Supreme Court Ruling on Class Action Arbitration

Carol Keough June 25, 2013

In a world where litigation can extend out over many years and costs may exceed hundreds of thousands of dollars, arbitration has often been an attractive alternative to a lawsuit.  The Supreme Court on May 10, 2013, in Oxford Health Plans v. Sutter (US Supreme Ct 06/10/2013) upheld the right of the arbitrator to determine whether a class action may be heard in arbitration based on the arbitrator’s interpretation of the parties’ contract language calling for arbitration.  By a unanimous decision, the Court refused to overturn the arbitrator’s decision to hear a class action when the parties’ contract provided that all disputes would be heard in arbitration.

Some arbitration provisions provide lists of the types of disputes that must go to arbitration.  Here the provision stated:  “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”.  The court held that this provision allowed for the arbitrator to decide what the parties’ intent was as to whether arbitration could include class actions.  The Court emphasized that it is not whether the arbitrator is correct in his interpretation of the contract, but whether the arbitrator did interpret the parties’ contract.  The arbitrator did interpret the contract and made the determination that the contract did provide for arbitration of class actions.  Arbitration provisions must be carefully crafted if the employer wants to prevent class action arbitrations.  If the arbitration provision does not clearly express an intent to prohibit class action arbitrations, the arbitrator may make that decision for the parties.


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