January 24, 2013

Agreement to class arbitration should not be inferred

By Deborah J. La Fetra Senior Attorney

Today PLF filed an amicus brief in Oxford Health Plans LLC v. Sutter, pending in the United States Supreme Court.  The issue is whether an arbitrator can order parties to class arbitration when the arbitration agreement is silent on that matter.  PLF argues that because class arbitration is fundamentally different than individual arbitration, implicating significant due process concerns, the default rule should be that consent should not be inferred by silence.  Instead, class arbitration is appropriate only where the parties affirmatively agree to that procedure.

The case is a follow-up to 2010’s Stolt-Nielsen v. AnimalFeeds, in which PLF also filed an amicus brief, where the United States Supreme Court held that the differences between individual arbitration and class arbitration are so great that arbitrators lack the power under the Federal Arbitration Act to interpret parties’ mere silence on the issue of class-action arbitration as constituting consent to resolve their disputes in class proceedings.  Both sides to the dispute in Stolt-Nielsen agreed that “silence,” in that case, represented no meeting of the minds as to class arbitration.   But silence could also mean that class arbitration simply was not considered by either side.  The appellate court in Oxford Health took this view and held that, by using the usual tools of contract interpretation, the arbitrator could be justified in finding that the parties’ general intent to arbitrate all disputes included class arbitration.  The Court will now decide whether silence in a contract necessarily equals failure to consent to class arbitration, or whether silence allows the arbitrator to fill in the gap.

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