“Good, Bad, or Ugly”: U.S. Supreme Court Upholds Arbitrator’s Interpretation of Contract as Providing for Class Arbitration

The Good, the Bad and the Ugly (soundtrack)

The Good, the Bad and the Ugly (soundtrack) (Photo credit: Wikipedia)

A unanimous U.S. Supreme Court today affirmed an arbitrator’s interpretation of an arbitration clause to permit class proceedings.  Oxford Health Plans LLC v. Sutter, No. 12-135, 569 U.S. __ (June 10, 2013).  The question presented was whether an arbitrator, who found that the parties’ contract provided for class arbitration, “exceeded [his] powers” under §10(a)(4) of the Federal Arbitration Act, 9 U. S. C. §1 et seq.  Delivering the opinion of the Court and citing Stolt-Nielsen S. A. v. AnimalFeeds Int’l Corp., 559 U. S. 662, 684 (2010), Justice Kagan concluded that the arbitrator’s decision survives the limited judicial review §10(a)(4) allows.

The arbitration clause at issue provided as follows:

No civil action concerning any dispute arising under this Agreement shall be instituted before any court, and all such disputes shall be submitted to final and binding arbitration in New Jersey, pursuant to the rules of the American Arbitration Association with one arbitrator.

Slip Op. at 2.

The state court granted Oxford’s motion to compel arbitration, and the parties agreed that the arbitrator should decide whether their contract authorized class arbitration.  Id.  The arbitrator determined that it did. Id.  Oxford filed a motion in federal court to vacate the arbitrator’s decision on the ground that he had exceeded his powers under §10(a)(4), but the District Court denied the motion, and the Third Circuit affirmed.  Id.

While the arbitration proceeded, the Supreme Court Court held in Stolt-Nielsen that “a party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so.” 559 U. S. at 684. The parties in Stolt-Nielsen had stipulated that they had never reached an agreement on class arbitration.

The Supreme Court in Oxford Health Plans LLC distinguished Stolt-Nielsen: Read the rest of this entry »

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