U.S. Supreme Court Rejects Class Arbitration in Absence of Agreement; Parties Must Specifically Agree To Class Arbitration Under the Federal Arbitration Act

There are differences between the California arbitration statutes (Code of Civil Procedure sections 1280-1294.2) and the Federal Arbitration Act (9 U.S.C. sections 1-16) and perhaps the clearest difference is when it comes to the arbitration of a class action. Under California procedure, “class arbitration” is permissible and a court can order it, for example, under an adhesive franchise contract (see Keating v. Superior Court, 31 Cal.3d 584, 612-613 (1982)). But under the FAA, there can be no class arbitration unless the parties specifically agree to it, and if the arbitration agreement is silent on the subject, the court cannot imply consent to a class-wide procedure. This is the essence of the U.S. Supreme Court’s ruling in Stolt-Nielsen SA v. AnimalFeeds International Corporation. To quote the court, “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.” For your convenience, a copy of the Supreme Court’s opinion is attached.