Following the U.S. Supreme Court’s 2010 decision in Stolt-Nielsen S.A. v. AnimalFeeds International Corp., most experts believed that class arbitration was virtually impossible. Stolt-Nielsen held that class arbitration was possible only if the parties specifically agreed to allow it. Since essentially no arbitration agreements expressly include an authorization for class arbitration – they are, after all, written by companies, not consumers – class arbitration was considered extinct.
But recently in Oxford Health Plans, LLC v. Sutter, the US. Supreme Court found that an arbitrator did not exceed his powers when he allowed a class. An arbitrator had ruled that the arbitration clause sent to arbitration the same class of disputes that it barred the parties from bringing in court, which includes a class action. Therefore, the arbitrator reasoned, class arbitration was allowed.
Distinguishing Stolt-Nielsen, the Court said it overturned the arbitral decision in that case not because the arbitrator misinterpreted the contract, but because he failed to interpret the contract. By contrast, in Oxford Health, the arbitrator had interpreted the contract. And so long as he was arguably construing the contract, a court cannot correct his mistakes under the Federal Arbitration Act, however good, bad or ugly.
But Oxford Health did not completely resolve the class-arbitration debate. The parties in that action agreed that the arbitrator should decide whether the contract authorized class procedures. The Court has never decided whether the availability of class arbitration is a question of arbitrability, which would presumptively be for a court to decide. If it is, absent evidence that the parties wanted an arbitrator to resolve the dispute, court review of an arbitrator’s decision on class arbitration would be de novo.
Contact us today for a free legal consultation with an experienced attorney.
Fields marked *may be required for submission.
If you would like to subscribe to the Jere Beasley Report digital edition, simply visit our Subscriptions page and provide the necessary information or call us at 800-898-2034.
Attorney Advertising - Prior results do not guarantee a similar outcome.