Oxford Health Plans v. Sutter

PETITIONER: Oxford Health Plans
RESPONDENT: John Ivan Sutter
LOCATION: John Ivan Sutter Pediatrics

DOCKET NO.: 12-135
DECIDED BY: Roberts Court (2010-2016)
LOWER COURT: United States Court of Appeals for the Third Circuit

CITATION: 569 US (2013)
GRANTED: Dec 07, 2012
ARGUED: Mar 25, 2013
DECIDED: Jun 10, 2013

ADVOCATES:
Eric D. Katz - for the respondent
Seth P. Waxman - for the petitioner

Facts of the case

John Ivan Sutter and Oxford Health Plans entered into a Primary Care Physician Agreement (PCPA). Under this agreement, Sutter provided primary care health services to patients in Oxford's care network in exchange for reimbursement by Oxford. The contract also included a general arbitration clause, which stated, in part, "No civil action concerning any dispute arising under this Agreement shall be instituted before any court." In 2002, Sutter initiated a class action, on behalf of himself and other health care providers under the PCPA, against Oxford, alleging breach of contract and violations of New Jersey law. Oxford moved to compel arbitration. The arbitrator found that the arbitration clause was so general that it encompassed any conceivable court action, including class actions. The arbitrator certified the class, and Oxford moved to vacate that decision in district court arguing the arbitration clause did not encompass class actions and the arbitrator exceeded his authority. The district court denied the motion and class wide arbitration proceeded.

In 2010, the U.S. Supreme Court decided Stolt-Neilson S.A. v. AnimalFeeds International Corp., which held that an arbitrator exceeded his authority by allowing class arbitration when the parties had no agreement on the issue. Oxford moved for reconsideration from the arbitrator in light of Stolt-Neilson, and then moved in district court to vacate the arbitrator's most recent award. Both motions were unsuccessful. On appeal, the U.S. Court of Appeals for the Third Circuit affirmed.

Question

Does an arbitrator exceed his authority when he determines that parties agreed to class arbitration based only on broad contractual language precluding litigation and requiring arbitration of any dispute arising under their contract?

Media for Oxford Health Plans v. Sutter

Audio Transcription for Oral Argument - March 25, 2013 in Oxford Health Plans v. Sutter

Audio Transcription for Opinion Announcement - June 10, 2013 in Oxford Health Plans v. Sutter

John G. Roberts, Jr.:

Justice Kagan has our opinion this morning in case 12-135, Oxford Health Plans versus Sutter.

Elena Kagan:

This is a case about the finality of arbitration decisions.

John Sutter, the respondent here, is a pediatrician who had a fee for services contract with petitioner Oxford Health Plans, a health insurance company.

Sutter sued Oxford in New Jersey Court on behalf of the proposed class of New Jersey physicians, alleging that Oxford had violated its agreements by failing to make full and prompt payment for the doctor's services.

Citing the contracts arbitration clause, Oxford successfully moved to compel arbitration of Sutter's claims.

Oxford and Sutter then agreed that the arbitrator should decide whether their contract authorized class arbitration.

After analyzing the text of their arbitration agreement, the arbitrator concluded that it did and the case proceeded on a classwide basis.

A few years later, we hold in a case called Stolt-Nielsen that an arbitrator may employ class procedures only if the parties have affirmatively authorized them.

Oxford immediately asked the arbitrator to reconsider his decision in light of Stolt-Nielsen, but the arbitrator issued a new opinion explaining again that he read the parties' agreement to authorize class arbitration and therefore, that Stolt-Nielsen had no impact on the case.

Oxford filed this suit in federal court arguing that the arbitrator had exceeded his powers which under Section 10(a)(4) of the Federal Arbitration Act is a ground to vacate an arbitrator's decision.

The District Court rejected Oxford's argument in the U.S. Court of Appeals for the Third Circuit affirmed.

Today, we affirm the Third Circuit.

Courts can vacate arbitral awards only in very unusual circumstances.

Here, as I just said, Oxford relies on Section 10(a)(4) which authorizes a court to set aside an arbitrator's decision when the -- when the arbitrator exceeded his powers.

We have long held that an arbitrator does not exceed his powers by making an error, even a large one.

That's because when the parties agree to have an arbitrator resolve a dispute, theyv bargained for the arbitrator's answer and they have to live with it.

An arbitrator's decision that is even arguably construing or applying the contract cannot be vacated.

It's only when an arbitrator clearly goes beyond the scope of his delegated authority when he imposes his own policy preferences rather than looking to the contract that a Court may overturn his decision.

In short, the only question for us is whether the arbitrator arguably interpreted the contract, not whether he got its meaning right or wrong.

As our opinion explains, the arbitrator's decisions here were through and through, interpretations of the parties' agreement.

In both, he answered the question the parties submitted to him whether their agreement allowed class arbitration.

He did so by interpreting the text of their arbitration clause.

Whether his interpretation was right or wrong makes no difference.

Because the arbitrator was interpreting the contract, he did not exceed his powers.

It is just that simple.

Our opinion is unanimous.

Justice Alito has filed a concurring opinion in which Justice Thomas joins.