The Supreme Court's First Look at Class Action Arbitrability

What is it about?

The 2003 U.S. Supreme Court decision in Green Tree Financial Corp. v. Bazzle originated out of a South Carolina state court case filed by Lynn and Burt Bazzle. The Bazzles had entered into a loan contract that included an arbitration clause that did not explicitly provide for class arbitration. Nonetheless, the state's trial court certified a class of plaintiffs and subsequently ordered arbitration. The arbitrator eventually granted the class of plaintiffs an award of more than 10 million dollars, which the trial court later confirmed. Ultimately, the case was consolidated with another similar proceeding and eventually made its way to the U.S. Supreme Court, which considered three questions: 1. Which decision-maker—court or arbitrator—should decide whether the contracts in question were "silent" on the issue of class arbitration? 2. What standard should the appropriate decision-maker apply in determining whether a contract allows class arbitration—i.e., the FAA or state law? 3. Under whatever standard was appropriate, was class arbitration properly ordered in the cases at hand? The Court's plurality opinion in Bazzle answered only the first question, resolving it in favor of the arbitrator being the correct decision-maker. The plurality did not reach the merits of whether imposing class arbitration when an agreement is silent on that issue is consistent with the Federal Arbitration Act. Even so, Bazzle underscored the importance of precise language in arbitration clauses, prompting parties entering arbitration agreements to become more vigilant about explicitly addressing the issue of class arbitration.

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Photo by Tingey Injury Law Firm on Unsplash

Photo by Tingey Injury Law Firm on Unsplash