Fenwick Employment Brief - June 2013: U.S. Supreme Court Upholds Classwide Arbitration, Finding Arbitrator “Arguably” (Even if Incorrectly) Construed Agreement

by Fenwick & West LLP
Contact

In Oxford Health Plans LLC v. Sutter, the United States Supreme Court affirmed an arbitral decision allowing the plaintiff to proceed with classwide arbitration even in the absence of express language to that effect in the arbitration clause. The decision follows the Court’s trend in recognizing and enforcing the bargain two parties reach through an arbitration agreement, including the finality of arbitral rulings subject to very limited review.

In reaching its decision, the Court recognized the limited role courts play in reviewing arbitral rulings and awards under Section 10(a)(4) of the Federal Arbitration Act (“FAA”): “the sole question for us is whether the arbitrator (even arguably) interpreted the parties’ contract, not whether he got its meaning right or wrong.” Here, although the arbitration clause was silent on the subject, the arbitrator concluded that a class action “is plainly one of the possible forms of civil action that could be brought in court” such that “on its face, the arbitration clause . . . expresses the parties’ intent that class arbitration be maintained.” The Court refused to vacate that conclusion: “So long as the arbitrator was arguably construing the contract — which this one was — a court may not correct his mistakes under [the FAA]. …The arbitrator’s construction holds, however good, bad, or ugly.”

The Court’s general deference to the arbitral decision is founded in the concept that the parties “bargained for” the arbitrator’s construction “and so far as the arbitrator’s decision concerns the construction of the contract, the courts have no business overruling him because their interpretation of the contract is different from his.” That deference, shown through a series of decisions giving parties increased latitude to design the terms of arbitration and increased enforcement of that bargain, stands in stark contrast to the California Supreme Court’s continued scrutiny and attempts to reign in arbitration agreements, particularly in the consumer and employment contexts, at the state level. Further developments from both courts are sure to come.

As a practical matter, this decision provides a powerful example of the fact that arbitrations have the potential for the full range of “good, bad, or ugly” outcomes. In this instance, the arbitrator allowed the plaintiff to seek classwide arbitration over Oxford’s strenuous objections that such class treatment was never the parties’ intent. While the Court did not take a position — either way — on the arbitrator’s construction of the arbitration clause, the outcome certainly begs the question of what parties should do to avoid Oxford’s predicament. An obvious option would be to expressly disallow classwide arbitration. That strategy, however, invokes other considerations, especially in the employment context in California: Would the disallowance operate as a waiver of class (or even representative) actions generally or would the parties retain the right to bring such actions in court? Would such a waiver violate public policy or otherwise be unconscionable? There is much debate over these issues, and the “right” answer for any organization is neither crisp nor clear; employers should tread cautiously in this area, with appropriate guidance from legal counsel.

Written by:

Fenwick & West LLP
Contact
more
less

Fenwick & West LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.