbitration closely modeled on the AAA's. See e.g. JAMS, Class Action Procedures (2009), http://www.jamsadr.com/rules-class-action-procedures/.

20. Brief for American Arbitration Ass'n as Amicus Curiae in Support of Neither Party at 22-24, Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 130 S. Ct. 1758 (2010) (No. 08-1198) . The Stolt-Nielsen case is discussed below.

21. Normally, under the Federal Arbitration Act, only the final award of an arbitrator may be taken to court on an application to confirm or vacate the award. Michaels v. Mariforum Shipping, S.A., 624 F.2d 411, 414 (2d Cir. 1980). However, courts have generally been willing to review awards which dispose finally of some portion of a dispute. See, e.g., Island Creek Coal Sales Co. v. City of Gainesville, 729 F.2d 1046, 1049 (6th Cir. 1984).

22. AAA Supplementary Rules, Rule 3(a). Professor Strong has described these partial final awards as "[o]ne of the AAA Supplementary Rules' most interesting innovations." Strong, supra note 4, at 509-10.

23. Amicus Brief for American Arbitration Association, supra note 20, at 22. Of the 135 Clause Construction Awards, 95 found that the arbitration clause permitted the case to proceed as a class arbitration, 7 found that it did not, and 33 incorporated a stipulation among the parties to proceed on a class basis. Id. See also, William H. Baker, Class Action Arbitration, in International Commercial Arbitration in New York 319, 336-40 (J. Carter & J. Fellas, eds. 2010) (surveying the Clause Construction Awards entered up to September 2009 in cases administered by the AAA.).

24. See e.g. JSC Surgutneftegaz v. President & Fellows of Harvard Coll., No. 04-Civ-6069(RMB), 2007 WL 3019234 at *2 (S.D.N.Y. Oct. 11, 2007) (confirming Clause Construction Award); Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 435 F.Supp.2d 382, 387 (S.D.N.Y. 2006), rev'd, 548 F.3d 85 (2d Cir. 2008), rev'd, 130 S. Ct. 1758 (2010) (vacating Clause Construction Award).

25. Dealer Computer Servs, Inc. v. Dub Herring Ford, 547 F.3d 558, 564 (6th Cir. 2008). This decision by the Sixth Circuit, finding that a Clause Construction Award did not meet the ripeness requirement for judicial review, was arguably overruled by the Supreme Court's later decision (discussed below) in Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 130 S. Ct. 1758 (2010). Indeed, Justice Ginsburg so suggested in her dissent in Stolt-Nielsen, 130 S. Ct. at 1783, in which she reviewed the case law dealing with when (and if) an arbitration award other than a final award may be reviewed by a court. In its subsequent decision refusing to review a Class Determination Award, a majority of the Sixth Circuit denied that Stolt-Nielsen had overruled its prior decision, Dealer Computer Servs, Inc. v. Dub Herring Ford, 623 F.3d 348, 355 (6th Cir. 2010), although the dissent in that case maintained that the prior decision had been overruled. Id. at 359.

26. AAA Supplementary Rules, supra note 19, at Rule 4.

27. Id.

28. Amicus Brief for American Arbitration Association, supra note 20, at 22.

29. Dealer Computer Servs, 623 F.3d at 358.

30. Id. at 359.

31. AAA Supplementary Rules, supra note 19, at Rule 9(a). See also, Strong, supra note 4, at 513-515.

32. Id., Rule 9(b). The Class Arbitration Docket may be found at http://www.adr.org/sp.asp?id=25562. Rule 9(b) further provides that "The Class Arbitration Docket will provide certain information about the arbitration to the extent known to the AAA, including: (1) a copy of the demand for arbitration; (2) the identities of the parties; (3) the names and contact information of counsel for each party; (4) a list of awards made in the arbitration by the arbitrator; and (5) the date, time and place of any scheduled hearings." Id.

33. Id., Rule 10(b).

34. As noted above, 283 such demands were filed with the AAA between October 2003 and September 2009. Amicus Brief for American Arbitration Association, supra note 20, at 22. Others were filed with other providers of arbitration services, and still others were handled as ad hoc arbitrations, but sometimes using elements of the AAA's Supplementary Rules. See, e.g., Stolt-Nielsen, 130 S. Ct. at 1765.

35. The parties in 33 arbitrations stipulated that the arbitration clause permitted the arbitration to be conducted on a class basis, and the parties in 6 arbitrations stipulated that a class arbitration should the certified. Amicus Brief for American Arbitration Association, supra note 20, at 22.

36. Baker, supra note 23, at 346.

37. One such decision is Nagrampa v. Mailcoups, Inc., 469 F.3d 1257, 1283, 1293 (9th Cir. 2006).

38. Kristian, 446 F.3d at 61, 64.

39. Fensterstock v. Educ. Fin. Partners, 611 F.3d 124, 140 (2d Cir. 2010).

40. Id. The court found that California law was not preempted by the Federal Arbitration Act, because it places '"arbitration agreements with class action waivers on the exact same footing as contracts that bar class action litigation outside the context of arbitration."' Id. at 134, quoting Shroyer v. New Cingular Wireless Servs, Inc., 498 F.3d 976, 990 (9th Cir. 2007).

41. Stolt-Nielsen, 130 S. Ct. 1758.

42. Id. at 1765.

43. Id.; See also JLM Indus., Inc. v. Stolt-Nielsen, S.A., 387 F.3d 163, 183 (2d Cir. 2004).

44. Stolt-Nielsen, 130 S. Ct. at 1765.

45.Id. at 1766.

46. Id.

47. Id.

48. Id.; see Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 435 F.Supp.2d 382, 387 (S.D.N.Y. 2006).

49. Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 548 F.3d 85 (2d Cir. 2008).

50. 9 U.S.C. §10(a). Those grounds are:

  1. where the award was procured by corruption, fraud, or undue means;
  2. where there was evident partiality or corruption in the arbitrators, or either of them;
  3. where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or
  4. where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.

51. Wilko v. Swan, 346 U.S. 427, 436-437 (1953) (quoted in Stolt-Nielsen, 130 S. Ct. at 1766).

52. Hall Street Assocs L.L.C. v. Mattel, Inc., 552 U.S. 576, 585 (2008).

53. Id. at 579.

54. Id. at 589-90.

55. Id. at 585 (internal citations omitted).

56. Stolt-Nielsen, 130 S.Ct at 1768 n.3 (internal citations omitted).

57. Id. at 1772. The First Circuit had read Bazzle the same way as the Second Circuit: "[T]he Court concluded [in Bazzle] that an arbitrator, not a judge, should decide what kind of arbitration proceeding the parties had agreed to." Kristian, 446 F.3d at 41.

58. Stolt-Nielsen, 130 S. Ct. at 1772.

59. Id. at 1768.

60. Id. at 1770. Of course, the parties to Stolt-Nielsen had contracted for and expected the arbitrators to decide exactly the question that they decided. Id. at 1765-1766.

61. Id. at 1775.

62. Id.

63. Id. at 1776.

64. Id.

65. Id. at 1765.

66. Id. As Professor Park pointed out in critiquing the district court's decision, "The job of interpreting the parties' intent falls to the arbitrators. This task, which implicates mixed questions of fact and law, as well as evaluation of industry custom and practice, has always been entrusted to the arbitrators." W.W. Park, Determining an Arbitrator's Jurisdiction: Timing and Finality in American Law, 8 Nev. L.J. 135, 163 n.113 (2007).

67. Hall Street, 552 U.S. at 585.

68. See 9 U.S.C. §10(a)(4).

69. Fensterstock, 611 F.3d at 140.

70. Id.

71. Id. at 141.

72. Professor Strong suggests that class arbitration may nevertheless have a future outside the United States. Strong, supra note 4, at 509.

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