On June 10, 2013, the Supreme Court issued an arbitration decision underscoring the importance of including express class waivers in arbitration agreements. In a unanimous decision, the Supreme Court upheld an arbitrator’s ruling that an arguably ambiguous arbitration provision permitted class arbitration. Oxford Health Plans, LLC v. Sutter, No. 12-135, 2013 WL 2459522, 569 U.S. ___ (2013).

Factual Background

In Oxford Health, a doctor sued health insurance company Oxford Health Plans (“Oxford”) on behalf of himself and a proposed class of other similarly situated medical providers over a payment dispute. The trial court sent the matter to arbitration and, importantly, the parties agreed that the arbitrator should decide whether their contract authorized class arbitration. Id. at *2. The arbitration provision broadly provided that “[n]o 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.” The arbitrator interpreted this provision to permit class arbitration. Id. at *2.

Oxford moved to vacate the arbitrator’s decision on the ground that, contrary to the Supreme Court’s holding in Stolt-Nielson S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 130 S. Ct. 1758, 176 L.Ed.2d 605 (2010), the arbitrator exceeded his authority under § 10(a)(4) of the Federal Arbitration Act by imposing class arbitration where no sufficient contractual basis existed. Oxford Health, at *3. The district court denied Oxford’s motion and the Third Circuit affirmed. Id.

The Supreme Court Decision

The Supreme Court unanimously affirmed, holding that the arbitrator did not act outside the scope of his powers. Id. Justice Kagan, writing for the Court, distinguished Stolt-Nielson, where the contract lacked any contractual basis for ordering class arbitration and the parties stipulated that they had never reached an agreement on class arbitration. Id. at *5. Here, on the other hand, the arbitrator exercised his delegated authority and interpreted the language of the contract to permit class arbitration. Id.

Significantly, because Oxford agreed that the arbitrator should determine whether the contract authorized class procedures, the issue of whether the arbitrator made a mistake in interpreting the agreement was not before the Court, and the “arbitrator’s construction holds, however good, bad, or ugly.” Id. at *6. The Court noted that that it would face a different issue if Oxford had argued that the availability of class arbitration was a question of arbitrability, in which case the Court could review the arbitrator’s determination de novo. Id. at *4 n.2.

What Oxford Health Means

The take away is simple–if you don’t want class arbitration, make sure the contract says so. Companies can proactively avoid the troubles in Oxford Health by including express class waivers with their arbitration agreements. Furthermore, if there is any question as to whether an arbitration agreement permits class relief, the company should refuse to agree to allow an arbitrator to decide the issue in order to allow a court to decide the issue or be willing to accept an arbitrator’s interpretation.