This case raised the important issue of whether the Federal Arbitration Act (FAA) permits an arbitrator or court to order class arbitration where, as here, the parties have merely agreed to submit “any dispute under this Agreement” to binding arbitration, and nothing more. NELF filed an amicus brief on the merits in the case, in support of petitioner Oxford Health Plans, arguing that such a minimally worded arbitration clause can never provide the necessary “contractual basis” required under Stolt-Nielsen v. AnimalFeeds Internat’l Corp., 130 S.Ct. 1758 (2010) to authorize class arbitration. Therefore, Stolt-Nielsen requires vacatur of an arbitral award of class arbitration, as in this case, when it is based on a boilerplate agreement to arbitrate “any dispute under this agreement.” In this case, the Third Circuit invoked the FAA’s deferential standard of review to affirm an arbitrator’s “interpretation” of the parties’ generic “any dispute” arbitration clause as somehow providing a “contractual basis” authorizing class arbitration.
NELF argued in its amicus brief that the lower court’s ruling should be reversed as contrary to the Supreme Court’s holding in Stolt-Nielsen that an arbitrator cannot order class arbitration unless there is a “contractual basis” that the parties have agreed to class arbitration. While Stolt-Nielsendid not require an express contractual reference to class arbitration, the Court did conclude that a mere agreement to arbitrate disputes could never support an implied agreement to class arbitration. Therefore, the parties’ boilerplate “any dispute” at issue cannot provide a “contractual basis” authorizing class arbitration. Moreover, the Third Circuit’s deference to an arbitral award to the contrary is misplaced, because the Court held in Concepcion that the FAA cannot be interpreted to destroy itself by compelling class-wide arbitration without the parties’ mutual consent.
NELF also argued that, if the Third Circuit’s decision is allowed to stand, not only the petitioner in this case, but countless other businesses that are subject to the same “any dispute” arbitration clause could face the significant burdens and financial risks associated with class arbitration. As the Supreme Court itself recently observed, “[w]e find it hard to believe that [any] defendant would bet the company [on class arbitration] with no effective means of review [under the FAA] . . . .” AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1752 (2011).
In a unanimous and disappointing decision, the Court held that the FAA requires courts to defer to an arbitrator’s erroneous “interpretation” of an agreement with respect to authorizing class actions. In a surprising about-face, the Court limited Stolt-Nielsen to its unusual facts, wherein the parties had apparently stipulated that there was no contractual basis supporting class arbitration. It must be emphasized that, at the time of Stolt-Nielsen, there was a widespread misunderstanding of an earlier Supreme Court case as recognizing an implied right to class arbitration (which would have to be overcome by a class waiver). Hence, the likely reason for the plaintiffs’ attorney in Stolt-Nielsen, who was seeking class arbitration for his clients, to actually stipulate that his clients had never agreed to class arbitration. The result in Stolt-Nielsen, in which the Court vacated an arbitral award of class arbitration, is now a dead letter, and that case’s “contractual basis” requirement is now meaningless when an arbitrator decides the issue.