Yesterday the U.S. Supreme Court released its decision affirming Oxford Health Plans, LLC v. Sutter, 675 F. 3d 215 (3rd Cir., 2012). The Opinion clarifies the U.S. Supreme Court’s position on the sanctity of arbitrator rulings. In essence the U.S. Supreme Court held that long as an arbitrator is interpreting an agreed upon contract, the arbitrator’s decisions – no matter how incorrect they might be – are enforceable and should not be overturned. The Reporter of Decisions provided the following summary of the Opinion:
Respondent Sutter, a pediatrician, provided medical services to petitioner Oxford Health Plans’ insureds under a fee-for-services contract that required binding arbitration of contractual disputes. He nonetheless filed a proposed class action in New Jersey Superior Court, alleging 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 §10(a)(4) of the Federal Arbitration Act (FAA), 9 U. S. C. §1. The District Court denied the motion, and the Third Circuit affirmed.
After this Court decided Stolt-Nielsen S. A. v. AnimalFeeds Int’l Corp., 559 U. S. 662—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 §10(a)(4). The District Court denied the motion, and the Third Circuit affirmed.
Held: The arbitrator’s decision survives the limited judicial review allowed by §10(a)(4). Pp. 4−9.
(a) A party seeking relief under §10(a)(4) bears a heavy burden. “It is not enough . . . to show that the [arbitrator] committed an error—or even a serious error.” Stolt-Nielsen, 559 U. S., at 671. Because the parties “bargained for the arbitrator’s construction of their agreement,” an arbitral decision “even arguably construing or applying the contract” must stand, regardless of a court’s view of its (de)merits. Eastern Associated Coal Corp. v. Mine Workers, 531 U. S. 57. Thus, the sole question on judicial review is whether the arbitrator interpreted the parties’ contract, not whether he construed it correctly. Here, the arbitrator twice did what the parties asked: He considered their contract and decided whether it reflected an agreement to permit class proceedings. That suffices to show that he did not exceed his powers under §10(a)(4). Pp. 4−6.
(b) Stolt-Neilsen does not support Oxford’s contrary view. There, the parties stipulated that they had not reached an agreement on class arbitration, so the arbitrators did not construe the contract, and did not identify any agreement authorizing class proceedings. This Court thus found not that they had misinterpreted the contract but that they had abandoned their interpretive role. Here, in stark contrast, the arbitrator did construe the contract, and did find an agreement to permit class arbitration. So to overturn his decision, this Court would have to find that he misapprehended the parties’ intent. But §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. Oxford’s remaining arguments go to the merits of the arbitrator’s contract interpretation and are thus irrelevant under §10(a)(4). Pp. 6−9.
The actual text of the U.S. Supreme Court’s opinion can be found by clicking, here.