On June 10th, the Supreme Court issued a unanimous opinion in Oxford Health Plans v. Sutter, No. 12-135, that will be viewed by some as increasing the risk of class proceedings in arbitration. The sweep of the case, however, will likely be much more limited for several reasons.

In Oxford, the Supreme Court rejected a defendant’s request to vacate an arbitrator’s ruling that interpreted an expansive arbitration clause to permit the plaintiff to proceed on a class basis before the arbitrator. The arbitrator reasoned that this agreement referred to arbitration “the same universal class of disputes” that could be brought as a “civil action . . . before any court,” including class proceedings. The Supreme Court’s decision reflects at least a temporary unwillingness to extend its prior decision three years earlier in Stolt-Nielsen S.A. v. Animalfeeds Int’l Corp., 559 U.S. 662 (2010). Stolt-Nielsen stands for the proposition that an arbitrator may apply class proceedings only if the parties have authorized them, and not when the parties stipulated that the agreement was silent as to whether class arbitration proceedings were permissible.

Three facts in particular limit the sweep of the Court’s new decision in Oxford Health. First, the Court emphasized that the defendant failed to argue below that the arbitrator should not be deciding whether class proceedings were permissible. In fact, the defendant twice asked that the arbitrator resolve this issue. Therefore, the Court rested its decision on the significant deference owed to an arbitrator, explaining that it may vacate an arbitrator’s decision “only if ‘the arbitrator acts outside the scope of his contractually delegated authority’” by “issuing an award that ‘simply reflects his own notions of economic justice’ rather than ‘drawing its essence from the contract.’” Thus, the “sole question” before the Court was “whether the arbitrator (even arguably) interpreted the parties’ contract, not whether he got its meaning right or wrong.”

The Court had little trouble concluding that it had. Distinguishing its prior decision in Stolt-Nielsen by noting that the parties there stipulated that they had not consented to class proceedings in arbitration, the Oxford court found that the arbitrator “did construe the contract (focusing, per usual, on its language) and did find an agreement to permit class arbitration.” The Court explained that even if it found that the arbitrator misapprehended the parties’ intent, there was no basis to overturn the arbitrator’s decision, for the FAA “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.”

Of particular importance, the Court noted that the standard of review of the arbitrator’s decision may have been different if the defendant had argued below that it presented a “question of arbitrability,” since such questions are typically reviewed de novo. Because the defendant had not challenged the arbitrability of the propriety of class-wide arbitration, the Court declined to address whether the availability of class arbitration is a question of arbitrability or an even whether the arbitrator had the authority to bind absent class members.

Second, the Supreme Court made clear that it was not endorsing the substance of the arbitrator’s ruling, explaining “[n]othing 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.” Defendants seeking to avoid class arbitration will find support in Justice Alito’s concurrence, which stated that if the Court “were reviewing the arbitrator’s interpretation of the contract de novo, we would have little trouble concluding that he improperly inferred ‘an implicit agreement to authorize class-action arbitration . . . from the fact of the parties’ agreement to arbitrate.’” In addition, Justice Alito also explained that because absent class members were not a party to the arbitration, they were likely not bound by the arbitrator’s interpretation of the contract.

Third, the parties’ underlying agreement in Oxford obviously did not expressly state that class proceedings in arbitration were not available. Had it done so, there is little doubt that the class action waiver provision would have been enforced. For the reasons stated above, this does not mean that class proceedings in arbitration are appropriate in the absence of a class waiver provision. It simply makes clear that the whole dispute likely would have been avoided had an explicit class waiver provision been included from the outset.