06-3474-cv Stolt-Nielsen SA v. AnimalFeeds Int'l Corp.
1 UNITED STATES COURT OF APPEALS 2 FOR THE SECOND CIRCUIT 3 August Term, 2007 4 (Argued: May 30, 2008 Decided: November 4, 2008) 5 Docket No. 06-3474-cv 6 ------------------------------------ 7 STOLT-NIELSEN SA, 8 Stolt-Nielsen Transportation Group Ltd.,a 9 Odfjell ASA, Odfjell Seachem AS, Odfjell USA, Inc., 10 Jo Tankers BV, Jo Tankers, Inc., and Tokyo Marine Co. Ltd., 11 Petitioners-Appellees, 12 - v - 13 ANIMALFEEDS INTERNATIONAL CORP., 14 Respondent-Appellant, 15 KP Chemical Corp., 16 Respondent.* 17 ------------------------------------ 18 Before: KEARSE, SACK, and LIVINGSTON, Circuit Judges. 19 Appeal from an order and judgment of the United States
20 District Court for the Southern District of New York (Jed S.
21 Rakoff, Judge) vacating an arbitration award. We conclude that
22 the arbitration panel, in construing an arbitration clause in an
23 international maritime agreement to permit class arbitration when
* The Clerk of Court is directed to amend the official caption as set forth above. 1 the clause was silent on that issue, did not manifestly disregard
2 the law.
3 Reversed and remanded with instructions to deny the
4 petition to vacate.
5 STEVEN F. CHERRY, Wilmer Cutler 6 Pickering Hale and Dorr LLP (William J. 7 Kolasky, Leon B. Greenfield, and David 8 F. Olsky, Wilmer Cutler Pickering Hale 9 and Dorr LLP, Washington, DC, of 10 counsel), McLean, VA, for 11 Petitioners-Appellees Odfjell ASA, 12 Odfjell Seachem AS, and Odfjell USA, 13 Inc. 14 CHRISTOPHER CURRAN, White & Case LLP 15 (Francis A. Vasquez, Jr., Peter J. 16 Carney, Eric Grannon, Kristen McAhren, 17 and Charles C. Moore, of counsel), 18 Washington, DC, for Petitioners- 19 Appellees Stolt-Nielsen SA and Stolt- 20 Nielsen Transportation Group Ltd. 21 Richard J. Rappaport, Amy B. Manning, 22 and Tammy L. Adkins, McGuireWoods LLP, 23 Chicago, IL; and Richard J. Jarashow, 24 McGuireWoods LLP, New York, NY, for 25 Petitioners-Appellees Jo Tankers BV and 26 Jo Tankers, Inc. 27 Keith S. Dubanevich, Garvey Schubert 28 Barer, Portland, OR, for Petitioner- 29 Appellee Tokyo Marine Co. Ltd. 30 BERNARD PERSKY, Labaton Sucharow LLP 31 (Steven A. Kanner, Much Shelist Freed 32 Denenberg Ament & Rubenstein, P.C., 33 Chicago, IL; Michael D. Hausfeld, Cohen, 34 Milstein, Hausfeld & Toll, P.L.L.C., 35 Washington, DC; Solomon B. Cera, Gold 36 Bennet Cera & Sidener LLP, San 37 Francisco, CA; J. Douglas Richards, 38 Milberg Weiss Bershad & Schulman LLP, 39 New York, NY; W. Joseph Bruckner, 40 Lockridge Grindal Nauen P.L.L.P., 41 Minneapolis, MN; and Aaron F. Biber, 42 Gray, Plant, Mooty, Mooty & Bennett, 43 P.A., Minneapolis, MN, of counsel), New 44 York, NY, for Respondent-Appellant. 2 1 SACK, Circuit Judge: 2 The parties to this litigation are also parties to
3 international maritime contracts that contain arbitration
4 clauses. The contracts are silent as to whether arbitration is
5 permissible on behalf of a class of contracting parties. The
6 question presented on this appeal is whether the arbitration
7 panel, in issuing a clause construction award construing that
8 silence to permit class arbitration, acted in manifest disregard
9 of the law. The United States District Court for the Southern
10 District of New York (Jed S. Rakoff, Judge) answered that
11 question in the affirmative and therefore vacated the award. We
12 conclude to the contrary that the demanding "manifest disregard"
13 standard has not been met. The judgment of the district court is
14 therefore reversed and the cause remanded with instructions to
15 deny the petition to vacate.
16 BACKGROUND
17 Respondent-Appellant AnimalFeeds International Corp.
18 ("AnimalFeeds") alleges that Petitioners-Appellees Stolt-Nielsen
19 SA, Stolt-Nielsen Transportation Group Ltd., Odfjell ASA, Odfjell
20 Seachem AS, Odfjell USA, Inc., Jo Tankers BV, Jo Tankers, Inc.,
21 and Tokyo Marine Co. Ltd. (collectively "Stolt-Nielsen") are
22 engaged in a "global conspiracy to restrain competition in the
23 world market for parcel tanker shipping services in violation of
24 federal antitrust laws." Appellant's Br. 4. AnimalFeeds seeks
25 to proceed on behalf of a class of "[a]ll direct purchasers of
26 parcel tanker transportation services globally for bulk liquid
3 1 chemicals, edible oils, acids, and other specialty liquids from
2 [Stolt-Nielsen] at any time during the period from August 1,
3 1998, to November 30, 2002." Claimants' Consolidated Demand for
4 Class Arbitration, May 19, 2005, at 4.
5 AnimalFeeds initially filed suit in the United States
6 District Court for the Eastern District of Pennsylvania on
7 September 4, 2003. That action was transferred to the District
8 of Connecticut pursuant to an order of the Judicial Panel on
9 Multidistrict Litigation, see 28 U.S.C. § 1407 (2000),
10 consolidating "actions shar[ing] factual questions relating to
11 the existence, scope and effect of an alleged conspiracy to fix
12 the price of international shipments of liquid chemicals in the
13 United States," In re Parcel Tanker Shipping Servs. Antitrust
14 Litig., 296 F. Supp. 2d 1370, 1371 (J.P.M.L. 2003). In the
15 District of Connecticut, Stolt-Nielsen moved to compel
16 arbitration. The district court denied the motion but we
17 reversed, holding that the parties' transactions were governed by
18 contracts with enforceable agreements to arbitrate and that the
19 antitrust claims were arbitrable. JLM Indus., Inc. v.
20 Stolt-Nielsen SA, 387 F.3d 163, 183 (2d Cir. 2004).1
21 The parties then entered into an agreement stating,
22 among other things, that the arbitrators "shall follow and be
1 AnimalFeeds was not a named party in JLM Industries, which reversed a decision that had been entered by the District of Connecticut prior to In re Parcel Tanker Shipping Services Antitrust Litigation's transfer and consolidation order. It is undisputed, however, that our decision in JLM Industries had the effect of requiring arbitration of AnimalFeeds's claims. 4 1 bound by Rules 3 through 7 of the American Arbitration
2 Association's Supplementary Rules for Class Arbitrations (as
3 effective Oct. 8, 2003)." Agreement Regarding New York
4 Arbitration Procedures for Putative Class Action Plaintiffs in
5 Parcel Tanker Services Antitrust Matter ("Class Arbitration
6 Agreement") 3.
7 Rule 3 provides: 8 Upon appointment, the arbitrator shall 9 determine as a threshold matter, in a 10 reasoned, partial final award on the 11 construction of the arbitration clause, 12 whether the applicable arbitration clause 13 permits the arbitration to proceed on behalf 14 of or against a class (the "Clause 15 Construction Award"). The arbitrator shall 16 stay all proceedings following the issuance 17 of the Clause Construction Award for a 18 period of at least 30 days to permit any 19 party to move a court of competent 20 jurisdiction to confirm or to vacate the 21 Clause Construction Award. . . . 22 In construing the applicable arbitration 23 clause, the arbitrator shall not consider 24 the existence of these Supplementary Rules, 25 or any other AAA rules, to be a factor 26 either in favor of or against permitting the 27 arbitration to proceed on a class basis.2 28 American Arbitration Ass'n, Supplementary Rules for Class
29 Arbitrations (2003) ("Supplementary Rules"), available at
30 http://www.adr.org/sp.asp?id=21936 (last visited October 17,
31 2008). Pursuant to the Class Arbitration Agreement, AnimalFeeds,
2 The Supplementary Rules were issued following the Supreme Court's decision in Green Tree Financial Corp. v. Bazzle, 539 U.S. 444, 452-53 (2003), which held that when parties agree to arbitrate, the question of whether the agreement permits class arbitration is one of contract interpretation to be determined by the arbitrators, not by a court. 5 1 together with several co-plaintiffs not parties to this appeal,
2 filed a demand for class arbitration. An arbitration panel was
3 appointed to decide the Clause Construction Award.
4 The arbitration panel was required to consider the
5 arbitration clauses in two standard-form agreements known as the
6 Vegoilvoy charter party and the Asbatankvoy charter party.3 The
7 Vegoilvoy agreement, which governs all transactions between
8 AnimalFeeds and Stolt-Nielsen relevant to this appeal, contains
9 the following broadly worded arbitration clause:
10 Any dispute arising from the making, 11 performance or termination of this Charter 12 Party shall be settled in New York, Owner and 13 Charterer each appointing an arbitrator, who 14 shall be a merchant, broker or individual 15 experienced in the shipping business; the two 16 thus chosen, if they cannot agree, shall 17 nominate a third arbitrator who shall be an 18 Admiralty lawyer. Such arbitration shall be 19 conducted in conformity with the provisions 20 and procedure of the United States 21 Arbitration Act, and a judgment of the Court 22 shall be entered upon any award made by said 23 arbitrator. Nothing in this clause shall be 24 deemed to waive Owner's right to lien on the 25 cargo for freight, dead freight or demurrage.
26 The Asbatankvoy agreement, which governs some relevant
27 transactions between Stolt-Nielsen and other putative class
3 "A charter party is a specific contract, by which the owners of a vessel let the entire vessel, or some principal part thereof, to another person, to be used by the latter in transportation for his own account, either under their charge or his." Asoma Corp. v. SK Shipping Co., 467 F.3d 817, 823 (2d Cir. 2006) (citations and internal quotation marks omitted); see also 2 Thomas J. Schoenbaum, Admiralty & Maritime Law § 11-1, at 2 (4th ed. 2004) ("The charter party is . . . a specialized form of contract for the hire of an entire ship, specified by name." (footnote omitted)).
6 1 members not parties to this appeal, contains a similar broadly
2 worded arbitration clause.4 Both agreements unambiguously
3 mandate arbitration but are silent as to whether arbitration may
4 proceed on behalf of a class.
5 The arbitration panel, tasked with deciding whether
6 that silence permitted or precluded class arbitration, received
7 evidence and briefing from both sides. AnimalFeeds and its co-
8 plaintiffs argued that because the arbitration clauses were
9 silent, arbitration on behalf of a class could proceed. They
10 cited published clause construction awards under Rule 3 of the
11 Supplementary Rules permitting class arbitration awards where the
12 arbitration clause was silent. They also argued that public
13 policy favored class arbitration and that the contracts'
14 arbitration clauses would be unconscionable and unenforceable if
15 they forbade class arbitration.
16 Stolt-Nielsen's position was that because the
17 arbitration clauses were silent, the parties intended not to
18 permit class arbitration. It cited several federal cases and
19 arbitration decisions denying consolidation and class treatment
20 of claims where the arbitration clause was silent. Stolt-Nielsen
21 also argued that arbitration decisions cited by AnimalFeeds were
22 inapposite because they were not made in the context of
23 international maritime agreements, where parties have no
4 The Asbatankvoy arbitration clause is reproduced in the district court's opinion. See Stolt-Nielsen SA v. Animalfeeds Int'l Corp., 435 F. Supp. 2d 382, 384 n.1 (S.D.N.Y. 2006). 7 1 expectation that arbitration will proceed on behalf of a class.
2 In addition, Stolt-Nielsen offered extrinsic evidence regarding
3 "the negotiating history and the context" of the arbitration
4 agreements to "reinforce the conclusion that the parties did not
5 intend . . . to authorize class arbitration." Respondents'
6 Opposition to Claimants' Motion for Clause Construction Award
7 Permitting Class Arbitration ("Stolt-Nielsen's Arbitration Br.")
8 16. At oral argument before the arbitration panel, Stolt-Nielsen
9 acknowledged that the interpretation of the contracts at issue
10 here was a question of first impression.
11 On December 20, 2005, the arbitration panel issued a
12 Clause Construction Award deciding that the agreements permit
13 class arbitration.5 The panel based its decision largely on the
14 fact that in all twenty-one published clause construction awards
15 issued under Rule 3 of the Supplementary Rules, the arbitrators
16 had interpreted silent arbitration clauses to permit class
17 arbitration. The panel acknowledged that none of those cases was
18 decided in the context of an international maritime contract. It
19 said that it was nonetheless persuaded to follow those clause
20 construction awards because the contract language in the cited
21 cases was similar to the language used in the charter parties,
22 the arbitrators in those cases had rejected contract-
23 interpretation arguments similar to the ones made by
5 The panel did not certify a class or otherwise decide whether the arbitration would actually proceed as a class action. The panel's decision was limited to deciding a question of contract interpretation: whether the arbitration agreements permit class arbitration. 8 1 Stolt-Nielsen in this case, and Stolt-Nielsen had been unable to
2 cite any arbitration decision under Rule 3 in which contractual
3 silence had been construed to prohibit class arbitration.
4 In addition, the panel distinguished Second Circuit
5 case law prohibiting consolidation of claims when an arbitration
6 agreement is silent, see, e.g., United Kingdom v. Boeing Co., 998
7 F.2d 68, 74 (2d Cir. 1993), reasoning that "consolidation of two
8 distinct arbitrations under two distinct arbitration clauses
9 raises a different situation from a class action." Clause
10 Construction Award 6.
11 Lastly, the panel acknowledged that the arbitration
12 clauses under consideration "are part of a long tradition of
13 maritime arbitration peculiar to the international shipping
14 industry." Id. It concluded nonetheless that Stolt-Nielsen's
15 arguments regarding the negotiating history and context of the
16 agreements did not establish that the parties intended to
17 preclude class arbitration.
18 Stolt-Nielsen petitioned the district court to vacate
19 the Clause Construction Award. The court granted the petition,
20 concluding that the award was made in manifest disregard of the
21 law. Stolt-Nielsen SA v. Animalfeeds Int'l Corp., 435 F. Supp.
22 2d 382, 387 (S.D.N.Y. 2006). According to the district court,
23 the arbitrators "failed to make any meaningful choice-of-law
24 analysis." Id. at 385. They therefore failed to recognize that
25 the dispute was governed by federal maritime law, that federal
26 maritime law requires that the interpretation of charter parties 9 1 be dictated by custom and usage, and that Stolt-Nielsen had
2 demonstrated that maritime arbitration clauses are never subject
3 to class arbitration. Id. at 385-86. Even under state law, the
4 district court said, the panel was required to interpret
5 contracts in light of industry custom and practice. Id. at 386.
6 Because these clearly established rules of law were presented to
7 the panel and the panel failed to apply them, the district court
8 held, the Clause Construction Award must be, and was, vacated.
9 Id. at 387.
10 AnimalFeeds appeals.
11 DISCUSSION
12 I. Standard of Review
13 We review de novo a district court's order vacating an
14 arbitration award for manifest disregard of the law. Hoeft v.
15 MVL Group, Inc., 343 F.3d 57, 69 (2d Cir. 2003).
16 II. Grounds for Vacating an Arbitration Award
17 "It is well established that courts must grant an
18 arbitration panel's decision great deference." Duferco Int'l
19 Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383, 388 (2d
20 Cir. 2003). The Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et
21 seq. (2006), allows vacatur of an arbitral award:
22 (1) where the award was procured by 23 corruption, fraud, or undue means;
24 (2) where there was evident partiality or 25 corruption in the arbitrators, or either 26 of them;
27 (3) where the arbitrators were guilty of 28 misconduct in refusing to postpone the 10 1 hearing, upon sufficient cause shown, or 2 in refusing to hear evidence pertinent 3 and material to the controversy; or of 4 any other misbehavior by which the 5 rights of any party have been 6 prejudiced; or
7 (4) where the arbitrators exceeded their 8 powers, or so imperfectly executed them 9 that a mutual, final, and definite award 10 upon the subject matter submitted was 11 not made.
12 Id. § 10(a).6 We have also recognized that the district court
13 may vacate an arbitral award that exhibits a "manifest disregard"
14 of the law. Duferco, 333 F.3d at 388 (citing Goldman v.
15 Architectural Iron. Co., 306 F.3d 1214, 1216 (2d Cir. 2002);
16 Westerbeke Corp. v. Daihatsu Motor Co., Ltd., 304 F.3d 200, 208
17 (2d Cir. 2002). We do not, however, "recognize manifest
18 disregard of the evidence as proper ground for vacating an
19 arbitrator's award." Wallace v. Buttar, 378 F.3d 182, 193 (2d
20 Cir. 2004) (citation and internal quotation marks omitted;
21 emphasis added).
22 III. Stolt-Nielsen's "Manifest Disregard" Claim
23 A. Legal Standards
24 The party seeking to vacate an award on the basis of
25 the arbitrator's alleged "manifest disregard" of the law bears a
26 "heavy burden." GMS Group, LLC v. Benderson, 326 F.3d 75, 81 (2d
27 Cir. 2003). "Our review under the [judicially constructed]
6 Section 11 of the FAA, moreover, enumerates various circumstances in which the district court may "modify[] or correct[]" an arbitration award. 9 U.S.C. § 11.
11 1 doctrine of manifest disregard is 'severely limited.'" Duferco,
2 333 F.3d at 389 (quoting India v. Cargill Inc., 867 F.2d 130, 133
3 (2d Cir. 1989)). "It is highly deferential to the arbitral award
4 and obtaining judicial relief for arbitrators' manifest disregard
5 of the law is rare." Id.7 The "manifest disregard" doctrine
6 allows a reviewing court to vacate an arbitral award only in
7 "those exceedingly rare instances where some egregious
8 impropriety on the part of the arbitrators is apparent." Id.
7 The Duferco court made this point in quantitative terms, noting that between "1960 [and the 2003 Duferco decision] we have vacated some part or all of an arbitral award for manifest disregard in . . . four out of at least 48 cases where we applied the standard." Duferco, 333 F.3d at 389 (collecting cases). The fact that a finding of manifest disregard is "exceedingly rare," id., does not, of course, mean that this appeal does not provide us with just such a case. But to update the observation made by the Duferco court, since Duferco, we have vacated one award, and remanded two others for clarification. See Rich v. Spartis, 516 F.3d 75 (2d Cir. 2008); Porzig v. Dresdner, Kleinwort, Benson, N. Am. LLC, 497 F.3d 133 (2d Cir. 2007); Hardy v. Walsh Manning Sec., L.L.C., 341 F.3d 126 (2d Cir. 2003). We count fifteen instances during the same period in which we have declined to do either. See Parnell v. Tremont Capital Mgmt. Corp., 280 F.App'x 76 (2d Cir. 2008) (summary order); Metlife Sec., Inc. v. Bedford, 254 F. App'x 77 (2d Cir. 2007) (summary order); Appel Corp. v. Katz, 217 F. App'x 3 (2d Cir. 2007) (summary order); Nicholls v. Brookdale Univ. Hosp. & Med. Ctr., 204 F. App'x 40 (2d Cir. 2006) (summary order); D.H. Blair & Co. v. Gottdiener, 462 F.3d 95 (2d Cir. 2006); IMC Mar. Group, Inc. v. Russian Farm Cmty. Project, 167 F. App'x 845 (2d Cir. 2006) (summary order); Nutrition 21, Inc. v. Wertheim, 150 F. App'x 108 (2d Cir. 2005) (summary order); Bear, Stearns & Co. v. 1109580 Ontario, Inc., 409 F.3d 87 (2d Cir. 2005); Stone & Webster, Inc. v. Triplefine Int'l Corp., 118 F. App'x 546 (2d Cir. 2004) (summary order); Tobjy v. Citicorp/Inv. Servs., 111 F. App'x 640 (2d Cir. 2004) (summary order); Wallace v. Buttar, 378 F.3d 182 (2d Cir. 2004); IBAR Ltd. v. Am. Bureau of Shipping, 92 F. App'x 820 (2d Cir. 2004) (summary order); Carpenter v. Potter, 91 F. App'x 705 (2d Cir. 2003) (summary order); Banco de Seguros del Estado v. Mut. Marine Office, Inc., 344 F.3d 255 (2d Cir. 2003); Hoeft v. MVL Group, Inc., 343 F.3d 57 (2d Cir. 2003). 12 1 Vacatur of an arbitral award is unusual for good
2 reason: The parties agreed to submit their dispute to
3 arbitration, more likely than not to enhance efficiency, to
4 reduce costs, or to maintain control over who would settle their
5 disputes and how -- or some combination thereof. See Porzig v.
6 Dresdner, Kleinwort, Benson, N. Am. LLC, 497 F.3d 133, 138-39 (2d
7 Cir. 2007); Willemijn Houdstermaatschappij, BV v. Standard
8 Microsystems Corp., 103 F.3d 9, 12 (2d Cir. 1997); see also Note,
9 Judicial Review of Arbitration Awards on the Merits, 63 Harv. L.
10 Rev. 681, 681-82 (1950). "To interfere with this process would
11 frustrate the intent of the parties, and thwart the usefulness of
12 arbitration, making it 'the commencement, not the end, of
13 litigation.'" Duferco, 333 F.3d at 389 (quoting Burchell v.
14 Marsh, 58 U.S. (17 How.) 344, 349 (1854)). It would fail to
15 "maintain arbitration's essential virtue of resolving disputes
16 straightaway." Hall Street Assocs., L.L.C. v. Mattel, Inc., 128
17 S. Ct. 1396, 1405 (2008).
18 In this light, "manifest disregard" has been
19 interpreted "clearly [to] mean[] more than error or
20 misunderstanding with respect to the law." Merrill Lynch,
21 Pierce, Fenner & Smith, Inc. v. Bobker, 808 F.2d 930, 933 (2d
22 Cir. 1986). "We are not at liberty to set aside an arbitration
23 panel's award because of an arguable difference regarding the
24 meaning or applicability of laws urged upon it." Id. at 934.
25 A federal court cannot vacate an arbitral 26 award merely because it is convinced that the 27 arbitration panel made the wrong call on the 28 law. On the contrary, the award should be 13 1 enforced, despite a court's disagreement with 2 it on the merits, if there is a barely 3 colorable justification for the outcome 4 reached.
5 Wallace, 378 F.3d at 190 (2d Cir. 2004) (citation and internal
6 quotation marks omitted; emphasis added in Wallace).
7 In the context of contract interpretation, we are
8 required to confirm arbitration awards despite "serious
9 reservations about the soundness of the arbitrator's reading of
10 th[e] contract." Westerbeke Corp., 304 F.3d at 216 n.10 (2d Cir.
11 2002). "Whether the arbitrators misconstrued a contract is not
12 open to judicial review." Bernhardt v. Polygraphic Co. of Am.,
13 350 U.S. 198, 203 n.4 (1956). "Whatever arbitrators' mistakes of
14 law may be corrected, simple misinterpretations of contracts do
15 not appear one of them." I/S Stavborg v. Nat'l Metal Converters,
16 Inc., 500 F.2d 424, 432 (2d Cir. 1974).
17 The concept of "manifest disregard" is well illustrated
18 by New York Telephone Co. v. Communications Workers of America
19 Local 1100, 256 F.3d 89 (2d Cir. 2001) (per curiam). There the
20 arbitrator recognized binding Second Circuit case law but
21 deliberately refused to apply it, saying -- no doubt to the
22 astonishment of the parties -- "'Perhaps it is time for a new
23 court decision.'" Id. at 91. Because the arbitrator explicitly
24 rejected controlling precedent, we concluded that the arbitral
25 decision was rendered in manifest disregard of the law. Id. at
26 93.
14 1 "The manifest disregard doctrine is not confined to
2 that rare case in which the arbitrator provides us with explicit
3 acknowledgment of wrongful conduct, however." Westerbeke, 304
4 F.3d at 218 (citing Halligan v. Piper Jaffray, Inc., 148 F.3d
5 197, 204 (2d Cir. 1998) ("[W]e doubt whether even under a strict
6 construction of the meaning of manifest disregard, it is
7 necessary for arbitrators to state that they are deliberately
8 ignoring the law."), cert. denied, 526 U.S. 1034 (1999)). If the
9 arbitrator's decision "strains credulity" or "does not rise to
10 the standard of barely colorable," id. (citations, internal
11 quotation marks, and brackets omitted), a court may conclude that
12 the arbitrator "willfully flouted the governing law by refusing
13 to apply it," id. at 217.
14 There are three components to our application of the
15 "manifest disregard" standard.
16 First, we must consider whether the law 17 that was allegedly ignored was clear, and 18 in fact explicitly applicable to the 19 matter before the arbitrators. An 20 arbitrator obviously cannot be said to 21 disregard a law that is unclear or not 22 clearly applicable. Thus, misapplication 23 of an ambiguous law does not constitute 24 manifest disregard.
25 Second, once it is determined that the law 26 is clear and plainly applicable, we must 27 find that the law was in fact improperly 28 applied, leading to an erroneous outcome. 29 We will, of course, not vacate an arbitral 30 award for an erroneous application of the 31 law if a proper application of law would 32 have yielded the same result. In the same 33 vein, where an arbitral award contains 34 more than one plausible reading, manifest 35 disregard cannot be found if at least one
15 1 of the readings yields a legally correct 2 justification for the outcome. Even where 3 explanation for an award is deficient or 4 non-existent, we will confirm it if a 5 justifiable ground for the decision can be 6 inferred from the facts of the case.
7 Third, once the first two inquiries are 8 satisfied, we look to a subjective 9 element, that is, the knowledge actually 10 possessed by the arbitrators. In order to 11 intentionally disregard the law, the 12 arbitrator must have known of its 13 existence, and its applicability to the 14 problem before him. In determining an 15 arbitrator's awareness of the law, we 16 impute only knowledge of governing law 17 identified by the parties to the 18 arbitration. Absent this, we will infer 19 knowledge and intentionality on the part 20 of the arbitrator only if we find an error 21 that is so obvious that it would be 22 instantly perceived as such by the average 23 person qualified to serve as an 24 arbitrator.
25 Duferco, 333 F.3d at 389-90 (citations omitted).
26 B. The Effect of Hall Street on 27 the "Manifest Disregard" Doctrine
28 We pause to consider whether a recent Supreme Court
29 decision, Hall Street Associates, L.L.C. v. Mattel, Inc., 128 S.
30 Ct. 1396 (2008), affects the scope or vitality of the "manifest
31 disregard" doctrine. See Thomas E.L. Dewey & Kara Siegel, Room
32 for Error: 'Hall Street' and the Shrinking Scope of Judicial
33 Review of Arbitral Awards, N.Y.L.J., May 15, 2008, at 24
34 (commenting that Hall Street "appeared to question the validity"
35 of the manifest disregard doctrine).
36 There, the parties had entered into an arbitration
37 agreement that, unlike the FAA, provided for a federal court's de
16 1 novo review of the arbitrator's conclusions of law. Hall Street,
2 128 S. Ct. at 1400-01. The Court rejected the parties' attempt
3 to contract around the FAA for expanded judicial review of
4 arbitration awards, concluding that the grounds for vacatur of an
5 arbitration award set forth in the FAA, 9 U.S.C. § 10, are
6 "exclusive." Hall Street, 128 S. Ct. at 1401, 1403. Although
7 the "manifest disregard" doctrine was not itself at issue, the
8 Hall Street Court nonetheless commented on its origins:
9 The Wilco Court . . . remarked (citing FAA 10 § 10) that "[p]ower to vacate an 11 [arbitration] award is limited," and went 12 on to say that "the interpretations of the 13 law by the arbitrators in contrast to 14 manifest disregard [of the law] are not 15 subject, in the federal courts, to 16 judicial review for error in 17 interpretation." 18 Hall Street, 128 S. Ct. at 1403 (quoting Wilko, 346 U.S. at 436-
19 37) (citations omitted) (second, third, and fourth alterations in
20 Hall Street).
21 Maybe the term "manifest disregard" was 22 meant to name a new ground for review, but 23 maybe it merely referred to the § 10 grounds 24 collectively, rather than adding to them. 25 Or, as some courts have thought, "manifest 26 disregard" may have been shorthand for 27 § 10(a)(3) or § 10(a)(4), the subsections 28 authorizing vacatur when the arbitrators 29 were "guilty of misconduct" or "exceeded 30 their powers." 31 Id. at 1404 (citations omitted). The Court declined to resolve
32 that question explicitly, noting instead that it had never
33 indicated, in Wilko or elsewhere, that "manifest disregard" was
34 an independent basis for vacatur outside the grounds provided in
35 section 10 of the FAA. See id. 17 1 In the short time since Hall Street was decided, courts
2 have begun to grapple with its implications for the "manifest
3 disregard" doctrine. Some have concluded or suggested that the
4 doctrine simply does not survive. See Ramos-Santiago v. United
5 Parcel Service, 524 F.3d 120, 124 n.3 (1st Cir. 2008) (dicta);
6 Robert Lewis Rosen Assocs., Ltd. v. Webb, 566 F.Supp.2d 228, 233
7 (S.D.N.Y. 2008); Prime Therapeutics LLC v. Omnicare, Inc., 555 F.
8 Supp. 2d 993, 999 (D. Minn. 2008); Hereford v. D.R. Horton, Inc.,
9 -- So. 2d --, No. 1070396, 2008 WL 4097594, *5, 2008 Ala. LEXIS
10 186, *12-*13 (Ala. Sept. 5, 2008). Others think that "manifest
11 disregard," reconceptualized as a judicial gloss on the specific
12 grounds for vacatur enumerated in section 10 of the FAA, remains
13 a valid ground for vacating arbitration awards. See MasTec N.
14 Am., Inc. v. MSE Power Sys., Inc., No. 1:08-cv-168, 2008 WL
15 2704912, at *3, 2008 U.S. Dist. LEXIS 52205, at *8-9 (N.D.N.Y.
16 July 8, 2008); Chase Bank USA, N.A. v. Hale, 859 N.Y.S.2d 342,
17 349 (Sup. Ct. N.Y. County 2008).
18 We agree with those courts that take the latter
19 approach. The Hall Street Court held that the FAA sets forth the
20 "exclusive" grounds for vacating an arbitration award. Hall
21 Street, 128 S. Ct. at 1403. That holding is undeniably
22 inconsistent with some dicta by this Court treating the "manifest
23 disregard" standard as a ground for vacatur entirely separate
24 from those enumerated in the FAA. See, e.g., Hoeft, 343 F.3d at
25 64 (describing manifest disregard as "an additional ground not
26 prescribed in the [FAA]"); Duferco, 333 F.3d at 389 (observing
18 1 that the doctrine's use is limited to instances "where none of
2 the provisions of the FAA apply"); DiRussa v. Dean Witter
3 Reynolds Inc., 121 F.3d 818, 821 (2d Cir. 1997) (referring to the
4 doctrine as "judicially-created"), cert. denied, 522 U.S. 1049
5 (1998); Merrill Lynch, Pierce, Fenner & Smith, Inc., 808 F.2d at
6 933 (same).8 But the Hall Street Court also speculated that "the
7 term 'manifest disregard' . . . merely referred to the § 10
8 grounds collectively, rather than adding to them" -- or as
9 "shorthand for § 10(a)(3) or § 10(a)(4)." Hall Street, 128 S.
10 Ct. at 1404. It did not, we think, abrogate the "manifest
11 disregard" doctrine altogether.9
12 We agree with the Seventh Circuit's view expressed
13 before Hall Street was decided: 14 It is tempting to think that courts are 15 engaged in judicial review of arbitration 16 awards under the Federal Arbitration Act, 17 but they are not. When parties agree to
8 But see I/S Stavborg, 500 F.2d at 431 (2d Cir. 1974) ("But perhaps the rubric 'manifest disregard' is after all not to be given independent significance; rather it is to be interpreted only in the context of the specific narrow provisions of 9 U.S.C. §§ 10 & 11 . . . ." (footnote omitted)); Amicizia Societa Navegazione v. Chilean Nitrate & Iodine Sales Corp., 274 F.2d 805, 808 (2d Cir.) ("It is true that an award may be vacated where the arbitrators have 'exceeded their powers.' 9 U.S.C. § 10(d). Apparently relying upon this phrase, the Supreme Court in Wilko v. Swan suggested that an award may be vacated if in 'manifest disregard' of the law."), cert. denied, 363 U.S. 843 (1960) (internal citation omitted). 9 Cf. State Employees Bargaining Agent Coal. v. Rowland, 494 F.3d 71, 84, 86 (2d Cir. 2007) (adhering to Circuit precedent despite the Supreme Court having "cryptically cast doubt" on prior holdings, noting that "[w]e are bound by our own precedent unless and until its rationale is overruled, implicitly or expressly, by the Supreme Court or this court en banc" (citation and internal quotation marks omitted)). 19 1 arbitrate their disputes they opt out of the 2 court system, and when one of them 3 challenges the resulting arbitration award 4 he perforce does so not on the ground that 5 the arbitrators made a mistake but that they 6 violated the agreement to arbitrate, as by 7 corruption, evident partiality, exceeding 8 their powers, etc. -- conduct to which the 9 parties did not consent when they included 10 an arbitration clause in their contract. 11 That is why in the typical arbitration . . . 12 the issue for the court is not whether the 13 contract interpretation is incorrect or even 14 wacky but whether the arbitrators had failed 15 to interpret the contract at all, for only 16 then were they exceeding the authority 17 granted to them by the contract's 18 arbitration clause. 19 Wise v. Wachovia Sec., LLC, 450 F.3d 265, 269 (7th Cir.)
20 (citations omitted), cert. denied, 127 S. Ct. 582 (2006). This
21 observation is entirely consistent with Hall Street. And it
22 reinforces our own pre-Hall Street statements that our review for
23 manifest disregard is "severely limited," "highly deferential,"
24 and confined to "those exceedingly rare instances" of "egregious
25 impropriety on the part of the arbitrators." Duferco, 333 F.3d
26 at 389.
27 Like the Seventh Circuit, we view the "manifest
28 disregard" doctrine, and the FAA itself, as a mechanism to
29 enforce the parties' agreements to arbitrate rather than as
30 judicial review of the arbitrators' decision. We must therefore
31 continue to bear the responsibility to vacate arbitration awards
32 in the rare instances in which "the arbitrator knew of the
33 relevant [legal] principle, appreciated that this principle
34 controlled the outcome of the disputed issue, and nonetheless
35 willfully flouted the governing law by refusing to apply it." 20 1 Westerbeke, 304 F.3d at 217. At that point the arbitrators have
2 "failed to interpret the contract at all," Wise, 450 F.3d at 269,
3 for parties do not agree in advance to submit to arbitration that
4 is carried out in manifest disregard of the law. Put another
5 way, the arbitrators have thereby "exceeded their powers, or so
6 imperfectly executed them that a mutual, final, and definite
7 award upon the subject matter submitted was not made." 9 U.S.C.
8 § 10(a)(4).
9 C. Analysis of Stolt-Nielsen's 10 "Manifest Disregard" Claim
11 If we were of the view that Hall Street, decided after
12 the district court granted the petition in this case, eliminated
13 "manifest disregard" review altogether, our inquiry would be at
14 an end. We would be required to send this matter back to the
15 district court for it to dismiss the petition on that ground.
16 But in light of our conclusion that the "manifest disregard"
17 doctrine survives Hall Street, we must instead decide whether the
18 district court's finding of "manifest disregard" was correct.10
19 1. Review of the District Court's Opinion. According
20 to the district court, the arbitration panel went astray when it
21 "failed to make any meaningful choice-of-law analysis." Stolt-
22 Nielsen, 435 F. Supp. 2d at 385.
10 We undertake this task cognizant of the fact that the district court did not have the benefit of the Hall Street decision and its requirement that courts adhere scrupulously to a narrow, FAA-tethered view of their authority to vacate arbitration awards based on manifest disregard of the law.
21 1 In actuality, the choice of law rules in this 2 situation are well established and clear cut. 3 Because the arbitration clauses here in issue 4 are part of maritime contracts, they are 5 controlled in the first instance by federal 6 maritime law. 7 Id. Because the arbitrators failed to recognize that the dispute
8 was governed by federal maritime law, the district court
9 reasoned, they ignored the "established rule of maritime law"
10 that the interpretation of contracts "is . . . dictated by custom
11 and usage." Id. at 385-86. Even under state law, the arbitral
12 panel was required to interpret contracts in light of "industry
13 custom and practice." Id. at 386 (citation and internal
14 quotation marks omitted). The district court concluded that, had
15 the arbitration panel followed these well-established canons,
16 the [p]anel would necessarily have found for 17 Stolt, since, as the [p]anel itself noted, 18 Stolt presented uncontested evidence that the 19 clauses here in question had never been the 20 subject of class action arbitration.
21 Id. (emphasis in original).
22 Had the district court been charged with reviewing the
23 arbitration panel's decision de novo, we might well find its
24 analysis persuasive. See Westerbeke, 304 F.3d at 216 n.10. But
25 the errors it identified do not, in our view, rise to the level
26 of manifest disregard of the law.
27 a. Choice of Law
28 First, the arbitral panel did not "manifestly
29 disregard" the law in engaging in its choice-of-law analysis.
30 See Stolt-Nielsen, 435 F. Supp. 2d at 385-86.
22 1 The "manifest disregard" standard requires that the
2 arbitrators be "fully aware of the existence of a clearly defined
3 governing legal principle, but refuse[] to apply it, in effect,
4 ignoring it." Duferco, 333 F.3d at 389. "In determining an
5 arbitrator's awareness of the law, we impute only knowledge of
6 governing law identified by the parties to the arbitration." Id.
7 at 390.
8 Stolt-Nielsen's brief to the arbitration panel referred
9 to choice-of-law principles in a single footnote without citing
10 supporting case law. It then assured the panel that the issue
11 was immaterial:
12 Claimants argue that the law of New York 13 governs these contracts . . . . We believe, 14 to the contrary, that because these are 15 federal maritime contracts, federal maritime 16 law should govern. The Tribunal need not 17 decide this issue, however, because the 18 analysis is the same under either.
19 Stolt-Nielsen's Arbitration Br. 7 n.13. This concession bars us
20 from concluding that the panel manifestly disregarded the law by
21 not engaging in a choice-of-law analysis and expressly
22 identifying federal maritime law as governing the interpretation
23 of the charter party language.11
24 We are not convinced that the arbitral panel, in any
25 event, "failed to make any meaningful choice-of-law analysis."
11 Had the arbitrators looked to the charter parties themselves for a choice-of-law provision, as of course they may have, they would have found none. See Stolt-Nielsen, 435 F. Supp. 2d at 385 n.2.
23 1 Even where an arbitrator's explanation for an award is deficient,
2 we must confirm it if a justifiable ground for the decision can
3 be inferred from the record. See Bear, Stearns & Co. v. 1109580
4 Ontario, Inc., 409 F.3d 87, 91 (2d Cir. 2005); Duferco, 333 F.3d
5 at 390; see also Wallace, 378 F.3d at 190 (2d Cir. 2004) ("[A]
6 court reviewing an arbitral award cannot presume that the
7 arbitrator is capable of understanding and applying legal
8 principles with the sophistication of a highly skilled
9 attorney."). The first paragraph of the arbitrators' discussion
10 of the law states that they "must look to the language of the
11 parties' agreement to ascertain the parties' intention whether
12 they intended to permit or to preclude class action. This
13 is . . . consistent with New York law . . . and with federal
14 maritime law." Clause Construction Award 4. Although the panel
15 did not use the term "choice of law," it is a plausible reading
16 of the award decision that the panel intended to interpret the
17 charter parties according to the rules of both New York State law
18 and federal maritime law –- each of which, the panel thought,
24 1 would render the same result.12 That is what Stolt-Nielsen had
2 asked it to do.
3 b. Federal Maritime Rule of Construction
4 Second, the arbitration panel did not manifestly
5 disregard the law with respect to an established "rule" of
6 federal maritime law. See Stolt-Nielsen, 435 F. Supp. 2d at 386.
7 Although the district court's opinion states that the
8 interpretation of maritime contracts "is very much dictated by
9 custom and usage," id. at 385-86, custom and usage is more of a
10 guide than a rule, see Great Circle Lines, Ltd. v. Matheson &
11 Co., 681 F.2d 121, 125 (2d Cir. 1982) ("Certain long-standing
12 customs of the shipping industry are crucial factors to be
13 considered when deciding whether there has been a meeting of the
14 minds on a maritime contract."); Schoonmaker-Conners Co. v.
15 Lambert Transp. Co., 269 F. 583, 585 (2d Cir. 1920) ("While
16 maritime contracts or their interpretation are probably more
12 We find it instructive that under New York choice-of-law principles, the first question to resolve in determining whether to undertake a choice of law analysis is whether there is an actual conflict of laws. It is only when it can be said that there is no actual conflict that New York will dispense with a choice of law analysis. Fieger v. Pitney Bowes Credit Corp., 251 F.3d 386, 393 (2d Cir. 2001) (citations and internal quotation marks omitted). Another plausible reading of the arbitration award, then, is that the panel concluded there was no need to make a "choice of law" between federal maritime law and New York law because there was no actual conflict of laws in the case before it.
25 1 subject to the influence of usage or general custom than most
2 other agreements, yet they are and a charter is a contract like
3 another, subject to the same general rules and leading to the
4 same liabilities."); Samsun Corp. v. Khozestan Mashine Kar Co.,
5 926 F. Supp. 436, 439 (S.D.N.Y. 1996) ("[E]stablished practices
6 and customs of the shipping industry inform the court's analysis
7 of what the parties agreed to.").13 Thus, although the custom
8 and usage rule is "clear and plainly applicable" as a general
9 matter in disputes over the meaning of charter parties, Duferco,
10 333 F.3d at 390, it should "be considered," "influence"
11 interpretation, and "inform the court's analysis." It does not
12 govern the outcome of each case.
13 Indeed, Stolt-Nielsen cites no decision holding that a
14 federal maritime rule of construction specifically precludes
15 class arbitration where a charter party's arbitration clause is
16 silent. Cf. Bazzle v. Green Tree Fin. Corp. ("Bazzle I"), 569
17 S.E.2d 349, 360 (S.C. 2002) (holding as a matter of state law
18 that "class-wide arbitration may be ordered when the arbitration
19 agreement is silent"), vacated on other grounds, 539 U.S. 444
20 (2003). To the contrary, during oral argument before the
21 arbitration panel, counsel for Stolt-Nielsen conceded that the
13 According to Stolt-Nielsen's submission to the arbitration panel, "both New York state law and federal maritime law allow a court or arbitrator to examine the negotiating history and the context in which the contract was executed in order to ascertain the parties' intent." Stolt-Nielsen's Arbitration Br. 15 (emphasis added).
26 1 interpretation of the charter parties in this case was an issue
2 of first impression.
3 Stolt-Nielsen's challenge to the Clause Construction
4 Award therefore boils down to an argument that the arbitration
5 panel misinterpreted the arbitration clauses before it because
6 the panel misapplied the "custom and usage" rule. But we have
7 identified an arbitrator's interpretation of a contract's terms
8 as an area we are particularly loath to disturb. See Westerbeke,
9 304 F.3d at 214 ("The arbitrator's factual findings and
10 contractual interpretation are not subject to judicial challenge,
11 particularly on our limited review of whether the arbitrator
12 manifestly disregarded the law."); id. at 222 (holding that
13 "vacatur for manifest disregard of a commercial contract is
14 appropriate only if the arbitral award contradicts an express and
15 unambiguous term of the contract or if the award so far departs
16 from the terms of the agreement that it is not even arguably
17 derived from the contract" (emphases added)); John T. Brady & Co.
18 v. Form-Eze Sys., Inc., 623 F.2d 261, 264 (2d Cir.) ("This court
19 has generally refused to second guess an arbitrator's resolution
20 of a contract dispute."), cert. denied, 449 U.S. 1062 (1980).
21 As for whether the panel misapplied the "custom and
22 usage" rule, we have held that "the misapplication . . . of . . .
23 rules of contract interpretation does not rise to the stature of
24 a 'manifest disregard' of law." Amicizia Societa Navegazione v.
25 Chilean Nitrate & Iodine Sales Corp., 274 F.2d 805, 808 (2d
26 Cir.), cert. denied, 363 U.S. 843 (1960). And determinations of
27 1 custom and usage are findings of fact, Mentor Ins. Co. (U.K.) v.
2 Brannkasse, 996 F.2d 506, 513 (2d Cir. 1993), which federal
3 courts may not review even for manifest disregard, Wallace, 378
4 F.3d at 193.
5 The arbitration panel, after summarizing Stolt-
6 Nielsen's argument with respect to custom and usage,
7 "acknowledge[d] the forcefulness with which [it was] presented,"
8 but concluded that it failed to "establish that the parties to
9 the charter agreements intended to preclude class arbitration."
10 Clause Construction Award 7. The panel thus considered Stolt-
11 Nielsen's arguments and found them unpersuasive. Its conclusion
12 does not "contradict[] an express and unambiguous term of the
13 contract or . . . so far depart[] from the terms of the agreement
14 that it is not even arguably derived from the contract."
15 Westerbeke, 304 F.3d at 222. It therefore did not evidence
16 manifest disregard of the law.
17 c. State Law 18 Third, the arbitration panel did not manifestly
19 disregard New York State law. See Stolt-Nielsen, 435 F. Supp. 2d
20 at 387.
21 The district court noted that New York State law, much
22 like federal maritime law, requires courts to interpret ambiguous
23 contracts by reference to "industry custom and practice," id.
24 (citation and internal quotation marks omitted); it takes a
25 "narrow view of what can be read into a contract by implication,"
26 id. at 387. The district court concluded that to whatever extent
28 1 state law applied, it would require the arbitration panel to
2 construe the arbitration clauses not to permit arbitration on
3 behalf of a class. Id.
4 We agree with the district court's observation that
5 state law follows a "custom and practice" canon of construction
6 where the terms of a contract are ambiguous. See Evans v. Famous
7 Music Corp., 1 N.Y.3d 452, 459-60, 775 N.Y.S.2d 757, 762, 807
8 N.E.2d 869, 873 (2004).14 But it is also state law that the
9 courts'
10 role in interpreting a contract is to 11 ascertain the intention of the parties at 12 the time they entered into the contract. If 13 that intent is discernible from the plain 14 meaning of the language of the contract, 15 there is no need to look further. This may 16 be so even if the contract is silent on the 17 disputed issue. 18 Id. at 458. Here, the arbitration panel may have concluded that
19 even though the arbitration clauses are silent on the disputed
20 issue of whether class arbitration is permitted, their silence
21 bespeaks an intent not to preclude class arbitration. That
22 reading, which is at least "colorable," is consistent with Evans.
23 The district court also cited myriad New York cases
24 that take a narrow view of what can be read into a contract or
25 arbitration clause by implication. See Stolt-Nielsen, 435 F.
26 Supp. 2d at 386-87. But none of these cases purports to
27 establish a rule regarding the interpretation of an arbitration
14 Evans was cited in AnimalFeeds's arbitration brief, in the Clause Construction Award, and in the district court's opinion. See Stolt-Nielsen, 435 F. Supp. 2d at 386. 29 1 clause that is silent on the issue of class arbitration. Indeed,
2 the cases largely beg the question whether contractual silence
3 means that the parties did not intend to allow class actions or
4 did not intend to bar them. Because no state-law rule of
5 construction clearly governs the question of whether class
6 arbitration is permitted by an arbitration clause that is silent
7 on the subject, the arbitrators' decision construing such silence
8 to permit class arbitration in this case is not in manifest
9 disregard of the law. See Cheng v. Oxford Health Plans, Inc., 45
10 A.D.3d 356, 357, 846 N.Y.S.2d 16, 17-18 (1st Dep't 2007) (per
11 curiam) (determining arbitration panel did not exhibit manifest
12 disregard of law when it concluded that "defendants could not
13 successfully demonstrate that New York law prohibited class
14 arbitrations").
15 2. Stolt-Nielsen's Glencore/Boeing Argument. The
16 district court did not reach another argument made by Stolt-
17 Nielsen in support of vacating the Clause Construction Award for
18 manifest disregard of the law. According to Stolt-Nielsen, this
19 court's decisions in Glencore, Ltd. v. Schnitzer Steel Products,
20 189 F.3d 264 (2d Cir. 1999), and United Kingdom v. Boeing Co.,
21 998 F.2d 68 (2d Cir. 1993), along with the Seventh Circuit's
22 decision in Champ v. Siegel Trading Co., 55 F.3d 269 (7th Cir.
23 1995), prohibit class arbitration unless expressly provided for
24 in an arbitration agreement. These cases do lend support to
25 Stolt-Nielsen's underlying argument regarding the correct
26 interpretation of the arbitration clauses at issue. We do not
30 1 think, however, that they establish law that is so clearly and
2 plainly applicable that we are compelled to conclude that the
3 arbitration panel willfully ignored it, thereby manifestly
4 disregarding the law.
5 In Boeing, the United Kingdom was a party to two
6 distinct contracts with two different parties giving rise to two
7 separate arbitration proceedings. Boeing, 998 F.2d at 69.
8 Because the two disputes arose from a single incident, the
9 district court, on the motion of the United Kingdom, ordered
10 consolidation of the arbitration proceedings even though neither
11 arbitration clause expressly permitted consolidation. Id. We
12 reversed, because "a district court cannot order consolidation of
13 arbitration proceedings arising from separate agreements to
14 arbitrate absent the parties' agreement to allow such
15 arbitration." Id.
16 The facts of Glencore are similar. The petitioner was
17 involved in two separate arbitration proceedings arising from
18 separate contracts with two different parties. Glencore, 189
19 F.3d at 265-66. The district court in that case refused to
20 consolidate the arbitration proceedings but ordered a joint
21 hearing. Id. at 266. Again we reversed, because "Boeing's
22 conclusion that there is no source of authority in either the FAA
23 or the Federal Rules of Civil Procedure for the district court to
24 order consolidation absent authority granted by the contracts
25 giving rise to the arbitrations applies with equal force to a
26 court's order of joint hearing." Id. at 267.
31 1 In Champ, the Seventh Circuit affirmed a district
2 court's order denying class arbitration where the arbitration
3 agreements were silent on that issue. Champ, 55 F.3d at 277.
4 The court relied in large part on our decision in Boeing
5 prohibiting consolidation under such circumstances; it "f[ou]nd
6 no meaningful basis to distinguish between the failure to provide
7 for consolidated arbitration and class arbitration." Id. at 275.
8 These decisions are not binding in this case. After
9 they were decided, the Supreme Court ruled in Green Tree
10 Financial Corp. v. Bazzle ("Bazzle II"), 539 U.S. 444 (2003),
11 that when the parties agree to arbitrate, the question whether
12 the agreement permits class arbitration is generally one of
13 contract interpretation to be determined by the arbitrators, not
14 by the court. Id. at 452-53. Boeing, Glencore, and Champ had
15 been grounded in federal arbitration law to the effect that the
16 FAA itself did not permit consolidation, joint hearings, or class
17 representation absent express provisions for such proceedings in
18 the relevant arbitration clause. See Glencore, 189 F.3d at 267;
19 Champ, 55 F.3d at 275; Boeing, 998 F.2d at 71. Bazzle II
20 abrogated those decisions to the extent that they read the FAA to
21 prohibit such proceedings. See Bazzle II, 539 U.S. at 454-55
22 (Stevens, J., concurring) ("[t]here is nothing in the Federal
23 Arbitration Act that precludes . . . the Supreme Court of South
24 Carolina" from determining "as a matter of state law that class-
25 action arbitrations are permissible if not prohibited by the
26 applicable arbitration agreement"). After Bazzle II, arbitrators
32 1 must approach such questions as issues of contract interpretation
2 to be decided under the relevant substantive contract law. See
3 id. at 450 (noting that state law normally governs contract
4 interpretation).
5 Boeing, Glencore, and Champ are instructive insofar as
6 they view the silence of an arbitration clause regarding
7 consolidation, joint hearings, and class arbitration as
8 disclosing the parties' intent not to permit such proceedings.
9 See Glencore, 189 F.3d at 267 ("There is nothing in the terms of
10 the agreements before the district court that provided for joint
11 hearing."); Champ, 55 F.3d at 275 ("The parties' arbitration
12 agreement makes no mention of class arbitration."); Boeing, 998
13 F.2d at 74 ("If contracting parties wish to have all disputes
14 that arise from the same factual situation arbitrated in a single
15 proceeding, they can simply provide for consolidated arbitration
16 in the arbitration clauses to which they are a party."). But
17 they do not represent a governing rule of contract interpretation
18 under federal maritime law or the law of New York. And it is the
19 governing rules of contract interpretation that arbitrators must
20 consult according to Bazzle II.
21 As noted, Stolt-Nielsen has cited no federal maritime
22 law or New York State law establishing a rule of construction
23 prohibiting class arbitration where the arbitration clause is
24 silent on that issue.15 The arbitration panel's decision to
15 Nor is Champ adhered to in every jurisdiction. See Jean R. Sternlight, As Mandatory Binding Arbitration Meets the Class Action, Will the Class Action Survive?, 42 Wm. & Mary L. Rev. 1, 33 1 construe the contract language at issue here to permit class
2 arbitration was therefore not in manifest disregard of the law.
3 IV. Stolt-Nielsen's Claim That the Arbitrators 4 Exceeded Their Authority
5 In addition to asserting that the arbitration panel
6 acted in manifest disregard of the law, Stolt-Nielsen contends
7 that the arbitration panel "exceeded its authority." Appellees'
8 Br. 18. Although the district court did not reach this claim, it
9 was preserved for appeal.16
10 The FAA provides for vacatur of arbitration awards
11 "where the arbitrators exceeded their powers." 9 U.S.C.
12 § 10(a)(4). We may disregard, in this instance, the post-Hall
13 Street view that arbitrators may "exceed their powers" when they
14 manifestly disregard the law; we have rejected Stolt-Nielsen's
15 "manifest disregard" claim. The remainder of "[o]ur inquiry
16 under § 10(a)(4) . . . focuses on whether the arbitrators had the
17 power, based on the parties' submissions or the arbitration
67-69 & n.260 (2000)(noting that state courts in California and Pennsylvania have allowed class arbitration "even though the arbitration clause is silent"); see also Keating v. Superior Court, 31 Cal.3d 584, 613, 183 Cal. Rptr. 360, 378, 645 P.2d 1192, 1210 (1982), rev'd on other grounds sub nom. Southland Corp. v. Keating, 465 U.S. 1 (1984); Dickler v. Shearson Lehman Hutton, Inc., 408 Pa. Super. 286, 296, 596 A.2d 860, 864-65 (Super. Ct. 1991). 16 We perceive no need to remand for the district court to consider this claim in the first instance, as it has been briefed, entails no findings of fact, and is a pure question of law we review de novo. See Ohio Bureau of Employment Servs. v. Hodory, 431 U.S. 471, 482 (1977); United States v. Canfield, 212 F.3d 713, 721 (2d Cir. 2000).
34 1 agreement, to reach a certain issue, not whether the arbitrators
2 correctly decided that issue." DiRussa, 121 F.3d at 824; see
3 also Hoeft, 343 F.3d at 71; Westerbeke, 304 F.3d at 219-20.
4 Here, the arbitration panel clearly had the power to
5 reach the issue of whether the Vegoilvoy agreement permitted
6 class arbitration. The parties expressly agreed that the
7 arbitration panel "shall follow and be bound by Rules 3 through 7
8 of the American Arbitration Association's Supplementary Rules for
9 Class Arbitrations," Class Arbitration Agreement 3. Rule 3 of
10 the Supplementary Rules provides that "the arbitrator shall
11 determine as a threshold matter, in a reasoned, partial final
12 award on the construction of the arbitration clause, whether the
13 applicable arbitration clause permits the arbitration to proceed
14 on behalf of or against a class." Because the parties
15 specifically agreed that the arbitration panel would decide
16 whether the arbitration clauses permitted class arbitration, the
17 arbitration panel did not exceed its authority in deciding that
18 issue –- irrespective of whether it decided the issue correctly.
19 CONCLUSION 20 For the foregoing reasons, the judgment of the district
21 court is reversed and the cause remanded to the district court
22 with instructions to deny the petition to vacate.17
17 Because we reverse the district court's "manifest disregard" holding and reject Stolt-Nielsen's claim that the arbitrators exceeded their authority, we need not and do not consider AnimalFeeds's assertion that denial of the petition is required on public policy grounds, viz., that class arbitration is necessary to vindicate important statutory rights under the Sherman Antitrust Act.