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Federal Arbitration Act

Oxford Health Plans, LLC v. Sutter

in
Oral argument: 
March 25, 2013
Court below: 
United States Court of Appeals for the Third Circuit

Over a decade ago, Petitioner Oxford Health Plans, LLC (Oxford) agreed to pay Respondent Dr. Ivan Sutter for providing medical services to members of Oxford’s managed care network. Their contract contains a broad arbitration clause which prohibits litigation of their disputes in court and instead requires that they arbitrate their disputes. In 2002, Sutter complained that Oxford failed to pay him and other primary health care providers for medical services. After an arbitrator decided that their contract clause allowed “class arbitration,” or the consideration of an arbitration claim on behalf of a group of similar claims, Oxford went to federal court to vacate the arbitration award, arguing that the arbitrator exceeded his power to arbitrate. Both the District Court and the United States Court of Appeals for the Third Circuit denied Oxford’s motion to vacate and instead upheld the arbitrator’s decision to hear Sutter’s claim in class arbitration. Oxford argues that the arbitrator’s decision for class arbitration must be vacated because Oxford and Sutter never agreed to class arbitration in their contract exchanging medical services for compensation. In contrast, Sutter argues that the Court should uphold the award because the arbitrator acted within his powers and based his decision on the terms of the agreement between the parties. Oxford warns that a holding for Sutter would discourage parties from agreeing to arbitration to avoid the risk of being saddled with the costs of class arbitration. In contrast, Sutter argues that a holding for Oxford would encourage parties to challenge arbitration decisions in court, undermining the purpose of arbitration to avoid the costs of litigation, and effectively prevent individuals from pursuing their small claims by robbing them of the opportunity to present their claims as a group rather than individually.

Questions Presented: 

In Stolt-Nielsen v. AnimalFeeds International Corp., 130 S. Ct. 1758, 1776 (2010), this Court made clear that "class-action arbitration changes the nature of arbitration to such a degree that it cannot be presumed the parties consented to it by simply agreeing to submit their disputes to arbitration." In this case, an arbitrator concluded that the parties affirmatively consented to class arbitration on the basis of a contract provision stating: "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."

The question presented is:

Whether an arbitrator acts within his powers under the Federal Arbitration Act (as the Second and Third Circuits have held) or exceeds those powers (as the Fifth Circuit has held) by determining that parties affirmatively "agreed to authorize class arbitration," Stolt-Nielsen, 130 S. Ct. at 1776, based solely on their use of broad contractual language precluding litigation and requiring arbitration of any dispute arising under their contract.

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Issue

Can an arbitrator decide that a contract broadly requiring arbitration of disputes also allows for "class arbitration" or the hearing of a claim on behalf of an entire group of similar claims?

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Written by: 
Ali Paradis
Alfonso Dulcey
Edited by: 
Charlotte Davis
Additional Resources: 

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American Express Company, et al. v. Italian Colors Restaurant, et al.

in
Oral argument: 
February 27, 2013
Court below: 
United States Court of Appeals for the Second Circuit

Italian Colors Restaurant, along with other merchants, sued American Express in a class action lawsuit for alleged antitrust violations for compelling merchants to accept American Express credit cards and pay exorbitant rates. In the agreements those merchants signed with American Express, they agreed to use bilateral arbitration rather than class actions in resolving any disputes. Italian Colors argues that this bilateral arbitration clause would create prohibitive costs for any pursuit of their legal rights. This effectively immunizes American Express from any liability under the Sherman Antitrust Act. Therefore, courts must not enforce the arbitration agreement in this context. American Express contends that courts should adhere to the terms of arbitration agreements unless the terms would violate substantive United States law. From a policy standpoint, Italian Colors claims that arbitration is a poor vehicle to vindicate antitrust claims because the length of time an arbitral proceeding would take would create problems for potential claimants, creating difficulty in pursuing a claim before the statute of limitation expires and removing a disincentive for corporate abuse. American Express notes the myriad benefits of arbitration over litigation, specifically arguing that arbitration is more beneficial to lower income plaintiffs and less subject to abuse by frivolous or vengeful lawsuits.

Questions Presented: 

Whether federal arbitration law recognizes an “effective vindication” exception to class-arbitration waivers that allows courts to ignore arbitration agreements and permit class-action lawsuits where individual plaintiffs’ claims are so small that no single plaintiff would rationally bring a bilateral, one-on-one arbitration to vindicate federal rights.

Issue

Can courts refuse to enforce class-arbitration waivers and permit class-action lawsuits where a plaintiff’s individual claim is worth much less than the cost of bringing that claim? 

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Written by: 
Ethan Roman
Dan Youngblut
Edited by: 
Charlotte Davis
Additional Resources: 

AT&T Mobility LLC v. Concepcion (09-893)

in

Oral argument: Nov. 9, 2010

Appealed from: United States Court of Appeals for the Ninth Circuit (Oct. 27, 2009)

CLASS ACTION, FEDERAL ARBITRATION ACT, PREEMPTION, CONSUMER CLAIMS

Vincent and Liza Concepcion ("the Concepcions") signed a two-year service contract with AT&T Mobility for wireless phone service and received free cell phones from AT&T as a part of their contract. AT&T charged the Concepcions a sales tax on their phones, and the Concepcions subsequently sued AT&T alleging that the company had fraudulently advertised the phones as free. The District Court for the Southern District of California consolidated the Concepcions' claim with a class action suit pending in the District Court on the same issue. The service contract that the Concepcions signed contained a clause requiring that they arbitrate disputes with AT&T directly, thus prohibiting the Concepcions from participating in class action suits. After AT&T moved to compel arbitration, the District Court denied AT&T's motion, and AT&T appealed to the Ninth Circuit Court of Appeals arguing that the Federal Arbitration Act ("FAA") expressly and impliedly preempted state law requiring the enforcement of the arbitration clause. The Ninth Circuit ruled against AT&T on the grounds that the arbitration provision represented an unconscionable exculpatory clause and could not be enforced. The United States Supreme Court will now determine whether the FAA preempts state law requiring the enforcement of the arbitration clause. This decision may affect consumers' ability to participate in class action suits and the extent to which they may arbitrate small claims.

Rent-A-Center, West v. Jackson (09-497)

in

Appealed from the United States Court of Appeals for the Ninth Circuit (Sept. 9, 2009)

Oral argument: Apr. 26, 2010

ARBITRATION, FEDERAL ARBITRATION ACT, ARBITRABILITY, UNCONSCIONABILITY, UNCONSCIONABLE

Respondent Antonio Jackson was an employee of Petitioner Rent-A-Center West, Inc. (“RAC”). Jackson sued RAC, alleging racial discrimination. Because Jackson had signed an arbitration clause as part of his employment contract, RAC asked the court to refer the case to arbitration. Jackson, however, argued the employment contract was unconscionable and therefore invalid. The arbitration clause contains a provision that only an arbitrator can decide validity. Jackson argues that a court must decide the validity of the arbitration clause before requiring arbitration. RAC argues that the parties agreed in the contract to submit this question to arbitration. The Ninth Circuit held that, when a party attacks the validity of an arbitration clause because of unconscionability, a court must decide its validity. The Supreme Court’s decision will influence how arbitration clauses will function in the future and the degree of court involvement in arbitration agreements.

Stolt-Nielsen S.A. v. AnimalFeeds International (08-1198)

in

Oral argument: Dec. 9, 2009

Appealed from: United States Court of Appeals for the Second Circuit (Nov. 4, 2008)

ARBITRATION, FEDERAL ARBITRATION ACT, ADMIRALTY LAW, MARITIME LAW

AnimalFeeds filed a class action lawsuit against the four major parcel tanker transportation companies, including Stolt-Nielsen, alleging antitrust violations. As per a written contact between the parties, the case was referred to an arbitration panel. The contract, however, is silent as to whether class arbitrations are permissible. Stolt-Nielsen argues that the silence in the agreement should mean that class arbitration is not permitted, while AnimalFeeds claims the decision should be left to the arbitrators. The arbitrators decided to allow class arbitration, but the district court (S.D.N.Y.) refused. The Second Circuit reversed. The Supreme Court's decision will place an economic burden on the losing side and may affect international businesses decisions on whether to select a forum in the United States.

Hall Street Associates, L.L.C. v. Mattel, Inc. (06-989)

in
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Oral argument: November 7, 2007

Appealed from: United States Court of Appeals, Ninth Circuit (August 1, 2006)

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