Last week, Oxford Health Plans filed its opening brief with the Supreme Court in Oxford Health Plans LLC v. Sutter. As we noted in an earlier post, even though Sutter is not an employment case, the Supreme Court’s decision will have an important effect on whether employers that have entered into arbitration agreements with their employees containing broad language requiring “all disputes” to be submitted to arbitration but no reference to class proceedings can be required to participate in “class arbitration” of employment claims.
Following the Supreme Court’s Stolt-Nielsen and Concepcion decisions, many observers believed that employers were already protected against being forced into class arbitration without clear contractual language authorizing it. Those decisions established that because class arbitration and bilateral arbitration limited to the parties of the agreement are profoundly different, a party cannot be required to participate in class arbitration unless the party has affirmatively agreed to do so.
Sutter addresses the issue whether an arbitrator may properly require class arbitration without either express contractual language providing for such a procedure or clear extrinsic (“parol”) evidence that the parties intended such a result, a question that Sutter argues was left unanswered in Stolt-Nielson. In Sutter, the plaintiff persuaded an arbitrator to interpret the arbitration clause in his agreement with Oxford Health as an agreement to engage in class arbitration. The clause reads as follows: “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 . . . ” Oxford Health argued to a district court judge and then to the Third Circuit Court of Appeals that the arbitrator’s interpretation is plainly wrong because the arbitration agreement says nothing at all about class arbitration. Both courts, however, rejected that argument, not because they agreed with the arbitrator’s decision, but because they deferred to the arbitrator’s interpretation, which read into the arbitration agreement an intent by the parties to include class arbitration.
In its Supreme Court brief, Oxford Health argues that the arbitrator’s interpretation of its arbitration clause to authorize class arbitration is so indefensible that it does not meet the requirement in Stolt-Nielsen that there be a contractual basis for finding that the parties agreed to class arbitration. “If the arbitrator’s reasoning here was sufficient to [satisfy Stolt-Nielsen],” Oxford Health argues, “then nothing short of a conclusive statement . . . precluding class arbitration . . .would permit a court to vacate an order imposing class proceedings.” (Brief for Petitioner at 34.)
Oxford Health also argues that the arbitrator’s decision that the parties agreed to class arbitration should have been subject to “meaningful review” by the district court. (Brief at 34-39.) The absence of meaningful court review, Oxford Health warns in its brief, would create two dangers. First, some arbitrators believe that if an employee’s arbitration agreement precludes a class action in court, it would be unfair to prevent the employee from pursuing class arbitration. Without real judicial review of their interpretations, arbitrators who feel this way may be tempted to interpret almost any arbitration agreement as an agreement to class arbitration. Oxford Health suggests that its arbitrator fell into this camp and that the interpretation of its arbitration clause as authorizing class arbitration was just a pretext for circumventing Stolt-Nielsen. Second, Oxford Health argues, arbitrators will often have a financial interest in whether an arbitration is a short, inexpensive individual proceeding or a high-stakes class arbitration that could last for years. Judicial oversight of their decisions about whether to allow class arbitrations is essential, Oxford Health argues, to ensure public confidence that the decisions are fair.
In a footnote, Oxford Health makes an even more fundamental argument: it suggests that courts should determine for themselves whether the parties agreed to class arbitration. (Brief at 38 n.9.) Whether an arbitration agreement permits class arbitration, Oxford Health argues, is not an ordinary issue of contract interpretation as to which courts generally defer to arbitrators. It is more like whether an arbitration agreement covers a particular type of dispute or whether the parties agreed to arbitrate at all -- issues that courts need to decide for themselves or review closely.
In summary, according to Oxford Health, the District Court and the Third Circuit were wrong to overlook the flimsiness of the arbitrator’s interpretation of its arbitration clause. A ruling by the Supreme Court in Oxford Health’s favor would close the door on efforts by plaintiffs’ counsel, sometimes against the individual interests of their clients, to expand bilateral arbitration as anticipated by the parties to broad class-wide proceedings ill-suited for arbitration. In the context of wage and hour claims, this would also eliminate the risk that FLSA collective actions could be pursued as class arbitrations without the express agreement of the parties.
The Plaintiff-Appellee’s brief is scheduled to be filed on February 21, 2103. In addition to Oxford Health’s brief, several amicus briefs were also filed last week (Chamber of Commerce), (Pacific Legal Foundation), (Voice of Defense Bar). The Supreme Court is scheduled to hear argument on March 25, 2013. A decision is expected by the end of June. We will continue to keep our readers current on developments in this case as they occur.