WASHINGTON (Legal Newsline) -- The U.S. Supreme Court, in a unanimous ruling Monday, upheld an arbitrator's authority in a case over a health care contract.

In its nine-page opinion, the nation's high court affirmed a decision of the U.S. Court of Appeals for the Third Circuit.

The case arises out of a contract between Oxford Health Plans and one of its health care providers, Dr. John Ivan Sutter.

The contract at issue included a typical broad arbitration clause: "No civil action concerning any dispute arising under this agreement shall be instituted before any court, and all such disputes shall be submitted to final and binding arbitration in New Jersey, pursuant to the Rules of the American Arbitration Association with one arbitrator."

Sutter, who filed a proposed class action in New Jersey Superior Court in 2002, alleged that Oxford failed to fully and promptly pay him and other physicians with similar Oxford contracts.

On Oxford's motion, the court compelled arbitration.

The parties agreed that the arbitrator should decide whether their contract authorized class arbitration, and he concluded that it did.

Oxford filed a motion in federal court to vacate the arbitrator's decision, claiming that he had "exceeded [his] powers" under Section 10(a)(4) of the Federal Arbitration Act.

The district court denied the motion, and the Third Circuit affirmed.

After the Supreme Court decided Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp. -- holding that an arbitrator may employ class procedures only if the parties have authorized them -- the arbitrator reaffirmed his conclusion that the contract approves class arbitration.

Oxford renewed its motion to vacate that decision under Section 10(a)(4).

The district court denied the motion, and the Third Circuit affirmed.

The Supreme Court granted review of the case.

"Class arbitration is a matter of consent: An arbitrator may employ class procedures only if the parties have authorized them," Justice Elena Kagan wrote for the court. "In this case, an arbitrator found that the parties' contract provided for class arbitration.

"The question presented is whether in doing so he 'exceeded [his] powers' under Section 10(a)(4) of the FAA. We conclude that the arbitrator's decision survives the limited judicial review Section 10(a)(4) allows."

Under the FAA, courts may vacate an arbitrator's decision "only in very unusual circumstances," Kagan explained.

"So the sole question for us is whether the arbitrator (even arguably) interpreted the parties' contract, not whether he got its meaning right or wrong," she wrote. "Here, the arbitrator did construe the contract (focusing, per usual, on its language), and did find an agreement to permit class arbitration.

"So to overturn his decision, we would have to rely on a finding that he misapprehended the parties' intent. But Section 10(a)(4) bars that course: It permits courts to vacate an arbitral decision only when the arbitrator strayed from his delegated task of interpreting a contract, not when he performed that task poorly.

"In sum, Oxford chose arbitration, and it must now live with that choice."

DRI: The Voice of the Defense Bar filed an amicus brief in the case, supporting petitioner Oxford. The brief took issue with the arbitrator's interpretation of the contract.

DRI's Center for Law and Public Policy argued in part, "Compelling parties to resolve disputes through costly, time-consuming and high-stakes class-wide arbitration, when the parties have not agreed to do so, frustrates the parties' intent, undermines their agreements and erodes the benefits offered by arbitration as an alternative to litigation. Imposing class arbitration on parties who have not agreed to that procedure, conflicts with the central goal of the Federal Arbitration Act: to ensure that arbitration agreements are enforced strictly according to the terms adopted by the parties."

The group, which represents more than 20,000 defense lawyers across the country, said some of its arguments appeared to have resonated with the court, which ruled solely on the authority to interpret the contract.

"The Court's latest iteration of the established principle that arbitration is based on consent should remind parties drafting (or revising) contracts in the future to be as clear, unambiguous and explicit as possible in addressing arbitration in general and class arbitration in particular," said Jerry Ganzfried, chair of DRI's Amicus Committee and author of the Oxford brief.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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