Despite all the predictions that class arbitration would be a thing of the past in the aftermath of the Supreme Court’s decision in Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 130 S. Ct. 1758 (2010), courts continue to distinguish Stolt-Nielsen and allow class arbitration. In Sutter v. Oxford Health Plans LLC, 2012 WL 1088887 (3d Cir. Apr. 3, 2012), the Third Circuit recently distinguished Stolt-Nielsen to allow class arbitration in the face of a broad arbitration clause which an arbitrator read to permit class arbitration despite no specific reference to it.
In Sutter, plaintiff alleged that Oxford improperly denied, underpaid or delayed the reimbursement of physicians’ claims for medical services. The complaint sounded in breach of contract and various violations of New Jersey law. Oxford moved to compel arbitration and the question of whether class arbitration was permissible eventually found its way to the arbitrator. Looking at the arbitration clause of the contract, the arbitrator determined that the clause was broad enough to include class arbitration. Indeed, were it not to permit class arbitration, the clause would make it impossible to bring a class action in any forum.
Oxford moved to vacate the arbitral award, contending that under Stolt-Nielsen, if an arbitration clause is silent on the issue of class arbitration, an arbitrator cannot infer the right to class arbitration. The Third Circuit began with the proposition that “[a]n arbitrator may exceed his powers by ordering class arbitration without authorization” and that under Stolt-Nielsen, “an arbitrator lacks the power to order class arbitration unless there is a contractual basis for concluding that the parties agree to that procedure.” The Third Circuit continued to distinguish Stolt-Nielsen on factual grounds because in that case, among other things, the parties had stipulated that they had not reached agreement on class arbitration, and the “arbitrators were bound to conclude that the parties intended neither to authorize nor to preclude class arbitration.” The Third Circuit concluded that Stolt-Nielsen “did not establish a bright line rule that class arbitration is allowed only under an arbitration agreement that incants ‘class arbitration’ or otherwise expressly provides for aggregate procedures.” Thus, where the arbitration clause was so broad as to include class arbitration, the Third Circuit held that “where, as here, the parties’ intent with respect to class arbitration is in question, the breadth of their arbitration agreement is relevant to the resolution of that question.” The Court thus affirmed the District Court’s denial of Oxford’s motion to vacate the arbitrator’s decision to authorize class arbitration.
The Sutter decision follows on the heels of the Second Circuit’s decision in In re American Express Merchants Litigation, in which the Second Circuit declined to enforce a class action waiver in an arbitration clause that would have prevented plaintiffs from having the opportunity to vindicate their statutory rights. While the Supreme Court’s recent decisions on class arbitration, including Stolt-Nielsen and AT&T Mobility v. Concepcion, for example, did not foreclose class arbitration, the emerging case law is beginning to provide a roadmap for companies to understand how to limit such arbitration. Sutter is a lesson learned in the drafting of arbitration clauses – they must be as precise as possible. Seeming “silence” on the issue of class arbitration will not prevent a court from applying traditional principles of contract construction to infer the intent of the parties.