Recent U.S. Supreme Court Arbitration Law Decisions

Two recent Supreme Court decisions, Oxford Health Plans, LLC v. Sutter and American Express Co. v. Italian Colors Restaurant, have clarified issues regarding class arbitration. In 2010, the Supreme Court ruled in Stolt-Nielsen S.A. v. AnimalFeeds International Corp. that the Federal Arbitration Act bars class arbitration unless the parties affirmatively agree to it. This decision appeared to eliminate class arbitration because it is rare to find such a provision in an agreement.

The Supreme Court recently refined this aspect of its arbitration law jurisprudence in Oxford Health. In doing so, the Court theoretically increased the opportunities to have class arbitration when an arbitration agreement is interpreted. The following aspects of the Oxford Health case are notable:

• The Court explained that an arbitrator’s interpretation of an arbitration agreement is owed deference, and that an arbitrator may interpret an agreement to allow class arbitration, even when there is no provision specifically authorizing it.
• Stolt-Nielsen can be distinguished from the Oxford Health case because the parties to the former case had already stipulated that no agreement to arbitrate existed.
• Although the decision in Stolt-Nielsen indicated that parties must affirmatively agree to arbitration, the Court did not elaborate on whether consent could be inferred from the agreement. The Oxford Health decision clarifies that an arbitrator can draw such an inference.
• The Oxford Health ruling reiterates the deference given to arbitrators under the Federal Arbitration Act, which only allows a court to vacate an arbitration award if the arbitrators exceeded their power.
• Where there is absolutely no basis for an arbitrator to permit class arbitration, the decision may be overturned. In that scenario, the arbitrators would exceed their roles, not merely misinterpret agreements.

In American Express Co. v. Italian Colors Restaurant, the Supreme Court affirmed the contractual nature of arbitration. Here are some important aspects of this case:

• The Court held that when an arbitration agreement contains a class arbitration waiver, it must be strictly enforced under the Federal Arbitration Act.
• The only way such a class arbitration waiver would not be enforced is if legislation renders it illegal or unenforceable.
• If there is a waiver of class arbitration in an agreement, the only way to invalidate it, aside from an act of the legislature, is to prove fraud, duress or unconscionability.

If you would like help drafting an arbitration agreement, consult an experienced Washington, D.C. corporate law attorney who can provide diligent legal representation.