Winston & Strawn Obtains Cutting-Edge Victory in Class Arbitration

Winston & Strawn lawyers recently prevailed on behalf of client Chartis subsidiaries Spruce Peak Realty and Stowe Mountain Lodge (collectively, the "Lodge"). The firm secured a significant victory in this putative class arbitration before the American Arbitration Association ("AAA") when the Arbitrator ruled that class arbitration was not authorized under the parties' agreement.

The arbitration, along with two parallel class actions in the United States District Court for the District of Vermont, were initiated by a class of residential condominium unit owners (the "Owners") of the Lodge, a luxury golf and ski resort community. The Owners alleged that they were defrauded into purchasing their units and that the Lodge violated Vermont condominium law by charging undisclosed and unlawful fees and common expenses. Further, the Owners moved to stay one of the federal actions in order to pursue class arbitration against the Lodge, even though the parties' arbitration agreement did not expressly authorize class arbitration. 

Whether class arbitration is permitted is a cutting-edge issue. In two recent Supreme Court cases, Stolt-Nielson and Concepcion, the Court held that class arbitration is strongly disfavored and can only proceed if there is an express or implicit contractual basis in the parties' agreement. Notwithstanding, many arbitrators routinely find an "implicit agreement" to class arbitration and federal courts affirm these awards on the basis of the deferential standard of review under the FAA. The Owners relied on this body of law and a Vermont statute specifically authorizing class treatment to resolve disputes under the state's condominium laws as a basis for construing the parties' agreement so as to permit class arbitration. However, the Lodge urged the Arbitrator to carefully review Supreme Court precedent, disregard unprincipled arbitral awards and poorly-reasoned decisions confirming them, and rule that class arbitration was precluded on these facts.

The Arbitrator agreed with the Lodge, and issued a clause construction award holding that the Owners could not proceed as a class on any claims in the AAA arbitration.

Jeffrey Amato and Sofia Arguello were on the Winston team.