Tag Archives: Classwide Arbitration

Unanimous Supreme Court Upholds Arbitrator’s Interpretation of Contract Allowing for Classwide Arbitration

English: Elena Kagan, Associate Justice of the...

English: Elena Kagan, Associate Justice of the Supreme Court of the United States (Photo credit: Wikipedia)

The U.S. Supreme Court today unanimously affirmed an arbitrator’s interpretation of an arbitration clause to permit class proceedings.  Oxford Health Plans LLC v. Sutter, No. 12-135, 569 U.S. __ (June 10, 2013).  The Court considered whether an arbitrator, who found that the parties’ contract provided for class arbitration, “exceeded [his] powers” under §10(a)(4) of the Federal Arbitration Act, 9 U. S. C. §1 et seq.  Justice Kagan, delivering the opinion of the Court and citing Stolt-Nielsen S. A. v. AnimalFeeds Int’l Corp., 559 U. S. 662, 684 (2010), concluded that the arbitrator’s decision survives the limited judicial review §10(a)(4) allows.

The arbitration clause at issue provided as follows:

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.

Slip Op. at 2.

The Supreme Court in Oxford Health Plans LLC distinguished Stolt-Nielsen:

The contrast with this case is stark. In Stolt-Nielsen, the arbitrators did not construe the parties’ contract, and did not identify any agreement authorizing class proceedings. So in setting aside the arbitrators’ decision, we found not that they had misinterpreted the contract, but that they had abandoned their interpretive role. Here, the arbitrator did construe the contract (focusing, per usual, on its language), and did find an agreement to permit class arbitration. So to overturn his decision, we would have to rely on a finding that he misapprehended the parties’ intent. But §10(a)(4) bars that course: It permits courts to vacate an arbitral decision only when the arbitrator strayed from his delegated task of interpreting a contract, not when he performed that task poorly. Stolt-Nielsen and this case thus fall on opposite sides of the line that §10(a)(4) draws to delimit judicial review of arbitral decisions.

Id. at 7.

The Court decided that Oxford must live with its choice of arbitral forum and the arbitrator’s construction of the contract, “however good, bad, or ugly”:

So long as the arbitrator was “arguably construing” the contract—which this one was—a court may not correct his mistakes under §10(a)(4). Eastern Associated Coal, 531 U. S., at 62 (internal quotation marks omitted). The potential for those mistakes is the price of agreeing to arbitration. As we have held before, we hold again: “It is the arbitrator’s construction [of the contract] which was bargained for; and so far as the arbitrator’s decision concerns construction of the contract, the courts have no business overruling him because their interpretation of the contract is different from his.” Enterprise Wheel, 363 U. S. at 599. The arbitrator’s construction holds, however good, bad, or ugly.

Id. at 8 (emphasis supplied).

By CHARLES H. JUNG

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