Third Circuit rules against HMO, permits class arbitration

Michael P. Tremoglie Apr. 5, 2012, 10:00am

PHILADELPHIA (Legal Newsline) - An attempt by Oxford Health Plans to vacate a district order for class arbitration in a contract dispute with a physician was rejected Tuesday by the U.S. Court of Appeals for the Third Circuit.

A three-judge panel said an arbitrator did not exceed his authority. A New Jersey physician accused Oxford, in 2002, of improperly paying physicians' claims for medical services. The physician filed a complaint in New Jersey Superior Court for himself and a class of providers against Oxford and other insurers. He alleged a breach of contract and other violations of New Jersey law.

Oxford moved for arbitration per the terms of the physician contract. The plaintiff opposed the motion saying it violated New Jersey public policy. He requested the Superior Court to certify the class before sending the claims to arbitration or claim the clause was invalid. The Superior Court granted arbitration and ordered class certification be resolved by the arbitrator.

During arbitration the question was asked whether the agreement's arbitration clause allows for class arbitration. The arbitrator said it did. Oxford subsequently filed a motion in District Court to vacate the award. It argued the arbitrator had exceeded his powers and manifestly disregarded the law by ordering class arbitration.

The District Court denied Oxford's motion in 2005. It was appealed to the Third Circuit, which affirmed the District Court in 2007.

After this ruling there was a subsequent 2010 case Supreme Court case -- Stolt-Nielsen S.A. v. AnimalFeeds International Corp. -- in which the Court ruled that an arbitral panel had exceeded its authority by allowing class arbitration when the parties had reached no agreement on the issue.

Oxford asked the arbitrator for reconsideration of his award in consideration of the Supreme Court ruling. The arbitrator declined.

Oxford then returned to the district court to vacate the arbitrator's most recent award or reconsider its own 2005 decision denying vacatur.

The district court denied Oxford's motion. Oxford took the case again to the Third Circuit - which denied the motion to vacate the class arbitration award for the second time.

The appeals court ruled, "Neither the arbitration clause nor any other provision of the agreement makes express reference to class arbitration. Nevertheless, when a dispute arose regarding Oxford's alleged failure to make prompt and accurate reimbursement payments to participating physicians, an arbitrator construed the broad text of the clause to authorize class arbitration. Oxford contends that the Supreme Court's decision in Stolt-Nielsen S.A. v. AnimalFeeds International Corp. ... requires vacatur of the award authorizing class arbitration.

"We disagree, and we will affirm the Order of the District Court denying Oxford's motion to vacate the award."

More News