Samuel Estreicher is a professor of law and director of the Center for Labor and Employment Law at the New York University of Law. He is also labor and employment law counsel to Morgan, Lewis & Bockius LLP. Michael J. Puma is an associate at the same firm, specializing in labor and employment law.
The authors analyze the U.S. Supreme Court’s long-awaited decision in Green Tree v. Bazzle in order to provide guidance to drafters of arbitration clauses. The authors cover the law relating to arbitration agreements that are silent on the issue of class actions in arbitration and litigation and those that bar class action proceedings.
On June 23, 2003, adding to its string of significant arbitration decisions in the past 15 or more years interpreting the Federal Arbitration Act (FAA),1 the U.S. Supreme Court handed down Green Tree Financial Corp. v. Bazzle.2 In this case, the Court vacated two multi-million dollar classwide arbitration awards, holding that it is for the arbitrator, not a court, to decide whether an arbitration agreement silent on the point authorizes the pursuit of class claims. The Court did not express any view on the enforceability of a provision precluding or waiving the right to arbitrate class claims. But it appears to have been the premise of both the plurality opinion and the principal dissent that if the agreement had plainly excluded class action claims, neither an arbitrator nor a court could order classwide arbitration.
Bazzle leaves several open issues at the intersection of predispute arbitration agreements and the availability of class actions, thereby confronting the parties with difficult choices and legal uncertainty when it comes to drafting arbitration agreements.