Legal Alert: Supreme Court Upholds Arbitrator's Authority to Interpret Agreement to Permit Class Proceedings

“The arbitrator’s construction holds, however good, bad, or ugly.” This was the succinct message delivered on June 10, 2013, by a unanimous U.S. Supreme Court in Oxford Health Plans LLC v. Sutter, No. 12-135, which challenged an arbitrator’s determination that an agreement between two private parties permitted class arbitration. Although the Court expressed doubt about whether the arbitrator’s decision was correct, the justices agreed that “the courts have no business overruling him because their interpretation of the contract is different from his.”

In Sutter, Petitioner Oxford Health Plans LLC entered into an employment agreement with Respondent, Dr. Sutter, that contained an arbitration provision stating: “[n]o civil action concerning any dispute arising under this Agreement shall be instituted before any court, and all such disputes shall be subject to final and binding arbitration.” When Sutter filed a putative class action, Oxford successfully moved to compel arbitration, relying on the agreement’s arbitration provision. The parties disputed whether the agreement permitted class arbitration. The issue was submitted to the arbitrator for resolution. The arbitrator concluded, among other things, that the broad language in the agreement authorized class arbitration because the language “any civil action” includes class actions. Oxford challenged the decision in court, but both the district court and the Third Circuit deferred to the arbitrator’s interpretation. The Third Circuit stated: “We are satisfied that the arbitrator endeavored to interpret the parties’ agreement within the bounds of the law, and we cannot say that his interpretation was totally irrational.” Sutter v. Oxford Health Plans LLC, 675 F.3d 215, 225 (3d Cir. 2012).

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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