Once More unto the Breach: The U.S. Supreme Court Takes Another Case Regarding Class-Wide Arbitration

The United States Supreme Court recently announced that it will return to the trenches of arbitration jurisprudence. Specifically, the Court granted certiorari in Oxford Health Plans LLC v. Sutter, No. 12-135 (U.S.), to review whether arbitrators exceed their powers in contravention of the Federal Arbitration Act (“FAA”) by ordering class-wide arbitration based solely on broad contractual language “requiring arbitration of any dispute arising under the[] contract.” The Court had left this question unresolved in its landmark decision in Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 559 U.S. ---, 130 S. Ct. 1758 (2010).

In Stolt-Nielsen, the Supreme Court held that arbitrators and courts cannot impose class-wide arbitration where an arbitration agreement is silent on the issue because “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.” Because the Stolt-Nielsen parties had stipulated that their arbitration agreement was in fact “silent” on the issue of class-wide arbitration, the Court did not reach the question of what constitutes contractual “silence” effectively barring class-wide arbitration.

The lower federal courts have taken divergent approaches to answering that question. For instance, in Sutter v. Oxford Health Plans LLC, the case the Supreme Court is to review, neither the arbitration agreement nor the overall contract between the parties made “express reference to class arbitration.” Nevertheless, the arbitrator interpreted the language requiring “any dispute arising under this Agreement” to be “submitted to final and binding arbitration” as including class actions. On appeal, the United States Court of Appeals for the Third Circuit affirmed because although “[a]n arbitrator may exceed his powers by ordering class arbitration without authorization” and “lacks the power to order class arbitration unless there is a contractual basis for concluding that the parties agreed to that procedure,” the arbitrator “articulate[d] a contractual basis for his decision to order class arbitration” and “relied upon the breadth of the arbitration agreement, [which reliance] Stolt-Nielsen does not proscribe.”

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