Oxford Health Plans, LLC, v. Sutter: Supreme Court Tells Company that Chose Arbitration: You Made Your Bed. Now Lie in It…With a Whole Class of Plaintiffs.

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Oxford Health Plans, LLC, v. Sutter: Supreme Court Tells Company that Chose Arbitration: You Made Your Bed. Now Lie in It…With a Whole Class of Plaintiffs.

Oxford Health Plans, LLC, v. Sutter: Supreme Court Tells Company that Chose Arbitration: You Made Your Bed. Now Lie in It…With a Whole Class of Plaintiffs.

Today, the United States Supreme Court surprised a lot of us. The Court acted unanimously, and with reasoning so unimpeachable and self-evident it can practically be described with a series of  truisms and proverbial expressions: Be careful what you wish for. What’s good for the goose is good for the gander. You cannot have your cake and eat it, too. Do not go for a second bite of the apple. And, perhaps most of all: you have made your bed, and now you must lie in it.

In Oxford HealthPlans, LLC, v. Sutter, Slip Op. (June 10, 2013), Justice Elena Kagan, writing for all nine justices, permitted an arbitrator to authorize class arbitration where the arbitration agreement did not contain express language referencing class action, clarifying Stolt-Nielsen v. AnimalFeeds Int’l Corp., 559 U.S. 662, 684 (2010).

The immediate significance of the decision cannot be overstated in cases where a broad general arbitration agreement exists without an explicit class action waiver. In such cases, arbitration may become a viable alternative for seasoned workers’ and consumer advocates bringing class claims. And, for companies faced with a potential class action, the outcome sends a clear message, reiterating what this blog has said repeatedly on the question:[1] be careful what you wish for!

In Oxford Health, the arbitration clause – like many companies’ – left much unsaid, simply stating:

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 in New Jersey, pursuant to the rules of the American Arbitration Association with one arbitrator.

Slip Op. at 2.

The arbitrator applied the contract’s terms and reasoned essentially that mutuality prevailed, i.e., that the sweeping clause “sent to arbitration ‘the same universal class of disputes’ that it barred the parties from bringing ‘as civil actions’ in court: The ‘intent of the clause’ was ‘to vest in the arbitration process everything that is prohibited from the court process.'”  Id. What’s good for the goose is good for the gander, in other words.

But, the company wanted to have its cake and eat it, too. It wanted to compel arbitration as a short-cut to sweep away class allegations, but then – when the arbitrator charged with enforcing its agreement found class allegations permissible – wanted a court to step in and say the arbitrator had exceeded his powers. The District Court and Third Circuit refused the invitation to do away with the principle of finality of arbitration awards.

Then came Stolt-Nielsen. The Supreme Court held there that “a party may not be compelled under the FAA [Federal Arbitration Act] to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so.” 559 U.S. at 684. Oxford went for a second bite of the proverbial apple, seeking a new decision.

The problem for Oxford was that in Stolt-Nielsen, the parties had stipulated that they never reached an agreement for class arbitration. Here, the arbitrator had found that the parties’ agreement to arbitrate all disputes naturally encompassed class allegations which otherwise would have been brought in court. Accordingly, the arbitrator held that Stolt-Nielsen was of no consequence. The company again sought judicial review, notwithstanding the fact that Oxford – not the plaintiffs – first sought to extricate the case from the courts.

The Third Circuit upheld the District Court, again rejecting the company’s attempt to seek vacatur under §10(a)(4) of the Federal Arbitration Act of the arbitrator’s decision permitting class arbitration. See 675 F.3d 215 (3rd Cir. 2012). The Third Circuit’s decision was in line with a Second Circuit decision, Jock v. Sterling Jewelers, Inc., 646 F.3d 113 (2nd Cir. 2011), which split with a Fifth Circuit decision, Reed v. Florida Metropolitan Univ., Inc., 681 F.3d 630 (5th Cir. 2012).

Today’s decision in Oxford Health sides with the Second and Third Circuits. The opinion is summarized as follows: “Oxford chose arbitration, and it must now live with that choice.” Slip Op. at 8. Having moved to compel arbitration, and twice asking the arbitrator to decide whether class arbitration was permissible under the arbitration clause, the company could not seek to vacate the arbitrator’s decision, which was based upon an arguable construction of the parties’ contract. Slip Op. at 4, 8 (quoting Eastern Associated Coal Corp. v. Mine Workers, 531 U.S. 57, 62 (2000)). Courts’ “sole question” when faced with a request to vacate an arbitral decision is “whether the arbitrator (even arguably) interpreted the parties’ contract, not whether he got its meaning right or wrong.” Slip Op. at 5.

Justice Samuel Alito’s concurrence, joined by Justice Clarence Thomas, goes a step farther, saying that they would “have little trouble concluding that [the arbitrator] improperly inferred” an agreement to class-wide arbitration into the arbitration clause referenced above, and essentially arguing for creation of an opt-in class action mechanism in arbitration, contrary to Fed.R.Civ.P. 23’s opt-out mechanism. Slip Op., concurrence at 2. Ultimately, though, the concurrence concedes that Oxford put the matter outside the Court’s prerogatives by submitting the question for decision to the arbitrator.

Two remaining questions after Oxford Health are: 1) whether companies (i.e., in the context of Bryan Schwartz Law, P.C.‘s work, employers) will more consistently implement arbitration agreements with explicit waivers of class claims, which they may have done after AT& T Mobility v. Concepcion, but perhaps felt they did not need to do, in light of Stolt-Nielsen; and 2) whether companies will successfully argue, as alluded to in Footnote 2 of Oxford Health (Slip Op. at 5), that the availability of class arbitration is a question of arbitrability – i.e., for courts to decide as part of their gatekeeper function?

Though the Supreme Court seemingly invites the latter as its arbitration case for the next term, it begs the question – why would employers be eager to pursue expensive private arbitration, but not be eager to have their chosen arbitrator decide the most important question in most class action litigation – namely, whether it is indeed a class action or not? It may invite forum shopping, as companies’ attorneys decide which side has the greener grass – i.e., whether they like their chances better with the particular judge they draw or with an arbitration service – though both courts and arbitrators alike are increasingly deciding like the arbitrator in Oxford Health did, that sweeping arbitration provisions are intended to encompass all class and individual allegations.

Though the victory may be short-lived, depending on the Supreme Court’s decision on arbitration class waivers, in American Express Co. v. Italian Colors Restaurant, workers’ and consumer advocates live to fight another day. Oxford Health was not the death knell. Certainly for the many companies with some kind of broad arbitration provision which does not specify a class waiver, Oxford Health will have an impact.

At the end of the day, today’s decision boils down to this: Oxford made its bed, and must lie in it. Companies will have to shop carefully for bedding, going forward.

If you are an employee with a question about an arbitration agreement or a class action claim you may have, contact Bryan Schwartz Law, P.C. today.

Disclaimer: The discussion in the foregoing article is not intended to provide legal advice in any particular case but is a general expression of viewpoints on current legal issues of general interest. Bryan Schwartz Law, P.C. does not represent you until you have a signed representation agreement or are a member of a certified class represented by the firm.

[1] See “Employers: Be Careful What You Wish For – YourMotion to Compel Arbitration Can Lead to Expensive, Class-Wide Arbitration,” December 26, 2012 (citing to prior articles).

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