Waiving Rights Goodbye: Class Action Waivers in Arbitration Agreements after Stolt-Nielsen v. Animalfeeds International

Abstract

Many arbitration agreements contain clauses that prohibit the parties from bringing class actions in arbitration or in court. The federal courts of appeals are split on whether these class action waivers are enforceable: some courts have held that §2 of the Federal Arbitration Act allows such agreements to be disregarded under basic contract principles, whereas other courts have found that class mechanisms are merely procedural and can be waived in an arbitration agreement. An April 2010 United States Supreme Court case, Stolt-Nielsen v. Animalfeeds International Corp., raised but did not resolve the issue. This article argues that the FAA should be amended or interpreted to provide a “totality of the circumstances” approach in which courts would consider factors such as whether the size of each claimant’s individual recovery would make it difficult or impossible for the claimant to pursue his or her claims on an individualized basis.

Keywords: Arbitration, Class Action, Federal Arbitration Act, FAA, Stolt-Nielsen