Supreme Court Defers to Arbitrator on Class Arbitration

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On June 10, 2013, the United States Supreme Court unanimously affirmed in Oxford Health Plans v. Sutter an arbitrator's decision to allow class arbitration based on contractual language in a physician's dispute with a health insurance company.  Sutter, a pediatrician, contracted with petitioner Oxford Health Plans (Oxford) to provide services to members of Oxford’s network.   Sutter later filed suit against Oxford in New Jersey Superior Court on behalf of himself and a proposed class of other New Jersey physicians under contract with Oxford, alleging that Oxford failed to pay the physicians in full.  Oxford moved to compel arbitration of Sutter’s claims, relying on broad language in the physicians’ contracts which required arbitration but did not explicitly mention class arbitration. 

The state court granted Oxford’s motion, thus referring the suit to arbitration.  The parties agreed that the arbitrator should decide whether their contract authorized class arbitration, and the arbitrator determined that it did.  Oxford filed a motion in federal court to vacate the arbitrator’s decision on the ground that he had “exceeded [his] powers” under §10(a)(4) of the Federal Arbitration Act (FAA).  The District Court denied the motion, and the Court of Appeals for the Third Circuit affirmed.  After the Supreme Court held in another case that an arbitrator may employ class procedures only if the parties have authorized them, the arbitrator still reaffirmed his conclusion that the physician contract approved class arbitration.  Oxford renewed its motion to vacate that decision under §10(a)(4).  The District Court again denied the motion, and the Third Circuit again affirmed.  

The Supreme Court granted cert and affirmed the decision of the Third Circuit, holding that the arbitrator’s decision survives the limited judicial review allowed by §10(a)(4) of the FAA.  The Court determined that the sole question on judicial review is whether the arbitrator interpreted the parties’ contract, not whether he construed it correctly.  The Supreme Court also found it significant that the parties had agreed for the arbitrator (instead of a court) to decide the question of whether class arbitration was authorized.  Acting pursuant to that agreement, the arbitrator reviewed the contract and found the broad language to permit class proceedings.  The Supreme Court found that the arbitrator did not exceed his powers under §10(a)(4).  The Supreme Court’s decision may be read here.

Reporter, Christina A. Gonzalez, Houston, +1 713 276 7340, cagonzalez@kslaw.com.

Topics:  Arbitration, Class Arbitration, Contract Interpretation, Federal Arbitration Act, Oxford Health, Oxford Health v Sutter, SCOTUS

Published In: Alternative Dispute Resolution (ADR) Updates, Civil Procedure Updates, General Business Updates, Health Updates

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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