Oxford v. Sutter: With Narrow Interpretation of Stolt-Nielsen and Deference to Arbitrator, Unanimous Supreme Court Revives Prospect of Class Arbitration

With the admonition that “this is the price for agreeing to arbitration,” Justice Elena Kagan’s unanimous majority opinion in the much-anticipated Oxford v. Sutter has affirmed the Third Circuit’s deference, pursuant to Section 10(a)(4) of the Federal Arbitration Act (FAA), to an arbitrator’s conclusion that the parties had contractually agreed that their disputes could be adjudicated on a class-wide basis, in arbitration. See Oxford Health Plans LLC v. Sutter, No. 12–135, slip op. at 1-4 (U.S. June 10, 2013) (available here). While undeniably favorable in holding out the possibility of some class actions being salvaged, albeit in arbitration, the most prominent consequence of the Oxford decision is likely to be that those companies seeking to avoid class actions will be more assiduous in categorically proscribing class treatment in the arbitration agreements they extract from employees and consumers.

Oxford arose when doctors sued their insurance company over reimbursements, and the insurer moved to compel arbitration. Slip op. at 2. After the arbitrator initially found the parties had agreed to class-wide arbitration, the insurer sought reconsideration on the basis of the Supreme Court’s Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010) decision, the most expansive reading of which has been that arbitrators’ referral to class-wide arbitration must be vacated when arbitrators conclude in favor of class arbitration on the basis of anything short of an unambiguous, overt, and mutual consent to use class arbitration. See, e.g., Reed v. Florida Metropolitan Univ., Inc., 681 F.3d 630 (5th Cir. 2012). Instead, Oxford largely adopts a narrower reading of Stolt-Neilsen, embodied in decisions like Jock v. Sterling Jewelers, Inc., 646 F.3d 113 (2d Cir. 2011), which focus on the quite inelastic range of judicial review afforded by the quite clear provisions of Section 10(a)(4) of the FAA and have found an intent to use class arbitration even where the parties’ arbitration agreement does not expressly consent to, or even reference, class arbitration.

Oxford turns entirely on the scope of judicial review under Section 10(a)(4). Under Oxford, there is little or no room for second-guessing the arbitrator’s interpretation provided the arbitrator has done a plausible impersonation of contract interpretation. Though seemingly an aggressive jurisprudential gesture, that Oxford is a unanimous decision is perhaps best explained by how little room Section 10(a)(4) leaves for cogent interpretation other than that adopted in the Kagan opinion concerning the deference owed arbitrators under Section 10(a)(4): “[C]onvincing a court of an arbitrator’s error—even his grave error—is not enough. So long as the arbitrator was ‘arguably construing’ the contract—which this one was—a court may not correct his mistakes. . . . The potential for those mistakes is the price of agreeing to arbitration.” Slip op. at 8.