June 10, 2013
Today, the Supreme Court in Oxford Health Plans v. Sutter, http://www.scotusblog.com/case-files/cases/oxford-health-plans-llc-v-sutter/, affirmed its commitment to narrow judicial review of arbitration decisions. In Sutter, the arbitrator interpreted an arbitration agreement to permit class arbitration. Because the parties asked the arbitrator to interpret the agreement, the only question for a court, according to the Supreme Court, is whether the arbitrator interpreted the parties’ agreement, not whether the arbitrator correctly or incorrectly interpreted the agreement. In other words, as long as the arbitrator is doing his job of interpreting the contract, “the courts have no business overruling him because their interpretation of the contract is different from his.” This decision will enable arbitrators, interpreting arbitration agreements that do not contain class arbitration waivers, to order class arbitration. While this is a result that the Court dislikes, given its past negative comments about class arbitration, the decision is correct because it affirms the long-held understanding that courts should narrowly review arbitration awards and overturn them only when the arbitrator did not do his job (i.e. failed to interpret the contract). In the short term, this decision may result in more class arbitrations. Over time, however, parties will redraft their arbitration agreements to explicitly preclude class arbitrations. While this decision is a short term victory for consumers and employees not subject to class arbitration waivers, eventually this decision will lose relevance because businesses will redraft their arbitration agreements with consumers and employers to explicitly reject class arbitrations in their arbitration agreements.
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