U.S. Supreme Court rules no class actions allowed in arbitration unless the contract expressly authorizes them (updated)

April 27, 2010  -  In a 5-3 ruling that dealt another blow to consumer rights, the U.S. Supreme Court ruled arbitration panels may not allow arbitration on a class-wide basis unless the arbitration agreement expressly authorizes it.  Although the parties in Stolt-Nielsen S.A. v. AnimalFeeds International Corp. were businesses, not consumers, the effects of the ruling will directly impact consumers who have signed loan agreements and other contracts containing arbitration clauses.  Now, if a company cheats a million of its customers out of $5 each, it will be able to keep the $5 million in unjust gain if it had the foresight to enter into contracts with its customers which require arbitration and which don’t allow class actions.  No consumer can afford to arbitrate a $5 claim.  If a consumer were allowed to file for arbitration on a class-wide basis, the consumer would be able to find attorneys to represent the class in arbitration proceedings.  This is just another in a long line of Supreme Court rulings that have put the rights of businesses ahead of the rights of consumers.

The court split along the same philosophical lines we’ve seen for some time now. Voting in the majority to ban class-wide arbitration were Justices Alito (who wrote the opinion), Roberts, Scalia, Kennedy and Thomas. Dissenting were Justices Ginsburg, Stevens and Breyer. Justice Sotomayor did not participate in the decision in the case.

STOLT-NIELSEN S. A. ET AL. v. ANIMALFEEDS INTERNATIONAL CORP.

Tagged as: arbitration, class action, Consumer Protection, consumers, Supreme Court