Sutter v. Oxford Health Plans, LLC, 675 F.3d 215 (3d Cir. 2012). Decisions in favor of class arbitration may seem to be few and far between these days. But in this case, an arbitrator and the Third Circuit Court of Appeals came down in favor of class arbitration, based on the language of the arbitration clause at issue. Judge Fuentes wrote the opinion for the panel.
Plaintiff was a doctor in defendant’s healthcare network. The two parties signed an agreement that contained an arbitration clause. The clause stated that “[n]o civil action copncerning 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.”
In 2002, plaintiff accused defendant of underpaying, delaying and denying proper reimbursement to him and other doctors similarly situated. Plaintiff filed a putative class action in the Superior Court of New Jersey. Defendant moved to compel arbitration, and that motion was granted.
The arbitrator was then asked to decide whether the parties’ agreement allowed for class arbitration. He decided that it did. He reasoned that the arbitration clause was very broad, and that it embraced “all conceivable court actions, including class actions.” Since “all such disputes” were to be arbitrated, that included class disputes. Defendant moved in federal court to vacate that ruling, but lost in the district court and in the Third Circuit. Arbitratrion then proceeded on a classwide basis.
Meanwhile, the Supreme Court of the United States decided Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 130 S.Ct. 1758 (2010). That case found class arbitration improper unless the parties had agreed to that. Defendant moved to vacate the arbitrator’s award based on Stolt-Nielsen. The arbitrator denied that relief. The district court upheld that decision. On appeal, so did the Third Circuit.
Judge Fuentes began by noting that the standard of review of an arbitrator’s award presumes that the award is enforceable. Only on very narrow grounds, enumerated in the Federal Arbitration Act, can an award be overturned. Unlke in Stolt-Nielsen, where the parties had stipulated that there was “no agreement” as to class arbitration, the parties had articulated a “contractual basis” for class arbitration, as the arbitrator found. Stolt-Nielsen did not require that the parties use the words “class arbitration” in order to evidence an intent to employ that procedure. Rather, Judge Fuentes stated, what matters is the intent of the parties, which can be determined from contractual language or other appropriate sources. The court declined to overturn the arbitrator’s view of the language used by the parties in this arbitration clause.
This decision is a breath of fresh air. Too many courts and arbitrators have misread Stolt-Nielsen as holding that unless parties expressly authorize classwide arbitration, it is not permitted. In fact, as Judge Fuentes rightly concluded after a detailed analysis of Stolt-Nielsen, that case says no such thing. This opinion shows the way for other courts to restore the right to class arbitration even where parties have not expressly used the term “class arbitration.”
The real hero of this story may be the arbitrator. Having sensibly viewed the broad arbitration clause as he did, his decision was then subject to a deferential standard of review by the courts. Under that standard of review, the courts were required to and did uphold his contractual interpretation.