Supreme Court could limit scope for class arbitration

Reuters News
Posted: Dec 07, 2012 4:59 PM
Supreme Court could limit scope for class arbitration

By Jonathan Stempel

(Reuters) - The Supreme Court on Friday agreed to hear an appeal that gives the nine justices a chance to limit the ability of consumers and businesses to litigate disputes as a class.

At issue was whether doctors could collectively arbitrate a dispute over payments with Oxford Health Plans LLC even though the governing arbitration agreement did not mention class actions.

The court has in recent years made it harder for some parties to litigate or arbitrate their claims together, which could boost payouts and lower costs.

In the 2010 case Stolt-Nielsen v. AnimalFeeds International Corp, the court said it "cannot be presumed" that parties to a dispute agreed to accept class arbitration simply by having agreed to arbitrate in the first place.

And the next year, in AT&T Mobility v. Concepcion, the court gave businesses a big victory by upholding contracts that required customers to arbitrate disputes individually, and waive their right to pursue class-action litigation.

In the Oxford case, an arbitrator allowed class arbitration of a dispute over that company's alleged failure to properly reimburse doctors including John Sutter, who challenged how some 16,500 physicians in New Jersey were reimbursed.

The arbitrator allowed class arbitration despite the silence on that issue of the governing contractual clause, which said: "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."

The 3rd U.S. Circuit Court of Appeals in Philadelphia upheld the Oxford arbitrator's decision in April, saying the arbitrator simply "construed the text of the arbitration agreement to authorize and require class arbitration".

But Seth Waxman, a former U.S. solicitor general representing Oxford, said this effectively gave arbitrators unfettered discretion to decide whether there was an "implicit" understanding between parties to allow class arbitration.

He said that while the federal appeals court in New York has taken a similar approach, the federal appeals court in New Orleans required more of a contractual or legal basis.

"A party's right not to be dragooned into class arbitration proceedings that it never agreed to authorize should not depend on which federal court is asked to enforce the ... basic precept that arbitration is a matter of consent, not coercion," Waxman wrote.

The doctors, while noting that the agreement was "atypical", urged the Supreme Court not to take the case.

They said the appellate court split appeared based more on the facts of the particular cases, and that the issue will become less important as more parties use agreements with explicit language about class arbitration.

A decision is expected by the end of June.

The case is Oxford Health Plans LLC v. Sutter, U.S. Supreme Court, No. 12-135.

(Reporting by Jonathan Stempel in New York; Editing by Kevin Drawbaugh and Dale Hudson)