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Weil Successfully Petitions Supreme Court For Writ of Cert Regarding Class Arbitration

On December 7, 2012 Weil and its co-counsel secured a significant victory on behalf of Oxford Health Plans LLC when the United States Supreme Court granted Oxford’s petition for certiorari in Oxford Health Plans LLC v. Sutter on a hotly contested issue concerning class arbitrations. Specifically, the Supreme Court will address the question of whether an arbitrator has the authority to compel class arbitration where the contract at issue contains broad language requiring arbitration of the parties’ disputes and prohibiting litigation, but does not specifically address class arbitration. By granting certiorari in Oxford Health Plans LLC v. Sutter, the Supreme Court stands to resolve a split among several circuits regarding “what contractual basis may support a finding that the parties agreed to authorize class-action arbitration.”

In 1998, Dr. John Sutter and Oxford entered into a professional services contract containing an arbitration clause that does not mention class proceedings and providing: “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 2002, Sutter brought a putative class action in New Jersey Superior Court asserting that Oxford improperly denied, underpaid, and delayed reimbursement of his health care claims for reimbursement. Oxford successfully moved to compel arbitration of Sutter’s claims.

Once in arbitration, and over Oxford’s objections, the arbitrator determined in a clause construction award that the contract between Sutter and Oxford authorized class arbitration. Subsequently, in March 2005, the arbitrator entered a class certification award, certifying a class of some 20,000 New Jersey physicians. Oxford moved to vacate the arbitrator’s clause construction and class certification awards, but the U.S. District Court for the District of New Jersey denied the motion, allowing the matter to proceed on a class basis. Oxford appealed the district court’s ruling in connection with the class certification award and the U.S. Court of Appeals for the Third Circuit upheld the district court’s holding.

Importantly, at the time of Oxford’s appeal, the Supreme Court had not yet rendered its decision in Stolt-Nielsen v. AnimalFeeds International Corp. that “a party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so.” In that 2010 decision, the Court determined that broad arbitration clauses should not be construed to permit class arbitration: “An implicit agreement to authorize class-action arbitration … is not a term that the arbitrator may infer solely from the fact of the parties’ agreement to arbitrate.”

In light of Stolt-Nielsen, Oxford requested reconsideration of the arbitrator’s clause construction award, arguing that Oxford did not consent to class arbitration simply by agreeing to a broad arbitration clause. The arbitrator adhered to his original decision, concluding that unlike the arbitrator in Stolt-Nielsen, he had analyzed and determined the parties’ contractual intent to allow class proceedings. Oxford moved to vacate the arbitrator’s most recent clause construction ruling, but the district court once again denied Oxford’s motion, and the Third Circuit affirmed the district court’s decision. Oxford’s petition followed.

Weil Litigation partner Edward Soto leads the representation of Oxford in the underlying arbitration proceeding (still ongoing) and handled the motion to vacate the arbitrator’s latest clause construction ruling in the district court and the appeal that followed in the Third Circuit.