On Friday, the U.S. Supreme Court granted cert. in another arbitration-related case, Oxford Health Plans LLC v. Sutter, No. 12-135. This is the question presented as stated in the cert. petition:
In Stolt-Nielsen v. AnimalFeeds International Corp., 130 S. Ct. 1758, 1776 (2010), this Court made clear that "class-action arbitration changes the nature of arbitration to such a degree that it cannot be presumed the parties consented to it by simply agreeing to submit their disputes to arbitration." In this case, an arbitrator concluded that the parties affirmatively consented to class arbitration on the basis of a contract provision stating: "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." The question presented is:
Whether an arbitrator acts within his powers under the Federal Arbitration Act (as the Second and Third Circuits have held) or exceeds those powers (as the Fifth Circuit has held) by determining that parties affirmatively "agreed to authorize class arbitration," Stolt-Nielsen, 130 S. Ct. at 1776, based solely on their use of broad contractual language precluding litigation and requiring arbitration of any dispute arising under their contract.
In April, the Third Circuit affirmed the district court's ruling that the arbitrator had not exceeded his authority in finding that the parties' agreement authorized class arbitration. Sutter v. Oxford Health Plans LLC, 675 F.3d 215 (3d Cir. 2012). The underlying dispute is a breach of contract claim related to the reimbursement rates paid by Oxford Health to physicians and other heathcare providers for primary care services. The arbitration clause appeared in the "primary care physician agreement" between the healthcare providers and Oxford Health.
The defendant's main argument was that under Stolt-Nielsen, class arbitration was permitted only if the contract explicitly authorized it. The Third Circuit declined to interpret Stolt-Nielsen so narrowly:
Stolt-Nielsen did not establish a bright line rule that class arbitration is allowed only under an arbitration agreement that incants "class arbitration" or otherwise expressly provides for aggregate procedures. Stolt-Nielsen, 130 S.Ct. at 1776 n. 10; Jock v. Sterling Jewelers Inc., 646 F.3d 113, 124 (2d Cir. 2011) (holding that an arbitrator did not exceed her powers by ruling that class arbitration was allowed under an agreement lacking an express class provision). The Court underscored this point, writing, "We have no occasion to decide what contractual basis may support a finding that the parties agreed to authorize class-action arbitration. Here, as noted, the parties stipulated that there was `no agreement' on the issue of class-action arbitration." 130 S.Ct. at 1776 n. 10; see also id. at 1783 (Ginsburg, J., dissenting) ("[T]he Court does not insist on express consent to class arbitration.").
Instead, Stolt-Nielsen established a default rule under the Federal Arbitration Act: "[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." Id. at 1775 (emphasis in original). Absent a contractual basis for finding that the parties agreed to class arbitration, an arbitration award ordering that procedure exceeds the arbitrator's powers and will be subject to vacatur under § 10(a)(4).
Id. at 222 (footnote omitted). The Court agreed with the arbitrator that the arbitration clause was broad enough to support the conclusion that the parties agreed to class arbitration. The clause read:
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.
Id. at 223 (emphasis added). The clause contained no language prohibiting class actions, and the arbitrator reasoned that the phrase "all such disputes" was broad enough to include them. The Third Circuit held that the arbitrator's interpretation of the agreement was not "totally irrational," which was all that affirmance required. Id. at 224-225.
ADR Profs Blog has a post on Friday's cert. grant, as does the Consumer Law and Policy Blog.
The SCOTUSblog case page has links to the cert. petition and amicus briefs filed to date.
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