U.S. Supreme Court Declines to Vacate Arbitrator's Ruling Authorizing Class Arbitration

In Oxford Health Plans LLC v. Sutter, the United States Supreme Court held that under §10(a)(4) of the Federal Arbitration Act (FAA), an arbitrator's decision to authorize class arbitration would survive judicial review so long as the arbitrator had acted within his delegated duty when interpreting a contract.

In Oxford, Sutter, a doctor, entered into a contract with Oxford to provide medical services.  Sutter filed a putative class action in New Jersey Superior Court, alleging that Oxford failed to pay him and other physicians in a timely manner. Oxford moved to compel arbitration. The trial court granted the motion and the parties agreed to let an arbitrator determine whether the contract authorized class arbitration. When the arbitrator concluded that it did, Oxford filed a motion in federal court to vacate the decision, asserting that the arbitrator had acted beyond his scope of power under §10(a)(4) of the FAA. The District Court denied the motion and the Third Circuit affirmed, holding that that because both parties had contracted to allow an arbitrator to interpret whether the contract authorized class arbitration, the arbitrator did not exceed his powers under §10(a)(4) of the FAA. 

The Supreme Court affirmed. The Court agreed that a violation of §10(a)(4) of the FAA only occurs where an arbitrator imposes class arbitration with no contractual basis. Here, both parties had agreed to allow an arbitrator to construe the contract. Therefore, the arbitrator was acting in his scope of power when he interpreted the contract to authorize class arbitration. The Court clarified that unless the arbitrator had incorporated his “own notions of [economic] justice” and strayed from his task of interpreting the contract in the first place, the Court was not permitted to vacate his decision. 

Justice Alito, joined by Justice Thomas, concurred that the appellant’s motion to vacate should be denied, but only because the Court was not reviewing the arbitrator’s interpretation of the contract de novo. He reasoned that the arbitrator had improperly assumed that all parties had consented to submit to class arbitration, particularly when some of the members of the plaintiff class had been absent.

Editor's note: This article was co-authored by Jennifer Lien, a summer law clerk in the Firm's San Francisco office.

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