No Class Arbitration Under the FAA Unless Specifically Agreed, At Least for Now

Today the Supreme Court decided a case important in the employment law field although the underlying case was a commercial dispute. The question in Stolt-Nielsen v. AnimalFeeds International (S.Ct. 4.27.10) [pdf] was whether under the Federal Arbitration Act, arbitrators could decide that class action was appropriate if the arbitration agreement was silent on that issue. Holding that the answer was no, Justice Alito wrote:

From these principles, it follows that a party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so.

The vote was the now familiar one with Justice Alito being joined by C.J. Roberts and Justices Scalia, Kennedy and Thomas. Justice Sotomayor did not participate and Justice Ginzberg wrote the dissent. In an argument that too has become familiar, she argued that the Court was prematurely answering the question.

This is extremely good news for all the employers who have arbitration agreements which are silent on class action.

However, just like the members of the majority, the members of the dissent, and even the argument for the dissent, we all know what comes next -- the cry for Congressional reversal.

Hopefully I will be wrong, as class arbitration is something that should be undertaken only after a long and careful study. In fact, class actions may be in for such a look in the Duke v. Wal-Mart decision which ultimately has to end up on the Supreme Court's plate.

The possible pyrrhic nature of today's victory for employers could come if it sparks greater interest in passage of the Arbitration Fairness Act, which would in its present form solve the question of employment law class action cases in arbitration by doing away with arbitration in such matters altogether.