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Posts Tagged ‘sutter’

Those of us who have been following the Supreme Court’s decisions on class actions and arbitration over the past few years may have been a bit surprised when the Court recently upheld an arbitrator’s decision to compel class arbitration in Oxford Health Plans LLC v. SutterOxford Health bucked a trend of decidedly defendant-friendly decisions on issues relating to the interplay between class actions and arbitration.  Today, the Court moved back into more familiar territory in deciding American Express Co. v. Italian Colors Restaurant (“Amex III“).  

The holding in Amex III, as summarized in the syllabus, is that “[t]he FAA does not permit courts to invalidate a contractual waiver of class arbitration on the ground that the plaintiff’s cost of individually arbitrating a federal statutory claim exceeds the potential recovery.”  Thus, just is it had held that state law of unconscionability could not be used to invalidate a class arbitration waiver in AT&T Mobility LLC v. Concepcion, the Court’s holding today limits the use of federal law to invalidate arbitration provisions that preclude class actions. 

Will Amex III finally be the case to end class actions as we know themConcepcion hasn’t, so I doubt Amex III will either.

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The Supreme Court issued its decision today in the first of two arbitration-related class action cases on the 2012-13 docket.  Today’s decision bucks what had been a trend in the Court’s decisions in recent years strongly favoring individual arbitration and limiting the situations in which class arbitration (private arbitration in which the plaintiffs proceed in a representative capacity on behalf of a class) can occur.

In a unanimous ruling, the Court in Oxford Health Plans LLC v. Sutter upheld an arbitrator’s decision to interpret an arbitration agreement as allowing for class arbitration, despite express reference to class arbitration in the parties’ written agreement.  Writing for the Court, Justice Kagan reasoned that applicable standard of review prevents the courts from second-guessing whether the arbitrator’s interpretation of the party’s contract was the correct one and only permits review of whether the decision was based on an interpretation of the parties’ agreement.  Because the arbitrator’s decision was clearly based on an analysis of contractual intent, the arbitrator’s decision could not be overturned.  The fact that the arbitrator had interpreted the parties’ agreement as providing for class arbitration and the deferential standard applicable to the arbitrator’s decision distinguished Oxford Health Plans from Stolt-Nielsen S.A. v. AnimalFeeds International Corp., in which the Court had held that class arbitration cannot be compelled absent express agreement by the parties.

Important to the Court’s decision was the fact that the defendant had conceded that the arbitrator should decide the question of whether the parties had agreed to class arbitration.  It was this concession that let Justice Alito to agree with the Court’s decision.  However, in a concurring opinion joined by Justice Thomas, Justice Alito expressed doubt that any ruling in the class arbitration proceeding would have any preclusive effect as to absent class members, an observation that raises a serious question about whether the Oxford Health decision will be of any practical impact in other cases.  He noted:

Class arbitrations that are vulnerable to collateral attack allow absent class members to unfairly claim the “benefit from a favorable judgment without subjecting themselves to the binding effect of an unfavorable one,” American Pipe & Constr. Co. v. Utah, 414 U. S. 538, 546– 547 (1974).  In the absence of concessions like Oxford’s, this possibility should give courts pause before concluding that the availability of class arbitration is a question the arbitrator should decide.

Defendants will likely see the concurrence as a roadmap for asking the question to be addressed by a court in the first instance, as opposed to simply conceding that the arbitrator should decide the issue whether class arbitration is allowed. 

There are two clear takeaways from the Oxford Health decision: 1) in drafting an arbitration provision, make sure to address the issue of whether arbitration on a class-wide basis will be allowed.  Under Stolt-Nielsen, agreements that bar class arbitration will be enforced; 2) think carefully before conceding that an arbitrator, rather than a court, should make decisions about how an arbitration agreement should be interpreted.

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I’m pleased to announce that the BakerHostetler Class Action Defense Team has just released its 2012 Year-end Review of Class Actions, a joint project with the firm’s Employment Class Actions, Antitrust, and Data Privacy practice teams.  See below for a synopsis of the project.  Click the link above to access a copy of the report itself:

We are pleased to share with you the BakerHostetler 2012 Year-end Review of Class Actions, which offers a summary of some of the key developments in class action litigation during the past year. Class action litigation continues to persist in all areas of civil litigation despite the Supreme Court’s 2011 decisions in AT&T Mobility v. Concepcion and in Wal-Mart Stores, Inc. v. Dukes, which were seen by many commentators as marking the beginning of the end of class actions as we know them. But while the Supreme Court’s 2011 decisions have had a significant impact on class action litigation, they have not brought about its demise and are not likely to do so anytime soon. In the last two years, we’ve seen landmark decisions and the addition of important judicial gloss to those decisions. 2013 will be no different as the Supreme Court is set to weigh in on a series of key cases this spring.

We hope you find this Review a useful tool as you move forward into the new year. This comprehensive analysis of last year’s developments in class action procedure and jurisdiction, as well as developments by subject matter will hopefully provide context and insight as you look ahead to 2013’s expected trends in class action law, including the proliferation of privacy class action litigation and class action litigation relating to the LIBOR rate-fixing scandal.

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