Class Arbitration can?t be imposed

Class Arbitration canÆt be imposed       The U.S. Supreme Court has held that class arbitration cannot be imposed on parties that have not agreed to it. (Stolt-Nielsen S.A., et al. v. AnimalFeeds International Corp., U.S., 08-1198, April 27.)
      In a 5-3 decision, written by Justice Alito, the court overturned a Second Circuit Court of Appeals decision by rejecting class arbitration of antitrust claims brought against four large parcel tanker companies, including Stolt-Nielsen, by shippers contracted for carriage of cargo using standard charter party agreements that included arbitration clauses.
      A note on the case from the law firm of Winston & Strawn said because 'class actions tend to increase the breadth and potential exposure of litigation against corporate defendants,' the court's decision eliminates uncertainty by holding that the Federal Arbitration Act does not permit the imposition of class arbitration on parties who have not explicitly agreed to authorize it.
      The parties agreed to submit the question of whether their arbitration agreement allowed for class arbitration to a panel of arbitrators, but the Supreme Court found the panel exceeded its powers and appeared to have rested its decision on AnimalFeeds' public policy argument rather than identifying and applying a rule of decision derived from the Federal Arbitration Act, maritime law or New York law. (New York is where the parties had agreed to arbitrate their dispute.)
      Instead the panel proceeded as if it had a common-law court's authority to develop what it viewed as the best rule for such a situation, the court said.
      The parcel tanker companies had submitted expert opinions from admiralty attorneys and arbitrators who said they had never seen arbitration clauses in charter party agreements allowing class action arbitration.
      A friend of the court brief by the Society of Maritime Arbitrators contended if class arbitration had been permitted, it might discourage shipping companies from having disputes arbitrated in the United States.

Missing numbers add up to $4.2 million
      A 72-foot yacht built by Sunseeker International and insured for nearly $4.2 million was damaged when a mobile crane toppled over while the boat was being offloaded from the Madame Butterfly at Port Hueneme, Calif.
      The subrogee insurer, St. Paul, brought an action (St. Paul Travelers Insurance Co. v. Madame Butterfly, S.D.N.Y, 08-Civ.410, March 31) against the ocean carrier, Wallenius Wilhelmsen Logistics (WWL), the crane lessor and stevedores responsible for offloading the yacht.
      St. Paul sought to recover the payout of the insurance claim, bringing claims for damage to goods in transit, negligence, unworkmanlike performance, conversion, negligent entrustment, and breach of contract. The crane lessor brought various cross claims.
      St. Paul argued the defendants were liable under a service contract entered into by WWL with Peters & May, a freight forwarder, as agent for Sunseeker.
      The defendants responded that the service contract did not apply and that the governing contract was the bill of lading, which would not permit suits against any party other than WWL. They also said WWL's liability was limited to the $500-per-package limitation under the Carriage of Goods by Sea Act (COGSA).
      WWL moved for partial summary judgment.
      The court agreed the central issue was 'whether the contract governing the carriage of the yacht is the service contract or the bill of lading.'
      It said the bill of lading structure was clear and required the shipper to bring any claims against the carrier and precluded the shipper from suing any third parties. It also said COGSA's package limitation applied unless the shipper chose to declare a higher value and pay a higher rate. That would give the shipper the option of purchasing other insurance as the shipper plainly did in this case, as St. Paul paid the loss and was suing instead of the shipper.
      The bill of lading contained an explicit clause precluding the shipper from suing any party other than WWL for damages. The court said the agreement not to sue was broad, and dismissal of the plaintiff's claims against the crane company and stevedore was plainly required if the bill of lading was the governing contract.
      The defendants argued that COGSA governed under the bill of lading and expressly limits WWL's liability to $500 per package unless a higher freight is paid and a higher value is declared in the 'declared value box' of the bill of lading, which was not done in this instance.
      The service contract, on the other hand, expressly provided that the Hague-Visby rules apply. The service contract also provided for English law and contained an exclusive choice of forum provision for arbitration in London. In addition, the service contract provided that if there is a conflict between the service contract and the bill of lading, the service contract is the governing contract.
      The court said it was 'clear from the undisputed facts that the bill of lading is the contract governing the carriage of the yacht.'
      While a service contract does govern a shipping relationship between WWL and freight forwarder Peters & May as agent for Sunseeker, the court said it did not apply to the specific shipment of the yacht in this case. The service contract required the service contract number to appear on a bill of lading governed by the service contract, but the number was not used in this case.
      'WWL has the exclusive discretion to waive the requirement that the service contract number appear on the bill of lading, and WWL plainly has not waived the provision in this case,' the court said.
      The plaintiff argued that a representative of Peters & May, who negotiated the freight rate, testified at his deposition that the service contract applied to the shipment of the yacht here because there was 'already ' an existing service contract in place.'
      But the court said under federal maritime law, a party cannot rely on extrinsic or parol (contradictory) evidence 'to modify the plain terms of an admiralty contract, including a bill of lading.'
      Because there was an agreement not to sue any party other than WWL in the bill of lading, the plaintiff's claims against the stevedore and crane company must be dismissed. The court added that even in the absence of an agreement not to sue, those two companies would have been protected by the same limitations on liability that apply to WWL.
      The claims against the crane company and stevedore were dismissed and WWL's motion for summary judgment limiting its liability to $500 was granted. St. Paul's motion for summary judgment was denied.