The US Supreme Court is set to issue rulings in two cases with potentially far-reaching class action implications.
In Shady Grove v. Allstate Ins., the Court will decide whether the Second Circuit correctly held that a New York law banning class actions for specific forms of claims seeking statutory penalties from insurance companies barred plaintiffs from attempting to pursue such claims in federal court. On November 2, 2009, the Court heard oral argument on the issue, with Justices Sotomayor and Breyer expressing concern that such a law might interfere with the federal class action rule’s policy concerns of promoting efficient and beneficial procedural mechanisms. Conversely, Justice Ginsburg indicated potential agreement with the Second Circuit by analogizing the New York law to state laws capping money damages.
In addition, on December 9, 2009, the Court heard oral argument in Stolt-Nielsen v. Animalfeeds International Corp., in which the Second Circuit held that the Federal Arbitration Act permits arbitrators to impose class arbitration on parties whose arbitration clauses are silent as to that issue. Justices from both ends of the political spectrum expressed reluctance to accept the concept of contractual “silence,” with Justice Scalia specifically stating that a contract must “either require [class arbitration] or ... not.” However, he also expressed concern that arbitrators might conclude that a contract allows class arbitration on the basis of alarmingly weak language.