Two years ago, the Supreme Court held “that a party may not be compelled under the [Federal Arbitration Act] to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so.” Stolt-Nielsen v. AnimalFeeds International Corp., 130 S. Ct. 1758, 1775 (2010) (emphasis in original). But the Court expressly declined at the time “to decide what contractual basis may support a finding that the parties agreed to authorize class-action arbitration.” Today, the Supreme Court granted review in Oxford Health Plans LLC v. Sutter, No. 12-135, to resolve a circuit split over what counts—consistent with the FAA—as an agreement to authorize class arbitration. This issue is important to businesses that seek to enforce arbitration agreements in the context of putative class actions when those agreements do not expressly address class arbitration.
Petitioner Oxford Health Plans LLC entered into a professional services contract with respondent Sutter, a physician, in 1986. The contract contained an arbitration provision that states that “[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 . . .” (emphasis added). In 2002, Dr. Sutter filed a putative class action against Oxford concerning its practices in processing reimbursement claims. Oxford successfully moved to compel arbitration under the agreement. Before the arbitrator, the parties disputed whether their agreement permitted class arbitration. The arbitrator concluded, among other things, that the broad language in the agreement authorized class arbitration because the language “any civil action” would include class action suits. The district court confirmed the arbitration award, and the Third Circuit affirmed, concluding: “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.”
The Third Circuit’s decision took an approach similar to the one followed by the Second Circuit in Jock v. Sterling Jewelers Inc., 646 F.3d 114 (2d Cir. 2011), cert. denied, 132 S. Ct. 1742 (2012). In Jock, the Second Circuit held that judicial review of the arbitrator’s decision was limited to determining if the question whether the agreement authorized class arbitration was properly presented to the arbitrator. On the other hand, the Fifth Circuit has reviewed and rejected an arbitrator’s determination that the parties intended to permit class arbitration in an agreement that did not refer to the subject. Reed v. Florida Metro. Univ., Inc., 681 F.3d 630 (5th Cir. 2012). Specifically, the Fifth Circuit held that language in an arbitration clause covering “any dispute” and making available “any remedy” failed to evidence the parties’ agreement to authorize class arbitration. The Fifth Circuit also pointed to the Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), explaining that under Concepcion and Stolt-Nielsen, “[w]ithout a contractual or other legal basis for class arbitration, an arbitrator has no authority to order the parties to submit to class arbitration.”
In tandem with American Express Co. v. Italian Colors Restaurant, No. 12-133, Oxford Health Plans will afford the Court the opportunity to continue providing the lower courts with guidance on the intersection of class actions and arbitration agreements.
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