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US Supreme Court Rules Class Arbitration Appropriate

Yesterday, in Oxford Health Plans LLC v. Sutter, the United States Supreme Court issued a unanimous opinion affirming the arbitrator’s construction of an arbitration agreement that did not expressly address class actions. This case was handled by my partner, Eric D. Katz. In the early stages of this decade-old litigation Mr. Katz was able to elicit Oxford’s concession that the arbitrator should decide the issue of arbitrability of the class claims. The arbitrator ruled that broad language in the arbitration agreement addressing causes of action and remedies in arbitration permitted class arbitration. The Supreme Court held that the arbitrator’s decision under the Federal Arbitration Act could not be disturbed unless the arbitrator “strayed from his delegated task of interpreting a contract” and imposed his own policy choice. “All we say is that convincing 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 under §10(a)(4).” Because the parties had agreed to allow the arbitrator to decide whether the agreement permitted class arbitration, the Supreme Court did not decide and expressly held open the issue of whether the availability of class arbitration is a question for the court or the arbitrator in the first instance.

This case represents a rare win for class action plaintiffs in the Supreme Court and is certainly a positive development for all consumers, employees and other individuals who have arbitration clauses forced upon them in boilerplate contracts.

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