Arbitration Case Analysis

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As a result of the decision, the Supreme Court’s opinions in Green Tree Financial Corp. v. Bazzzle, 539 U.S. 444, 123 S.Ct. 2402 (2003), are essentially a nullity in the Seventh Circuit.

According to the Seventh Circuit, there is no holding on which a majority of justices agree. It is a more reasonable conclusion than that of the Fifth Circuit in Pedcor Mgmt. Co., Inc. Welfare Benefit Plan v. Nations Personnel of Texas, Inc., 343 F.3d 355 (5th Cir. 2003).

The court in Pedcor wrote, “Justice Stevens did express his agreement, however, with the principle laid down by the plurality that arbitrators should be the first ones to interpret the parties’ agreement. As a result, the plurality’s governing rationale in conjunction with Justice Stevens’s support of that rationale substantially guides our consideration of this dispute.” Id., at 358-359.

As the Seventh Circuit notes, however, Justice Stevens did no such thing: “Justice Stevens’s only references to this point are that ‘arguably’ the arbitrator should have interpreted the agreements first.”

Accordingly, when considering arbitration issues in federal court, attorneys should disregard Green Tree entirely, and rely instead on Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002).

It also appears that the Seventh Circuit now considers its own decision in Champ v. Siegel Trading Co., Inc., 55 F.3d 269 (7th Cir. 1995), to be a dead letter.

In Champ, the Seventh Circuit held that a federal court had no power to order class arbitration where the arbitration agreement was silent on the matter. Although the Breyer opinion in U.S. Supreme Court in Green Tree made no reference to Champ (or to any other opinions by the U.S. Courts of Appeal), the Breyer opinion was consistent with Champ.

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One would expect that, in considering the closely related issue in the case at bar — whether a federal court can order consolidation in arbitration proceedings — there would be some citation to Champ. Instead, there is none.

At one point in the court’s decision, it even cites four of its prior decisions (but not Champ) for the proposition that longstanding federal policy favors arbitration.

If the court is unwilling to cite a case as closely on point as Champ, even for this extremely uncontroversial proposition, it is apparent that Champ, like Green Tree, is also considered to have no precedential value, after Green Tree failed to produce any majority opinion.

As a result, any citation to or discussion of these cases would appear to be a waste of both time and ink.

– David Ziemer

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David Ziemer can be reached by email.