U.S. Supreme Court Ruling Suggests Review of Arbitration Language

The U.S. Supreme Court’s decision on June 10, 2013 strongly suggests that employers should ensure that their arbitration agreements contain express language that excludes the arbitration of class action claims for that position to be enforceable.

In Oxford Health Plans LLC v. Sutter, the Supreme Court upheld an arbitrator’s ruling that a broad-based arbitration agreement permitted class arbitration in a dispute brought by a pediatrician.  The arbitration  agreement did not specifically include or exclude the arbitration of class claims.  The arbitrator held that the plain wording of the agreement  (“all disputes”) meant that class claims would be subject to arbitration.  The Supreme Court agreed.  Justice Kagan, writing the opinion for the Court, held:  “In sum, Oxford chose arbitration, and it must now live with that choice.  Oxford agreed with Sutter that an arbitrator should determine what their contract meant, including whether its terms approved class arbitration.”  The Court found that the arbitrator did not exceed his powers in making the ruling to include class claims in the arbitration process.

This decision highlights the need for employers to periodically evaluate the language of their arbitration agreements.  For many employers who want to have enforceable arbitration agreements and also take steps to preclude the arbitration of class claims, then the explicit language excluding class claims should be included in the arbitration agreements.  In a prior ruling, AT&T Mobility LLC v. Concepcion, the U.S. Supreme Court held an arbitration agreement that precluded class claims was enforceable.  So, employers – check your agreements.

- John Baum

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