Supreme Court To Address Class Arbitration Again In Oxford Health Plans

Three years ago, in the first of a series of decisions addressing class arbitration, the United States Supreme Court held in Stolt-Nielsen, S.A. v. AnimalFeeds International Corp. 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." 130 S. Ct. 1758, 1775 (2010) (emphasis in original). On February 27, 2013, the Supreme Court heard oral argument in American Express Co. v. Italian Colors Restaurant, No. 12-133, on whether the Federal Arbitration Act permits courts to invalidate arbitration agreements containing class action waivers. On March 25, 2013, the Supreme Court will hear oral argument in another case involving class arbitration, Oxford Health Plans LLC v. Sutter, No. 12-135, and have the opportunity to revisit a question facing lower courts since Stolt-Nielsen: In what circumstances, if any, can an arbitration agreement implicitly include an agreement to engage in class arbitration?

Stolt-Nielsen—often cited by claimants and respondents alike—identified problems that can arise when an arbitration agreement does not address class arbitration. When parties agree to arbitrate, they "forgo the procedural rigor and appellate review of the courts in order to realize the benefits of private dispute resolution." Id. However, the Supreme Court acknowledged that this trade-off—which often serves both parties' interests in one-on-one disputes—does not translate well to disputes involving a putative class of claimants: "the relative benefits of class-action arbitration are much less assured, giving reason to doubt the parties' mutual consent to resolve disputes through class-wide arbitration." Id. In AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1752 (2011), the Court continued to voice concern about class arbitration, observing that "arbitration is poorly suited to the higher stakes of class litigation." Ultimately, Stolt-Nielsen held that "an implicit agreement to authorize class-action arbitration ... is not a term that the arbitrator may infer solely from the fact of the parties' agreement to arbitrate," but noted that the facts presented "no occasion to decide what contractual basis may support a finding that the parties agreed to authorize class-action arbitration." 130 S. Ct. at 1775, 1776 n.10.

Stolt-Nielsen requires "a contractual basis for concluding that a party agreed" to class arbitration. 130 S. Ct. at 1775 (emphasis in original). Stolt-Nielsen does not suggest that agreement to class arbitration can be inferred when an arbitration agreement is silent on the subject. Nonetheless, divining what constitutes a "contractual basis" for concluding that parties agreed to class arbitration has divided state and federal courts across the country. A stark example of this division appears in the Third Circuit. In affirming the validity of an arbitration agreement and compelling the parties to arbitrate their dispute, a Third Circuit panel held that "silence regarding class arbitration generally indicates a prohibition against class arbitration." Quilloin v. Tenet HealthSystem Philadelphia, Inc., 673 F.3d 221, 232 (3d Cir. 2012). Less than three weeks later, in the case about to be argued to the Supreme Court, another Third Circuit panel affirmed an arbitrator's decision to allow class arbitration where the arbitrator's ruling "unquestionably relied on the breadth of the arbitration agreement," which all parties agreed did not mention class arbitration. Sutter v. Oxford Health Plans LLC, 675 F.3d 215, 224 (3d Cir.), cert. granted, 133 S. Ct. 786 (Dec. 7, 2012).

Other courts have required affirmative indication of an intent to allow class arbitration. For instance, the Fifth Circuit has interpreted Stolt-Nielsen to mean that "the mere fact that the parties would otherwise be subject to class action in the absence of an arbitration agreement is not a sufficient basis to conclude that they agreed to class arbitration when they entered into an arbitration agreement." Reed v. Fla. Metro. Univ., Inc., 681 F.3d 630, 643 (5th Cir. 2012). The Eleventh Circuit has similarly concluded that "nonconsensual class arbitration" is "prohibited under Stolt-Nielsen." Cruz v. Cingular Wireless, LLC, 648 F.3d 1205, 1213 (11th Cir. 2011).

But the Second Circuitwhich hears more arbitration cases than any other Circuitupheld an arbitrator's...