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CLIENT UPDATE

Putney, Twombly, Hall & Hirson LLP
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Tel: (212) 682-0020


June 13, 2013

Supreme Court Upholds Arbitrator's Decision To Allow Classwide Arbitration

On June 11, 2013, in Oxford Health Plans LLC v. Sutter, No. 12-135, the United States Supreme Court ruled that it would not vacate an arbitrator’s finding that a contract permits class arbitration despite the fact that the contract did not expressly provide for classwide arbitration.  The Court explained that the Federal Arbitration Act provides for a very narrow review of an arbitrator’s decision: “[T]he sole question for us is whether the arbitrator (even arguably) interpreted the parties’ contract, not whether he got its meaning right or wrong.”

Oxford Health Plans LLC v. Sutter

In Oxford Health Plans LLC v. Sutter,a pediatrician filed suit against Oxford on behalf of a proposed class of other New Jersey physicians under contract with Oxford, alleging that Oxford had failed to make full and prompt payment to doctors for their services at prescribed rates.  Oxford moved to compel arbitration pursuant to a clause in the parties’ fee-for-services contract requiring that all disputes “arising under [the] Agreement” be submitted to final and binding arbitration.

The New Jersey Superior Court granted Oxford’s motion, thus allowing the dispute to proceed to arbitration.  The parties agreed that the arbitrator should decide whether their contract authorized class arbitration; the arbitrator ruled that it did.  Oxford then filed a motion to vacate the arbitrator’s decision, arguing that the arbitrator “had exceeded his powers” under the Federal Arbitration Act.  Both the district court and the Third Circuit Court of Appeals rejected its request.  After the Supreme Court’s decision in Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010), denying class arbitration where the contract did not expressly provide for classwide arbitration, Oxford again submitted the dispute to arbitration, and then the district court and Court of Appeals, receiving the same responses from each. 

The Supreme Court affirmed the Third Circuit’s decision, holding that because the parties had expressly given the arbitrator the authority to interpret their contract, “even serious errors of law or fact” made by the arbitrator in construing the agreement to permit class arbitration could not be overturned under the Federal Arbitration Act, which permits only limited judicial review.  The Court distinguished Oxford from Stolt-Nielsen, stating that in Oxford the arbitrator construed the parties’ broad contractual language as permitting class arbitration, while in Stolt-Nielsen the parties’ stipulation that their contract was silent on the issue meant the arbitrator did not construe the contract or identify any agreement authorizing class proceedings.

Takeaway for Employers

The Court's decision reinforces that courts will uphold the Federal Arbitration Act’s strong deference to arbitrators.  The decision is also a reminder that employers should consider revising any arbitration agreements that remain "silent" on the issue of class arbitration.  Employers wishing to avoid class arbitration should consider including an express waiver of class arbitration in relevant agreements and should be certain not to agree to permit an arbitrator to decide whether classwide arbitration is available. 

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If you have any questions regarding the Oxford decision or the arbitrability of employment claims generally, please do not hesitate to contact us.

   

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