Supreme Court Upholds Arbitrator’s Decision Regarding Class Arbitration

Court holds that an arbitrator did not exceed his powers under the Federal Arbitration Act in finding that class procedures were authorized because the parties agreed that the arbitrator could decide the question.

On June 10, the U.S. Supreme Court issued a unanimous decision in Oxford Health Plans LLC v. Sutter, ruling that an arbitrator's finding that a contract allowed for class arbitration was a proper exercise of his powers under the Federal Arbitration Act (FAA) and could not be disturbed by the Court.1 Critically, the Court found that Oxford had agreed that the arbitrator should determine whether the contract authorized class procedures, and, therefore, the Court did not address whether that question was a "question of arbitrability" that is presumptively for the court to decide or review on a de novo basis. Instead, in light of the parties' agreement that the arbitrator was vested with the authority to answer the question of class arbitration, the Court concluded that the arbitrator's decision could only be vacated "when the arbitrator strayed from his delegated task of interpreting a contract, not when he performed that task poorly."2

Background

Oxford Health Plans concerned a primary care physician agreement (Agreement) entered into between Oxford Health Plans, a health insurance company, and Dr. John Sutter, a pediatrician. Under the Agreement, Sutter was to provide medical care to members of Oxford's network, and Oxford was to pay Sutter for those services at certain prescribed rates. The Agreement contained the following arbitration clause:

No civil action concerning any dispute arising under this Agreement shall be instituted before any court, and all such disputes shall be submitted to final and binding arbitration in New Jersey, pursuant to the rules of the American Arbitration Association with one arbitrator.

Several years after entering into the Agreement, Sutter sued Oxford on behalf of a proposed class of other New Jersey physicians under the same Agreement, alleging that Oxford had failed to make full and prompt payment to the physicians. After Oxford successfully moved to compel arbitration, the parties agreed that the arbitrator should decide whether the Agreement authorized class arbitration. The arbitrator ultimately found that the Agreement authorized class arbitration, prompting Oxford to move to vacate that decision in federal district court. The district court denied the motion, and the U.S. Court of Appeals for...