Supreme Court Weighs In Again On Class Arbitration In Oxford Health Plans And Italian Colors

In the past two weeks, the Supreme Court announced two major class arbitration decisions. In Oxford Health Plans LLC v. Sutter, handed down on June 10, the Court unanimously held that an arbitrator does not exceed his powers under the Federal Arbitration Act when he decides, with the parties' agreement, whether a contract authorizes class arbitration. Given the limited review of arbitrators' decisions under § 10(a)(4) of the FAA, the Court refused to vacate the arbitrator's decision to allow class arbitration, even though the arbitration agreement was silent on the issue. On June 20, in American Express Co. v. Italian Colors Restaurant, a majority of the Court held that a contractual waiver of class arbitration is enforceable under the Federal Arbitration Act, even where the costs of individual arbitration would exceed the potential recovery should the claimant prevail. As a result, Italian Colors and other merchants can pursue their antitrust claims in individual arbitrations or not at all. Although one of these opinions allows a class arbitration to proceed while the other mandates individual arbitrations, the decisions, read together, provide guidance for companies that wish to avoid class arbitration.

Oxford Health Plans LLC v. Sutter

Background. In 1998, Ivan Sutter, a New Jersey doctor, signed a contract with Oxford Health Plans that gave Sutter preferred access to Oxford's members in exchange for his providing services to those members at prescribed rates. See Sutter v. Oxford Health Plans LLC, 675 F.3d 215, 217 (3d Cir. 2012). The contract required the parties to arbitrate any disputes, but "[n]either the arbitration clause nor any other provision of the agreement makes express reference to class arbitration." Id. In 2002, Sutter filed suit, accusing Oxford of "improperly denying, underpaying, and delaying reimbursement of physicians' claims for the provision of medical services." Id. The trial court granted Oxford's motion to compel arbitration, and the parties "agreed that the arbitrator should decide whether their contract authorized class arbitration." Oxford Health Plans LLC v. Sutter, No. 12-135, slip op. at 2 (U.S. June 10, 2013). The arbitrator ruled that the contract authorized class arbitration. Id. Oxford challenged that ruling in court but lost, both in the district court and on appeal. While the arbitration was proceeding, the Supreme Court decided Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 559 U.S. 662, 684 (2010), which vacated an arbitration panel's decision to allow class arbitration on the basis that "a party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so." Citing Stolt-Nielsen, Oxford asked the arbitrator to reconsider his earlier ruling to allow class...