Monday, June 10, 2013
U.S. Supreme Court: Arbitrator's Decision Allowing Class Arbitration Survives Limited Judicial Review under FAA
The Supreme Court today unanimously held that a court has no power to vacate an arbitrator's interpretation of an arbitration agreement permitting class arbitration under section 10(a)(4) of the Federal Arbitration Act, so long as (1) the parties agreed that the arbitrator should decide whether their contract authorized class arbitration and (2) the arbitrator based on his decision on an interpretation of the arbitration agreement. Oxford Health Plans LLC v. Sutter (U.S. June 10, 2013).
The Court thus reaffirmed the narrow grounds for vacating an arbitrator's decision under section 10(a)(4) for exceeding his powers. The Court, in essence, found that Oxford got what it bargained for -- it "chose arbitration and it must now live with that choice." The Court distinguished its earlier decision in Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662, because there the parties had stipulated that they had not agreed to class arbitration and thus the arbitrator could not order class arbitration based on the parties' consent. The court also noted that the Court would have faced a different issue if Oxford had argued that the availability of class arbitration was a question of arbitrability, an issue that Stolt-Nielsen had left open. The Court emphasized that nothing in the opinion should be taken to reflect any agreement with the arbitrator's interpretation of the contract.
Justices Alito, with Justice Thomas concurring, wrote a brief concurrence to note that it was unclear whether absent class members would be bound by the arbitrator's ultimate resolution, since they had not consented to the arbitrator's interpretation of the contract. Justice Alito thus makes clear that his view that the availability of class arbitration should not be decided by the arbitrator, absent the stipulation of the parties in the case before the Court.
Oxford Health Plans is an affirmation of the very narrow grounds for judicial review of an arbitrator's decision. While the class arbitration in this case can go forward, it is unlikely to lead to very many class arbitrations, as corporate defendants increasingly are including explicit class action waivers in their arbitration agreements.