Oxford Health Plans LLC v. Sutter

(Slip Opinion) OCTOBER TERM, 2012 1
Syllabus
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
being done in connection with this case, at the time the opinion is issued.
The syllabus constitutes no part of the opinion of the Court but has been
prepared by the Reporter of Decisions for the convenience of the reader.
See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES
Syllabus
OXFORD HEALTH PLANS LLC v. SUTTER
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE THIRD CIRCUIT
No. 12–135. Argued March 25, 2013—Decided June 10, 2013
Respondent Sutter, a pediatrician, provided medical services to peti-
tioner Oxford Health Plans’ insureds under a fee-for-services contract
that required binding arbitration of contractual disputes. He none-
theless filed a proposed class action in New Jersey Superior Court, al-
leging 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 et. seq. 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 al-
lowed 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 agree-
ment,” 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, 62.
2 OXFORD HEALTH PLANS LLC v. SUTTER
Syllabus
Thus, the sole question on judicial review is whether the arbitrator
interpreted the parties’ contract, not whether he construed it correct-
ly. Here, the arbitrator twice did what the parties asked: He consid-
ered their contract and decided whether it reflected an agreement to
permit class proceedings. That suffices to show that he did not ex-
ceed 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 con-
trast, 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’ in-
tent. 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 arbitra-
tor’s contract interpretation and are thus irrelevant under §10(a)(4).
Pp. 6−9.
675 F. 3d 215, affirmed.
KAGAN, J., delivered the opinion for a unanimous Court. ALITO, J.,
filed a concurring opinion, in which THOMAS, J., joined.
Cite as: 569 U. S. ____ (2013) 1
Opinion of the Court
NOTICE: This opinion is subject to formal revision before publication in the
preliminary print of the United States Reports. Readers are requested to
notify the Reporter of Decisions, Supreme Court of the United States, Wash-
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SUPREME COURT OF THE UNITED STATES
_________________
No. 12–135
_________________
OXFORD HEALTH PLANS LLC, PETITIONER v.
JOHN IVAN SUTTER
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE THIRD CIRCUIT
[June 10, 2013]
JUSTICE KAGAN delivered the opinion of the Court.
Class arbitration is a matter of consent: An arbitrator
may employ class procedures only if the parties have au-
thorized them. See Stolt-Nielsen S. A. v. AnimalFeeds
Int’l Corp., 559 U. S. 662, 684 (2010). 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 §10(a)(4) of the
Federal Arbitration Act (FAA or Act), 9 U. S. C. §1 et seq.
We conclude that the arbitrator’s decision survives the
limited judicial review §10(a)(4) allows.
I
Respondent John Sutter, a pediatrician, entered into a
contract with petitioner Oxford Health Plans, a health in-
surance company. Sutter agreed to provide medical care
to members of Oxford’s network, and Oxford agreed to pay
for those services at prescribed rates. Several years later,
Sutter filed suit against Oxford in New Jersey Superior
Court on behalf of himself and a proposed class of other
New Jersey physicians under contract with Oxford. The
complaint alleged that Oxford had failed to make full and
2 OXFORD HEALTH PLANS LLC v. SUTTER
Opinion of the Court
prompt payment to the doctors, in violation of their agree-
ments and various state laws.
Oxford moved to compel arbitration of Sutter’s claims,
relying on the following clause in their contract:
“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.” App. 15–16.
The state court granted Oxford’s motion, thus referring
the suit to arbitration.
The parties agreed that the arbitrator should decide
whether their contract authorized class arbitration, and
he determined that it did. Noting that the question
turned on “construction of the parties’ agreement,” the
arbitrator focused on the text of the arbitration clause
quoted above. Id., at 30. He reasoned that the clause sent
to arbitration “the same universal class of disputes” that it
barred the parties from bringing “as civil actions” in court:
The “intent of the clause” was “to vest in the arbitration
process everything that is prohibited from the court pro-
cess.” Id., at 31. And a class action, the arbitrator contin-
ued, “is plainly one of the possible forms of civil action that
could be brought in a court” absent the agreement. Ibid.
Accordingly, he concluded that “on its face, the arbitration
clause . . . expresses the parties’ intent that class arbitra-
tion can be maintained.” Id., at 32.
Oxford filed a motion in federal court to vacate the
arbitrator’s decision on the ground that he had “exceeded
[his] powers” under §10(a)(4) of the FAA. The District
Court denied the motion, and the Court of Appeals for
the Third Circuit affirmed. See 05–CV–2198, 2005 WL
6795061 (D NJ, Oct. 31, 2005), aff ’d, 227 Fed. Appx. 135(2007).
Cite as: 569 U. S. ____ (2013) 3
Opinion of the Court
While the arbitration proceeded, this Court held in
Stolt-Nielsen that “a party may not be compelled under
the FAA to submit to class arbitration unless there is a
contractual basis for concluding that the party agreed to
do so.” 559 U. S., at 684. The parties in Stolt-Nielsen
had stipulated that they had never reached an agreement
on class arbitration. Relying on §10(a)(4), we vacated the
arbitrators’ decision approving class proceedings because,
in the absence of such an agreement, the arbitrators had
“simply . . . imposed [their] own view of sound policy.” Id.,
at 672.
Oxford immediately asked the arbitrator to reconsider
his decision on class arbitration in light of Stolt-Nielsen.
The arbitrator issued a new opinion holding that Stolt-
Nielsen had no effect on the case because this agreement
authorized class arbitration. Unlike in Stolt-Nielsen, the
arbitrator explained, the parties here disputed the mean-
ing of their contract; he had therefore been required “to
construe the arbitration clause in the ordinary way to
glean the parties’ intent.” App. 72. And in performing
that task, the arbitrator continued, he had “found that
the arbitration clause unambiguously evinced an intention
to allow class arbitration.” Id., at 70. The arbitrator con-
cluded by reconfirming his reasons for so construing the
clause.
Oxford then returned to federal court, renewing its
effort to vacate the arbitrator’s decision under §10(a)(4).
Once again, the District Court denied the motion, and the
Third Circuit affirmed. The Court of Appeals first under-
scored the limited scope of judicial review that §10(a)(4)
allows: So long as an arbitrator “makes a good faith at-
tempt” to interpret a contract, “even serious errors of law
or fact will not subject his award to vacatur.” 675 F. 3d
215, 220 (2012). Oxford could not prevail under that
standard, the court held, because the arbitrator had “en-
deavored to give effect to the parties’ intent” and “articu-
4 OXFORD HEALTH PLANS LLC v. SUTTER
Opinion of the Court
late[d] a contractual basis for his decision.” Id., at
223–224. Oxford’s objections to the ruling were “simply
dressed-up arguments that the arbitrator interpreted its
agreement erroneously.” Id., at 224.
We granted certiorari, 568 U. S. ___ (2012), to address
a circuit split on whether §10(a)(4) allows a court to vacate
an arbitral award in similar circumstances.1 Holding that
it does not, we affirm the Court of Appeals.
II
Under the FAA, courts may vacate an arbitrator’s deci-
sion “only in very unusual circumstances.” First Options
of Chicago, Inc. v. Kaplan, 514 U. S. 938, 942 (1995).
That limited judicial review, we have explained, “main-
tain[s] arbitration’s essential virtue of resolving disputes
straightaway.” Hall Street Associates, L. L. C. v. Mattel,
Inc., 552 U. S. 576, 588 (2008). If parties could take
“full-bore legal and evidentiary appeals,” arbitration would
become “merely a prelude to a more cumbersome and time-
consuming judicial review process.” Ibid.Here, Oxford invokes §10(a)(4) of the Act, which author-
izes a federal court to set aside an arbitral award “where
the arbitrator[] exceeded [his] powers.” A party seeking
relief under that provision 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 arbitra-
tor’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. East-
ern Associated Coal Corp. v. Mine Workers, 531 U. S. 57,
62 (2000) (quoting Steelworkers v. Enterprise Wheel & Car
——————
1 Compare675 F. 3d 215 (CA3 2012) (case below) (vacatur not proper),
and Jock v. Sterling Jewelers Inc., 646 F. 3d 113 (CA2 2011) (same),
with Reed v. Florida Metropolitan Univ., Inc., 681 F. 3d 630 (CA5 2012)
(vacatur proper).
Cite as: 569 U. S. ____ (2013) 5
Opinion of the Court
Corp., 363 U. S. 593, 599 (1960); Paperworkers v. Misco,
Inc., 484 U. S. 29, 38 (1987); internal quotation marks
omitted). Only if “the arbitrator act[s] outside the scope
of his contractually delegated authority”—issuing an
award that “simply reflect[s] [his] own notions of [economic]
justice” rather than “draw[ing] its essence from the con-
tract”—may a court overturn his determination. Eastern
Associated Coal, 531 U. S., at 62 (quoting Misco, 484 U. S.,
at 38). So the sole question for us is whether the arbitra-
tor (even arguably) interpreted the parties’ contract, not
whether he got its meaning right or wrong.2
And we have already all but answered that question just
by summarizing the arbitrator’s decisions, see supra, at 2–
3; they are, through and through, interpretations of the
parties’ agreement. The arbitrator’s first ruling recited
the “question of construction” the parties had submitted
to him: “whether [their] Agreement allows for class action
arbitration.” App. 29–30. To resolve that matter, the
arbitrator focused on the arbitration clause’s text, analyz-
——————
2 We would face a different issue if Oxford had argued below that the
availability of class arbitration is a so-called “question of arbitrability.”
Those questions—which “include certain gateway matters, such as
whether parties have a valid arbitration agreement at all or whether
a concededly binding arbitration clause applies to a certain type of
controversy”—are presumptively for courts to decide. Green Tree
Financial Corp. v. Bazzle, 539 U. S. 444, 452 (2003) (plurality opinion).
A court may therefore review an arbitrator’s determination of such a
matter de novo absent “clear[] and unmistakabl[e]” evidence that the
parties wanted an arbitrator to resolve the dispute. AT&T Technolo-
gies, Inc. v. Communications Workers, 475 U. S. 643, 649 (1986). Stolt-
Nielsen made clear that this Court has not yet decided whether the
availability of class arbitration is a question of arbitrability. See 559
U. S., at 680. But this case gives us no opportunity to do so because
Oxford agreed that the arbitrator should determine whether its con-
tract with Sutter authorized class procedures. See Brief for Petitioner
38, n. 9 (conceding this point). Indeed, Oxford submitted that issue to
the arbitrator not once, but twice—and the second time after Stolt-
Nielsen flagged that it might be a question of arbitrability.
6 OXFORD HEALTH PLANS LLC v. SUTTER
Opinion of the Court
ing (whether correctly or not makes no difference) the
scope of both what it barred from court and what it sent
to arbitration. The arbitrator concluded, based on that
textual exegesis, that the clause “on its face . . . expresses
the parties’ intent that class action arbitration can be
maintained.” Id., at 32. When Oxford requested reconsid-
eration in light of Stolt-Nielsen, the arbitrator explained
that his prior decision was “concerned solely with the par-
ties’ intent as evidenced by the words of the arbitration
clause itself.” App. 69. He then ran through his textual
analysis again, and reiterated his conclusion: “[T]he text of
the clause itself authorizes” class arbitration. Id., at 73.
Twice, then, the arbitrator did what the parties had asked:
He considered their contract and decided whether it re-
flected an agreement to permit class proceedings. That
suffices to show that the arbitrator did not “exceed[ ] [his]
powers.” §10(a)(4).
Oxford’s contrary view relies principally on Stolt-
Nielsen. As noted earlier, we found there that an arbitra-
tion panel exceeded its powers under §10(a)(4) when it
ordered a party to submit to class arbitration. See supra,
at 3. Oxford takes that decision to mean that “even the
‘high hurdle’ of Section 10(a)(4) review is overcome when
an arbitrator imposes class arbitration without a sufficient
contractual basis.” Reply Brief 5 (quoting Stolt-Nielsen,
559 U. S., at 671). Under Stolt-Nielson, Oxford asserts, a
court may thus vacate “as ultra vires” an arbitral decision
like this one for misconstruing a contract to approve class
proceedings. Reply Brief 7.
But Oxford misreads Stolt-Nielsen: We overturned the
arbitral decision there because it lacked any contractual
basis for ordering class procedures, not because it lacked,
in Oxford’s terminology, a “sufficient” one. The parties in
Stolt-Nielsen had entered into an unusual stipulation that
they had never reached an agreement on class arbitration.
See 559 U. S., at 668–669, 673. In that circumstance, we
Cite as: 569 U. S. ____ (2013) 7
Opinion of the Court
noted, the panel’s decision was not—indeed, could not
have been—“based on a determination regarding the
parties’ intent.” Id., at 673, n. 4; see id., at 676 (“Th[e]
stipulation left no room for an inquiry regarding the par-
ties’ intent”). Nor, we continued, did the panel attempt to
ascertain whether federal or state law established a “de-
fault rule” to take effect absent an agreement. Id., at 673.
Instead, “the panel simply imposed its own conception of
sound policy” when it ordered class proceedings. Id., at
675. But “the task of an arbitrator,” we stated, “is to
interpret and enforce a contract, not to make public policy.”
Id., at 672. In “impos[ing] its own policy choice,” the
panel “thus exceeded its powers.” Id., at 677.
The contrast with this case is stark. In Stolt-Nielsen,
the arbitrators did not construe the parties’ contract, and
did not identify any agreement authorizing class proceed-
ings. So in setting aside the arbitrators’ decision, we
found not that they had misinterpreted the contract, but
that they had abandoned their interpretive role. 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 par-
ties’ intent. But §10(a)(4) bars that course: It permits
courts to vacate an arbitral decision only when the arbi-
trator strayed from his delegated task of interpreting a
contract, not when he performed that task poorly. Stolt-
Nielsen and this case thus fall on opposite sides of the line
that §10(a)(4) draws to delimit judicial review of arbitral
decisions.
The remainder of Oxford’s argument addresses merely
the merits: The arbitrator, Oxford contends at length,
badly misunderstood the contract’s arbitration clause. See
Brief for Petitioner 21–28. The key text, again, goes as
follows: “No civil action concerning any dispute arising
under this Agreement shall be instituted before any court,
8 OXFORD HEALTH PLANS LLC v. SUTTER
Opinion of the Court
and all such disputes shall be submitted to final and bind-
ing arbitration.” App. 15–16. The arbitrator thought that
clause sent to arbitration all “civil action[s]” barred from
court, and viewed class actions as falling within that
category. See supra, at 2. But Oxford points out that the
provision submits to arbitration not any “civil action[s],”
but instead any “dispute arising under” the agreement.
And in any event, Oxford claims, a class action is not a
form of “civil action,” as the arbitrator thought, but merely
a procedural device that may be available in a court. At
bottom, Oxford maintains, this is a garden-variety arbi-
tration clause, lacking any of the terms or features that
would indicate an agreement to use class procedures.
We reject this argument because, and only because, it is
not properly addressed to a court. Nothing we say in this
opinion should be taken to reflect any agreement with the
arbitrator’s contract interpretation, or any quarrel with
Oxford’s contrary reading. All we say is that convincing a
court of an arbitrator’s error—even his grave error—is not
enough. So long as the arbitrator was “arguably constru-
ing” the contract—which this one was—a court may not
correct his mistakes under §10(a)(4). Eastern Associated
Coal, 531 U. S., at 62 (internal quotation marks omitted).
The potential for those mistakes is the price of agreeing
to arbitration. As we have held before, we hold again: “It
is the arbitrator’s construction [of the contract] which was
bargained for; and so far as the arbitrator’s decision con-
cerns construction of the contract, the courts have no
business overruling him because their interpretation of
the contract is different from his.” Enterprise Wheel, 363
U. S. at 599. The arbitrator’s construction holds, however
good, bad, or ugly.
In sum, Oxford chose arbitration, and it must now live
with that choice. Oxford agreed with Sutter that an arbi-
trator should determine what their contract meant, in-
cluding whether its terms approved class arbitration. The
Cite as: 569 U. S. ____ (2013) 9
Opinion of the Court
arbitrator did what the parties requested: He provided an
interpretation of the contract resolving that disputed
issue. His interpretation went against Oxford, maybe
mistakenly so. But still, Oxford does not get to rerun
the matter in a court. Under §10(a)(4), the question for a
judge is not whether the arbitrator construed the parties’
contract correctly, but whether he construed it at all.
Because he did, and therefore did not “exceed his powers,”
we cannot give Oxford the relief it wants. We accordingly
affirm the judgment of the Court of Appeals.
It is so ordered.
Cite as: 569 U. S. ____ (2013) 1
ALITO, J., concurring
SUPREME COURT OF THE UNITED STATES
_________________
No. 12–135
_________________
OXFORD HEALTH PLANS LLC, PETITIONER v.
JOHN IVAN SUTTER
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE THIRD CIRCUIT
[June 10, 2013]
JUSTICE ALITO, with whom JUSTICE THOMAS joins,
concurring.
As the Court explains, “[c]lass arbitration is a matter of
consent,” ante, at 1, and petitioner consented to the arbi-
trator’s authority by conceding that he should decide in
the first instance whether the contract authorizes class
arbitration. The Court accordingly refuses to set aside the
arbitrator’s ruling because he was “ ‘arguably construing
. . . the contract’ ” when he allowed respondent to proceed
on a classwide basis. Ante, at 8 (quoting Eastern Associated
Coal Corp. v. Mine Workers, 531 U. S. 57, 62 (2000)).
Today’s result follows directly from petitioner’s concession
and the narrow judicial review that federal law allows in
arbitration cases. See 9 U. S. C. §10(a).
But unlike petitioner, absent members of the plaintiff
class never conceded that the contract authorizes the ar-
bitrator to decide whether to conduct class arbitration.
It doesn’t. If we were reviewing the arbitrator’s interpre-
tation of the contract de novo, we would have little trouble
concluding that he improperly inferred “[a]n implicit
agreement to authorize class-action arbitration . . . from
the fact of the parties’ agreement to arbitrate.” Stolt-
Nielsen S. A. v. AnimalFeeds Int’l Corp., 559 U. S. 662,
685 (2010).
With no reason to think that the absent class members
2 OXFORD HEALTH PLANS LLC v. SUTTER
ALITO, J., concurring
ever agreed to class arbitration, it is far from clear that
they will be bound by the arbitrator’s ultimate resolution
of this dispute. Arbitration “is a matter of consent, not
coercion,” Volt Information Sciences, Inc. v. Board of Trus-
tees of Leland Stanford Junior Univ., 489 U. S. 468, 479
(1989), and the absent members of the plaintiff class have
not submitted themselves to this arbitrator’s authority in
any way. It is true that they signed contracts with arbi-
tration clauses materially identical to those signed by the
plaintiff who brought this suit. But an arbitrator’s erro-
neous interpretation of contracts that do not authorize
class arbitration cannot bind someone who has not author-
ized the arbitrator to make that determination. As the
Court explains, “[a]n arbitrator may employ class proce-
dures only if the parties have authorized them.” Ante,
at 1.
The distribution of opt-out notices does not cure this
fundamental flaw in the class arbitration proceeding in
this case. “[A]rbitration is simply a matter of contract
between the parties,” First Options of Chicago, Inc. v.
Kaplan, 514 U. S. 938, 943 (1995), and an offeree’s silence
does not normally modify the terms of a contract, 1 Re-
statement (Second) of Contracts §69(1) (1979). Accord-
ingly, at least where absent class members have not been
required to opt in, it is difficult to see how an arbitrator’s
decision to conduct class proceedings could bind absent
class members who have not authorized the arbitrator to
decide on a classwide basis which arbitration procedures
are to be used.
Class arbitrations that are vulnerable to collateral at-
tack allow absent class members to unfairly claim the
“benefit from a favorable judgment without subjecting
themselves to the binding effect of an unfavorable one,”
American Pipe & Constr. Co. v. Utah, 414 U. S. 538, 546–
547 (1974). In the absence of concessions like Oxford’s,
this possibility should give courts pause before concluding
Cite as: 569 U. S. ____ (2013) 3
ALITO, J., concurring
that the availability of class arbitration is a question the
arbitrator should decide. But because that argument was
not available to petitioner in light of its concession below,
I join the opinion of the Court.