Monday, June 10, 2013

SCOTUS Decision on Class Arbitration: Oxford Health Plans v. Sutter

Today was arbitration day at the Supreme Court (well, that and raisins). In addition to granting certiorari in BG Group PLC v. Argentina, the Court issued a unanimous decision in Oxford Health Plans LLC v. Sutter (No. 12-135). Justice Kagan writes the Court’s opinion in Oxford, which begins:

Class arbitration is a matter of consent: An arbitrator may employ class procedures only if the parties have authorized them. See Stolt-Nielsen S. A. v. AnimalFeeds Int’l Corp., 559 U. S. 662, 684 (2010). In this case, an arbitrator found that the parties’ contract provided for class arbitration. The question presented is whether in doing so he “exceeded [his] powers” under §10(a)(4) of the Federal Arbitration Act (FAA or Act), 9 U. S. C. §1 et seq. We conclude that the arbitrator’s decision survives the limited judicial review §10(a)(4) allows.

Here’s more from Justice Kagan’s opinion on the relationship between Oxford and Stolt-Nielsen [Op. at 6-7]:

Oxford’s contrary view relies principally on Stolt-Nielsen. As noted earlier, we found there that an arbitration panel exceeded its powers under §10(a)(4) when it ordered a party to submit to class arbitration. See supra, at 3. Oxford takes that decision to mean that “even the ‘high hurdle’ of Section 10(a)(4) review is overcome when an arbitrator imposes class arbitration without a sufficient contractual basis.” Reply Brief 5 (quoting Stolt-Nielsen, 559 U. S., at 671). Under Stolt-Nielson, Oxford asserts, a court may thus vacate “as ultra vires” an arbitral decision like this one for misconstruing a contract to approve class proceedings. Reply Brief 7.

But Oxford misreads Stolt-Nielsen: We overturned the arbitral decision there because it lacked any contractual basis for ordering class procedures, not because it lacked,in Oxford’s terminology, a “sufficient” one. The parties in Stolt-Nielsen had entered into an unusual stipulation that they had never reached an agreement on class arbitration. See 559 U. S., at 668–669, 673. In that circumstance, we noted, the panel’s decision was not—indeed, could not have been—“based on a determination regarding the parties’ intent.” Id., at 673, n. 4; see id., at 676 (“Th[e] stipulation left no room for an inquiry regarding the parties’ intent”). Nor, we continued, did the panel attempt to ascertain whether federal or state law established a “default rule” to take effect absent an agreement. Id., at 673. Instead, “the panel simply imposed its own conception of sound policy” when it ordered class proceedings. Id., at 675. But “the task of an arbitrator,” we stated, “is to interpret and enforce a contract, not to make public policy.” Id., at 672. In “impos[ing] its own policy choice,” the panel “thus exceeded its powers.” Id., at 677.

The contrast with this case is stark. In Stolt-Nielsen, the arbitrators did not construe the parties’ contract, and did not identify any agreement authorizing class proceedings. So in setting aside the arbitrators’ decision, we found not that they had misinterpreted the contract, but that they had abandoned their interpretive role. Here, the arbitrator did construe the contract (focusing, per usual, on its language), and did find an agreement to permit class arbitration. So to overturn his decision, we would have to rely on a finding that he misapprehended the parties’ intent. But §10(a)(4) bars that course: It permits courts to vacate an arbitral decision only when the arbitrator strayed from his delegated task of interpreting a contract, not when he performed that task poorly. Stolt-Nielsen and this case thus fall on opposite sides of the line that §10(a)(4) draws to delimit judicial review of arbitral decisions.

Note, however, footnote 2 of Justice Kagan's opinion:

We would face a different issue if Oxford had argued below that the availability of class arbitration is a so-called “question of arbitrability.” Those questions—which “include certain gateway matters, such as whether parties have a valid arbitration agreement at all or whethera concededly binding arbitration clause applies to a certain type of controversy”—are presumptively for courts to decide. Green Tree Financial Corp. v. Bazzle, 539 U. S. 444, 452 (2003) (plurality opinion). A court may therefore review an arbitrator’s determination of such a matter de novo absent “clear[] and unmistakabl[e]” evidence that the parties wanted an arbitrator to resolve the dispute. AT&T Technologies, Inc. v. Communications Workers, 475 U. S. 643, 649 (1986). Stolt-Nielsen made clear that this Court has not yet decided whether the availability of class arbitration is a question of arbitrability. See 559 U. S., at 680. But this case gives us no opportunity to do so because Oxford agreed that the arbitrator should determine whether its contract with Sutter authorized class procedures. See Brief for Petitioner 38, n. 9 (conceding this point).  

Justice Alito writes a concurring opinion, joined by Justice Thomas:

As the Court explains, “[c]lass arbitration is a matter of consent,” ante, at 1, and petitioner consented to the arbitrator’s authority by conceding that he should decide in the first instance whether the contract authorizes class arbitration. The Court accordingly refuses to set aside the arbitrator’s ruling because he was “‘arguably construing . . . the contract’” when he allowed respondent to proceed on a classwide basis. Ante, at 8 (quoting Eastern Associated Coal Corp. v. Mine Workers, 531 U. S. 57, 62 (2000)). Today’s result follows directly from petitioner’s concession and the narrow judicial review that federal law allows in arbitration cases. See 9 U. S. C. §10(a).

But unlike petitioner, absent members of the plaintiff class never conceded that the contract authorizes the arbitrator to decide whether to conduct class arbitration. It doesn’t. If we were reviewing the arbitrator’s interpretation of the contract de novo, we would have little trouble concluding that he improperly inferred “[a]n implicit agreement to authorize class-action arbitration . . . from the fact of the parties’ agreement to arbitrate.” Stolt-Nielsen S. A. v. AnimalFeeds Int’l Corp., 559 U. S. 662, 685 (2010).

With no reason to think that the absent class members ever agreed to class arbitration, it is far from clear that they will be bound by the arbitrator’s ultimate resolution of this dispute....

Class arbitrations that are vulnerable to collateral attack allow absent class members to unfairly claim the “benefit from a favorable judgment without subjecting themselves to the binding effect of an unfavorable one,” American Pipe & Constr. Co. v. Utah, 414 U. S. 538, 546–547 (1974). In the absence of concessions like Oxford’s, this possibility should give courts pause before concluding that the availability of class arbitration is a question the arbitrator should decide. But because that argument was not available to petitioner in light of its concession below, I join the opinion of the Court.


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