## Facts

- Shipping companies operating parcel tanker services contracted with AnimalFeeds under a standard charter party containing a broad New York arbitration clause governed by the Federal Arbitration Act (FAA).
- After a government investigation revealed a price-fixing conspiracy in the parcel tanker market, AnimalFeeds filed a putative class antitrust action that was ultimately directed to arbitration.
- The parties stipulated that the arbitration clause was “silent” on class arbitration and jointly submitted to the arbitrators the question whether class arbitration was permitted.
- The parties agreed the arbitrators would apply the American Arbitration Association’s Supplementary Rules for Class Arbitrations, which assign the clause-construction question to the arbitrator.
- The arbitration panel issued a clause-construction award concluding the arbitration clause permitted class arbitration, relying in part on prior arbitral interpretations of similar language.

## Issues

1. Whether the clause-construction award permitting class arbitration under an arbitration clause stipulated to be silent could be vacated under the FAA for “manifest disregard of the law.”
2. Whether any clearly governing federal maritime law or New York law barred class arbitration such that the arbitrators knowingly and deliberately refused to apply controlling law.

## Decision

- The Second Circuit reversed the district court’s order vacating the award and reinstated the arbitral clause-construction award.
- The court held that “manifest disregard” remains available only as a narrow, highly deferential doctrine tied to FAA vacatur standards, not as a vehicle for correcting legal error.
- The court concluded the challengers did not identify any clear and explicitly applicable maritime or New York rule forbidding class arbitration when an arbitration clause is silent on class procedures.
- Because no clearly controlling law was shown, the record could not support a finding that the arbitrators consciously refused to apply governing law.

## Legal Principles

- Vacatur for “manifest disregard of the law” requires more than error; the moving party must show (1) a clear, governing legal principle explicitly applicable to the dispute and (2) the arbitrators’ knowledge of and deliberate refusal to apply that principle.
- Where alleged governing law is unsettled or unsupported by authority directly addressing the disputed question, an arbitral interpretation generally cannot be set aside as manifest disregard.
- An arbitrator acts within the scope of authority when the parties submit a contract-interpretation question for decision, even if the clause is silent on a specific procedural mechanism, absent a clearly controlling legal prohibition.

## Conclusion

The Second Circuit reinstated an arbitral award permitting class arbitration because the challenger failed to show that the arbitrators intentionally defied clearly controlling federal maritime or New York law; without such a showing, FAA vacatur for manifest disregard was unavailable.


Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 548 F.3d 85 (2d Cir. 2008)