The U.S. Supreme Court issued its decision in Sutter today, unanimously holding that as long as the arbitrator bases a decision to allow or disallow class arbitration on the text of the parties’ agreement, her “construction holds, however good, bad, or ugly.”  Oxford Health Plans LLC v. Sutter, 569 U.S. ___ (June 10, 2013).  The case resolved a circuit split on how to interpret SCOTUS’ Stolt-Nielsen decision.  It also proved me right (yahoo!).  (I predicted the Court would affirm the Third Circuit both when it granted review, and when it heard the argument.)

As you may recall, this case involves a putative class of doctors who sued a health insurer over allegedly inadequate payments for services.  The case was brought in state court, the insurer successfully compelled arbitration, and the parties then agreed that the arbitrator should decide whether the contract authorized class arbitration.  The contract did not explicitly allow or disallow class actions in arbitration.  The arbitrator construed the text of the arbitration agreement and found that the parties’ intent was to allow class arbitration.

In the District of New Jersey, the Third Circuit and again the Supreme Court, the insurer argued that the arbitrator had “exceeded [his] powers” within the meaning of Section 10(a)(4) of the FAA by allowing class arbitration.  In its decision, the Supreme Court firmly refused to look behind the curtain of an arbitration.  Because it was clear that the arbitrator was given authority to determine whether the contract authorized class arbitration, and he based his decision on the text of the arbitration clause, the Supreme Court would not consider whether “he performed that task poorly.”

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