Confirmation / Vacation of Arbitration Awards

Jeffrey Reed brought a putative class action case against his alma mater, “on-line” school, Florida Metropolitan University, Inc. (“FMU”), in Texas state court, alleging that FMU solicited students in violation of certain provisions of the Texas Education Code. FMU removed to federal court, and moved to compel arbitration under the parties’ agreement. The court granted the motion to compel, and also refused to address the issue of whether class arbitration was allowable, which Reed had raised, finding it should be decided by the arbitrator. At arbitration, Reed moved for a “Clause Construction Award” allowing the arbitration to proceed on a class basis. Over FMU’s objection, the arbitrator ruled in Reed’s favor. Reed moved to confirm and FMU moved to vacate the ruling. The district court vacated the award, finding it exceeded the scope of the arbitrator’s power under the Federal Arbitration Act. Reed appealed. The Fifth Circuit Court of Appeals affirmed, based on the U.S. Supreme Court’s holdings in Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct 1758 (2010) and AT&T Mobility, LLC v. Concepcion, 131 S. Ct. 1740 (2011), emphasizing that the arbitrator forced the parties into class arbitration without a contractual basis for doing so. Reed v. Florida Metropolitan Univ., Inc., No. 11-50509 (5th Cir. May 18, 2012).

This post written by John Pitblado.

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Dr. Ivan Sutter filed a putative class action complaint against Oxford Health Plans in state court, alleging that Oxford had improperly denied, underpaid, and delayed reimbursement of claims. The court granted Oxford’s motion to compel arbitration and ordered all procedural issues to be resolved by the arbitrator, including those pertaining to class certification. Prior to the Supreme Court’s decision in Stolt-Nielsen, the arbitrator ruled that the arbitration clause in Oxford’s primary care physician agreement authorized class arbitrations. The clause at issue provided that: “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 district court denied Oxford’s motion to vacate and the Third Circuit affirmed.

Oxford sought reconsideration from the arbitrator after the Supreme 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.” The arbitrator reaffirmed his decision, holding that the arbitration provision indicated that the parties had agreed to resolve disputes through class arbitrations because the clause’s first phrase was broad enough to encompass class actions, and the second phrase made clear that all disputes, including class actions, were to be arbitrated. The Third Circuit held that the arbitrator’s interpretation of the arbitration provision was not totally irrational, even after Stolt-Nielsen, and thus affirmed the district court’s denial of Oxford’s second motion to vacate. The Third Circuit held that Stolt-Nielsen was distinguishable because the parties in that case had stipulated that the arbitration provision was “silent” as to class arbitrations, i.e., that there was no agreement on whether disputes could be resolved by class arbitration. The court further stated that Stolt-Nielsen “did not establish a bright line rule that class arbitration is allowed only under an arbitration agreement that incants ‘class arbitration.’” Sutter v. Oxford Health Plans, LLC, No. 11-1773 (3d. Cir. Apr. 3, 2012).

This post written by Ben Seessel.

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