Class action and arbitration issues are at the center of the Supreme Court’s docket this term. Oxford Health Plans LLC v. Sutter is the latest case involving the intersection of those issues. Oxford, which will be argued on March 25, follows on the heels of American Express Co. v. Italian Colors Restaurant, which addresses the enforceability of an arbitration agreement that (as interpreted) precludes parties from proceeding on a class-wide basis. Oxford, by contrast, asks whether, consistent with the Federal Arbitration Act, an arbitration agreement that does not expressly address class arbitration can nonetheless be interpreted to authorize that procedure.
Nearly three years ago, the Supreme Court explained “that a party may not be compelled under the [Federal Arbitration Act] to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so.” Stolt-Nielsen v. AnimalFeeds International Corp. But at the time, the court expressly declined “to decide what contractual basis may support a finding that the parties agreed to authorize class-action arbitration.” That question is now directly presented to the court in Oxford.
The petitioner, Oxford Health Plans LLC, entered into a professional services contract with the respondent, a physician named John Sutter, in 1986. The contract contained an arbitration provision that states that “no civil action concerning any dispute arising under this Agreement shall be instituted before any court, and all such disputes shall be subject to final and binding arbitration…”. In 2002, Sutter sued Oxford in a putative class action attacking the manner in which Oxford processed reimbursement claims. Oxford obtained a court order compelling Sutter to arbitrate under the agreement, but the arbitrator concluded that the agreement’s language authorized class arbitration because the phrase “any civil action” would include class action lawsuits. The district court confirmed the arbitration award, and the 3rd Circuit affirmed, concluding: “We are satisfied that the arbitrator endeavored to interpret the parties’ agreement within the bounds of the law, and we cannot say that his interpretation was totally irrational.”
The 3rd Circuit’s approach was similar to that of the 2nd Circuit, but in conflict with a decision of the 5th Circuit, holding that language in an arbitration clause covering “any dispute” and making available “any remedy” did not amount to party consent to class arbitration. Reed v. Florida Metro. Univ., Inc. In addition, the 5th Circuit cited AT&T Mobility LLC v. Concepcion, , explaining that under Concepcion and Stolt-Nielsen, “without a contractual or other legal basis for class arbitration, an arbitrator has no authority to order the parties to submit to class arbitration.”
The Supreme Court is now poised to resolve this conflict in Oxford. For some businesses—especially ones that plan to enter into arbitration agreements in the future—the immediate practical significance of Oxford may be limited, because (at least looking ahead) parties to arbitration clauses can avoid uncertainty over class arbitration through careful drafting. But many businesses are parties to already-existing arbitration agreements that do not expressly discuss class arbitration—understandable, given that many such agreements were drafted at a time when class arbitration was a virtual unknown. Oxford may help determine whether such businesses can be dragged, kicking and screaming, into class arbitrations when those businesses surely never intended (or anticipated) that they had agreed to such a procedure.