The Supreme Court this morning unanimously upheld an arbitrator’s decision finding that an arbitration contract that was silent as to class arbitration could nonetheless be interpreted to allow class arbitration when the arbitrator interpreted the contract using state law. The Court simply deferred to the arbitrator because the Federal Arbitration Act permits only very narrow review of arbitrator decisions. It would not say that the arbitrator was correct in his interpretation, only that the interpretation was not reviewable.
The decision does not once use the phrase “due process,” which was PLF’s primary concern, thus reflecting the narrow statutory basis of the holding. This was foreshadowed by the oral argument, in which none of the justices ever referred to due process, instead focusing all their questions on the impact of deference to the arbitrator. Nor does the decision discuss whether the typical arbitration language in the contract at issue could properly encompass class arbitration. The Court held that the petitioner, Oxford Health Plans, did not properly raise this issue. (Justice Alito’s concurrence did express some due process concern for the plight of absent class members, but said this could not change the result in light of Oxford Health Plans’ concessions).
Bottom line is that this decision does not make much difference in the freedom to contract for arbitration, going forward. The contract under consideration did not expressly discuss class arbitration, because class arbitration is a relatively new procedure that was not considered by the parties when they drafted the contract. Since the Court’s decision in Stolt-Nielsen v. AnimalFeeds in 2010, however, parties know full well that they must specify whether they wish to consent to class arbitration, and contracts drafted or revised after that date will reflect the parties’ intent one way or the other.