Today, the Supreme Court heard oral argument in Oxford Health Plans v. Sutter (Supreme Court docket no. 12-135). The issue is whether a contract that contains an arbitration clause, but is silent as to class arbitration, can be interpreted by an arbitrator to permit imposition of class arbitration over the objections of one party. PLF filed an amicus brief arguing that the due process implications of class arbitration are so profound that parties must affirmatively express consent to participate in that type of procedure.
The argument as a whole was almost entirely devoted to the issue of whether the Court should defer to the arbitrator’s decision because it was based on state laws of contract interpretation, a standard sort of issue in arbitration rendered more complicated in his case only because the matter to be interpreted was consent to class arbitration. In 2010, the Court in Stolt-Nielsen v. AnimalFeeds had held that consent to class arbitration is required, because class arbitration is so different from individual arbitration, but the facts of that case were simpler in that both parties stipulated that no class action was contemplated when they signed the arbitration agreement. In this case, the contract was simply silent, and there was no stipulation.
Former Solicitor General Seth Waxman represents Oxford Health Plans. Several justices noted that, generally, arbitrator decisions are entitled to great deference, but Waxman responded that the question of class arbitration versus bilateral (individual) arbitration is “special.” The unique nature of the question was a theme running throughout the argument because the Court will not reverse arbitrator errors in fact-finding or of applying the law to the facts. The Court will only reverse an arbitrator who exceeds his authority, but this is not always easy to discern. Justice Sotomayor asked, “how wrong does an arbitrator’s decision have to be to become an issue of law” to which the Court would not defer? Waxman responded that if the arbitrator’s decision goes to the fundamental question of consent to arbitrate, then the Court should not defer.
Eric D. Katz represented Dr. Sutter and the proposed class of 20,000 physicians who were challenging Oxford’s reimbursement policies. Naturally, he started off talking about deference, but Justice Scalia interrupted to ask whether the arbitrator’s decision is basically immunized from any review so long as the arbitrator says all he is doing is interpreting the contract, making every arbitration a bet-the-company proposition for business? Mr. Katz confidently said that was exactly right. Justice Breyer jumped in to suggest that Katz might want to backpedal just a little, but Katz stood firm and Breyer had to explain that the cases do permit reversal of an arbitrator’s decision for “manifest disregard” of the contract language and that Katz’s refusal to acknowledge even the tiniest loophole whereby the Court might review an arbitrator’s decision was “news” to him. Justice Alito asked how the 19,999 physicians other than Dr. Sutter could be bound by a class arbitration when it’s not clear that they ever anticipated being drawn into a class procedure. Chief Justice Roberts and Justice Scalia also pursued this line of questioning.
One notable absence: Neither attorney mentioned due process, nor did any Justice. This was a striking omission given the importance of the constitutional due process guarantee in the Court’s previous arbitration decisions. It will be interesting to see how prominent a role it plays in the decision, which will issue before the end of June.
Finally, most arguments manage to contain at least a moment or two of comic relief, and today’s came when Justice Breyer phrased a question in terms of whether the arbitrator consulted a Magic 8 ball and Justice Scalia asked, “What’s a Magic 8 ball?” The answer, according to Justice Breyer, is “a non-sportsman’s equivalent of throwing darts.”