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Split Court Tightens Arbitration Proceedings

(CN) - In a 5-3 decision with conservatives in the majority, the Supreme Court on Tuesday made it harder for consumers to join together in arbitration proceedings with businesses. The ruling tosses a 2nd Circuit decision that allowed class arbitration to proceed in a dispute between shipping companies and their customers who accused them of price-fixing.

In 2003, a Department of Justice criminal investigation found that shipping companies were engaging in an "illegal price fixing conspiracy," which prompted AnimalFeeds International to file a putative class action in Pennsylvania Federal Court.

AnimalFeeds supplies raw ingredients like fish oil to animal feed producers around the world.

The suit was consolidated with others like it, and the company sought arbitration in New York City on behalf of a class of purchasers of parcel tanker transportation services.

The parties agreed to submit the question whether their arbitration agreement allowed for class arbitration to a panel of arbitrators.

The panel determined that the arbitration clause allowed for class arbitration, but the District Court vacated the award, concluding that the arbitrators' award was "made in 'manifest disregard' of the law."

The 2nd Circuit then reversed, finding that because petitioners cited no authority in applying a "maritime rule of custom and usage against class arbitration, the arbitrators' decision was not in manifest disregard of maritime law," according to the ruling.

The high court found that "imposing class arbitration on parties who have not agreed to authorize class arbitration is consistent with the Federal Arbitration Act," Justice Samuel Alito wrote for the majority.

"The differences between bilateral and class-action arbitration are too great for arbitrators to presume, consistent with their limited powers under the FAA, that the parties' mere silence on the issue of class-action arbitration constitutes consent to resolve their disputes in class proceedings."

Alito was joined by Chief Justice John Roberts and Justices Antonin Scalia, Anthony Kennedy and Clarence Thomas.

In her dissent, Justice Ruth Bader Ginsberg called the ruling premature. "When an arbitration clause is silent on the question, may arbitration proceed on behalf of a class?" she asked. "The court prematurely takes up that important question and, indulging in de novo review, overturns the ruling of experienced arbitrators."

Ginsburg was joined by Justices John Paul Stevens and Stephen Breyer in the dissent.

Justice Sonia Sotomayor did not participate.

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