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Class Defense Blog

Cutting-Edge Issues in Class Action Law and Policy

Supreme Court Holds That Alien Tort Statute Doesn’t Apply Extraterritorially

By Andrew J. Pincus and Kevin Ranlett on Posted in Class Action Trends, U.S. Supreme Court

Today, the Supreme Court issued its long-awaited decision in Kiobel v. Royal Dutch Petroleum (pdf) on the scope of the Alien Tort Statute (“ATS”), 28 U.S.C. § 1350, a law that creates federal jurisdiction for civil actions brought by aliens for torts committed in violation of the law of nations or a U.S. treaty. In Kiobel, the Court held that presumption against applying federal statutes extraterritorially applies to the ATS, and affirmed the dismissal of an ATS complaint alleging violations of international law in Nigeria. Kiobel thus is a very welcome development for businesses that have been targeted by lawsuits under the ATS, an increasingly common vehicle for unjustified class actions in recent years.

See additional discussion below the fold. Continue Reading

Supreme Court Holds that Plaintiff Whose Individual Claims Were Mooted by an Offer of Judgment Lacks Standing to Maintain FLSA Collective Action

By Kevin Ranlett on Posted in Employment, U.S. Supreme Court

The Fair Labor Standards Act of 1938 (“FLSA”) permits an employee to file a “collective action” for damages against an employer individually and on behalf of other “similarly situated” employees who later choose to join the lawsuit. 29 U.S.C. § 216(b). In Genesis Healthcare Corp. v. Symczyk, before any other employee had opted to join the suit, the defendant made an offer of judgment to the named plaintiff for the full relief sought by her individual claims. Today, the Supreme Court held—by a 5-4 vote—that the district court had properly dismissed the FLSA collective action for lack of standing. Writing for the majority, Justice Thomas explained that once the offer of judgment had mooted the named plaintiff’s individual claims: “A straightforward application of well-settled mootness principles compels” the conclusion that the entire action “became moot, because she lacked any personal stake in representing” other employees, and thus there no longer was any “case or controversy” for decision, as required by Article III of the U.S. Constitution.

The court of appeals had reversed the dismissal, reasoning that to allow the defendant to “pick off” the named plaintiff with an offer of judgment before the collective action could be certified would “frustrate” the goals of FLSA collective-action provisions. In the Supreme Court, the majority rejected this argument because it rested on distinguishable cases involving class actions. In those cases, the majority explained, either it would be impossible for any other class member to pursue claims for injunctive relief if the class action were dismissed (because of the claims’ transitory nature) or the putative class already had acquired “independent legal status” before the offer of judgment was made. Neither is true of an FLSA collective action for damages that no other employee had yet joined.

The plaintiff also had relied on a statement in Deposit Guaranty National Bank v. Roper, 445 U.S. 326 (1980), criticizing the use of offers of judgment to “pick off” the named plaintiff in a class action before class certification. But the majority explained that Roper’s holding turned on the fact that the plaintiff in that case had a continuing interest in trying to reduce his share of attorneys’ fees by splitting them among an entire certified class. By contrast, in this case, the offer of judgment included the named plaintiff’s attorneys’ fees and thus “provided complete relief on [the plaintiff’s] individual claims.” Moreover, the majority suggested that Roper may have been abrogated by a later decision holding that an interest in seeking attorneys’ fees is insufficient to confer standing.

Justice Kagan, joined by Justices Ginsburg, Breyer and Sotomayor, dissented, taking issue with the majority’s reliance on what they saw as the lower courts’ “mistake” that the plaintiff’s claim was mooted by the unaccepted offer of judgment. The dissenters noted that the Court had simply assumed that the named plaintiff’s individual claims were moot because she had conceded that fact in the litigation. But because plaintiffs in future cases will not make the same concession, the dissenters contended that the Court’s holding was a “one-off” result involving a situation “that should never arise again.”

Symczyk is of substantial importance to any business that faces collective or class actions of any stripe. Despite the dissent’s assertion that the Court’s holding is limited to this case only, the logic of the Court’s decision applies to all FLSA collective actions—and potentially to class actions in general. Symczyk thus promises to give businesses a powerful method of settling named plaintiffs’ claims in the context of meritless collective and class actions. If a business is willing to pay the named plaintiff’s demand in full at the very outset of the case, the Supreme Court’s decision suggests that a plaintiff may be barred from pursuing a collective or class action and subjecting the business to the enormous costs of class-wide discovery in an effort to coerce a settlement.

Plaintiffs in future cases can be expected to argue, as did the dissent, that such an offer of judgment does not moot their individual claims.  Defendants may wish to point out that, in a footnote, the majority signaled that although it was not reaching the issue, if it did, it likely would agree with the unanimous conclusion of the courts of appeals that such an offer does have that effect.  See Szymczak, slip op. at 6 n.4 (citing O’Brien v. Ed Donnelly Enters., Inc., 575 F.3d 567, 575 (6th Cir. 2009); McCauley v. Trans Union, L.L.C., 402 F.3d 340, 342 (2d Cir. 2005); Weiss v. Regal Collections, 385 F.3d 337, 340 (3d Cir. 2004); Greisz v. Household Bank (Ill.), N.A., 176 F.3d 1012, 1015 (7th Cir. 1999)).  Defendants also can defend that conclusion by explaining that, as a matter of first principles, there is no Article III case or controversy for the court to resolve if the defendant is willing to agree to the relief the plaintiff seeks.

In any event, defendants should remain aware that making an offer of judgment to a named plaintiff to moot a collective or class action likely would not impede any government enforcement action based on the underlying allegations.

Will Your Class Action Go Viral?

By Kevin Ranlett on Posted in Class Action Settlements, Class Action Trends

Social media can be a game-changer for class actions.

I was recently reminded of this when reading news coverage of a proposed class settlement of claims involving chicken that a fast food restaurant allegedly had improperly described as halal. A Michigan lawyer, who wasn’t involved in the case, had taken to Facebook to complain that the settlement would distribute the $700,000 class fund to plaintiff’s counsel and two charities rather than to class members. (We’ve previously blogged about the emerging backlash against settlements with large cy pres components.)

Plaintiff’s counsel, apparently fearing that the Facebook posting would stir up objectors, persuaded the judge to require the Michigan lawyer to remove his post, replace it with the official class notice, and refrain from commenting further on the settlement. I wonder if that plaintiff’s counsel now appreciates the irony of suing over a web posting; the court filings and media coverage have drawn way more attention to the issue than the original Facebook posting ever would have. In any event, Public Citizen intervened and persuaded the judge to lift the gag order as a violation of the First Amendment.

I can understand the plaintiff’s counsel’s motive for seeking a gag order. A random stranger’s venting on Facebook, Twitter, or Youtube can go viral, multiplying the number of objections to a proposed class settlement. Such a development can be disappointing to both plaintiffs’ lawyers and defendants: Plaintiffs’ counsel don’t get paid for their work on a class action until a settlement is approved, and defendants are denied (at least for the time being) the peace and finality they sought when they agreed to settle rather than litigate.

Businesses should be monitoring social media for other class-action threats. Plaintiffs’ counsel are using social media to recruit potential named plaintiffs or class members. Moreover, the business’s own use of social media can be a source of liability risk. Privacy, employment discrimination, and false-advertising class actions with a social-media component abound. In-house counsel also should familiarize themselves with the FTC’s guidance concerning social media advertising. See Guides Concerning the Use of Endorsements and Testimonials in Advertising (pdf), 74 Fed. Reg. 198 (Oct. 15, 2009). And industries subject to special advertising regulations, such as pharmaceuticals, financial firms, and insurance companies, face additional oversight by the FDA and FINRA. A failure to comply with these regulations may trigger not only agency attention but also private class actions.

In sum, marketing departments are not the only ones that should have a social media strategy. So should legal departments. The modern Perry Mason is fluent in Facebook.

Ninth Circuit Narrows California Exception To Arbitration Agreements, But Puts Off Deciding Whether FAA Preempts The Exception Altogether

By Andrew J. Pincus and Archis A. Parasharami on Posted in Arbitration

Earlier today, the Ninth Circuit issued its en banc opinion in Kilgore v. KeyBank, N.A. The court had granted en banc review to decide whether the Federal Arbitration Act preempts California’s so-called “Broughton/Cruz” rule, which declares that claims for “public” injunctive relief under California consumer protection statutes are unsuitable for, and exempt from, arbitration.

As we have discussed in prior blog posts—and argued in an amicus brief on behalf of the U.S. Chamber of Commerce—the answer should be easy. The Supreme Court stated in AT&T Mobility LLC v. Concepcion that “[w]hen state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA.” That is exactly what the Broughton/Cruz rule does.

But the Ninth Circuit decided that there was no need to address that issue in this case, stating: “Defendants argue that Davis [v. O’Melveny & Myers]”—a prior case applying Broughton/Cruz—“was vitiated by Concepcion, and the Broughton-Cruz rule no longer exempts a public injunction claim from arbitration. We need not reach that broad argument. Even assuming the continued viability of the Broughton-Cruz rule, Plaintiffs’ claims do not fall within its purview.” The court went on to explain why the claim at issue did not in fact seek relief on behalf of the general public and thus did not even qualify for the Broughton/Cruz exemption as a matter of California law.

The court’s analysis on this point is helpful to defendants; since Concepcion, plaintiffs have (as in Kilgore itself) sought to recast damages class actions as injunction-only class actions in an attempt to invoke the Broughton/Cruz doctrine and avoid arbitration. The Ninth Circuit’s restrictive reading of the state-law doctrine means that it will be harder for plaintiffs’ lawyers to use this gambit to try to circumvent Concepcion.

There is some additional good news in Kilgore for businesses: The court made clear that any argument that a prohibition of “class arbitration is unconscionable under California law” is “now expressly foreclosed by Concepcion.” That conclusion seems clear from Concepcion itself, but a number of plaintiffs have sought to convince federal district courts that some wiggle room remains. This aspect of Kilgore’s holding should make those efforts even more of an uphill battle.

 Ultimately, the court put off for another day the more significant question of FAA preemption for those cases in which plaintiffs have properly pleaded (as a matter of California law) a claim for public injunctive relief. And while the vast majority of federal district courts in California to address the question have held that the FAA preempts Broughton/Cruz, there are some outlier decisions going the other way.
Kilgore’s bottom line is: important additional progress in ensuring the enforceability of arbitration agreements, but more litigation needed before California’s Broughton/Cruz loophole is finally eliminated.

Is There A Problem With Settlement Class Actions?

By Kevin Ranlett on Posted in Class Action Settlements

A new paper by Fordham law professor Howard Erichson, entitled “The Problem with Settlement Class Actions”—and a blog post about it by Andrew Trask—caught my eye.

The paper uses two recent class settlements, In re AIG and Sullivan v. DB Investments, Inc., as the springboard to discuss settlement class actions. Erichson argues that the problem with class settlements isn’t that the would-be class counsel will collude with defendants to reach a deal that sells out the rights of absent class members. Instead, he says that plaintiffs’ lawyers simply lack sufficient leverage to negotiate a fair deal because (1) the practice of certifying settlement classes that aren’t manageable for trial means that they can’t realistically threaten to take the case to trial; and (2) the defendant has monopsony power and so can “purchase” a class-wide release from any class-action plaintiff’s lawyer. To ameliorate these problems, Erichson proposes to ban settlement classes and permit courts to certify classes only if they could be tried.

Trask contends that Erichson has misdiagnosed the problem, noting that if the plaintiffs had lacked leverage the defendants in AIG and Sullivan wouldn’t have paid so much to settle class actions that likely couldn’t have been certified over the defendants’ opposition.

I think Trask is right, and that Erichson’s attempt to re-frame the problem with settlement class actions is mistaken. To begin with, settlement negotiations take place before the settlement class is certified, when the plaintiff still can threaten to obtain class certification over the defendant’s objections (or at the least, to inflict millions of dollars of asymmetric class discovery costs on the defendant). With these weapons in hand, plaintiffs often have lots of leverage over defendants—which is precisely why many defendants are forced to settle claims of even dubious merit.

Moreover, Erichson’s worry about a class-action defendant’s monopsony power ignores the fact that in most class actions, there is only a single class counsel on the other side of the table. In the cases in which multiple plaintiffs have filed class actions, transfers and the MDL process usually lead to coordination and the appointment of a single interim lead class counsel. And even when there are still multiple plaintiff’s firms at the table, the one that can obtain the highest settlement price from the defendant in theory could use the surplus to pay the other plaintiff’s firms to cooperate.

Of course, it’s not always a good thing when this happens. As many observers have suggested, class counsel are often focused on maximizing attorneys’ fees rather than the class recovery—a problem that may be exacerbated when there are many mouths to feed. In other words, the real problem is that courts do not always try to align the incentives of class counsel and the class by tying fee awards to amounts actually recovered by class members.

At bottom, Erichson seems suspicious of settlement class actions because he thinks that cases as a rule are settling for too little. But when a class action lacks merit—and studies suggest that a high percentage of class actions do—a reduction in the price of class settlements is a cause for celebration, not concern.

Judge Mulls Appointment of Own Expert to Evaluate What Could Be the Largest-Ever Class Settlement of Private Antitrust Claims

By Kevin Ranlett on Posted in Antitrust, Class Action Settlements

It’s rare for a court to appoint its own expert in a class action. But Judge Gleeson of the Eastern District of New York is poised to do precisely that in order to help him decide whether to grant final approval to the $7.25 billion proposed class settlement of antitrust claims by retailers challenging Visa’s and MasterCard’s interchange fees. Some observers say that the proposed class settlement in the case—In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, No. 1:05-md-01720—would be the largest class settlement of private antitrust claims in U.S. history.

In November, Judge Gleeson granted preliminary approval to the proposed settlement, which reportedly calls for $6.05 billion to be distributed to class members and for a $1.2 billion reduction in future interchange fees. Several major retailers and trade associations are expected to object to final approval of the settlement, after having objected to preliminary approval.

Judge Gleeson recently asked the parties if they had any objection to having law professor Alan Sykes—a leading law-and-econ scholar—advise the court “with respect to any economic issues that may arise in connection with the forthcoming motion for final approval of the proposed settlement.”

The complexity and multi-billion-dollar stakes of this case may have motivated Judge Gleeson to seek guidance from an independent expert regarding whether the proposed class settlement should be approved under Federal Rule of Civil Procedure 23(e). We haven’t seen judges evaluating other class action settlements—which generally present less complicated issues than this settlement appears to raise—consider appointing their own experts to assess the settlement’s fairness.

Do the Plaintiffs Lack Standing or Are Their Claims Simply Meritless—or Both?

By Kevin Ranlett on Posted in Adequacy, Class Action Trends, Class Certification, Commonality, Predominance, Typicality

Here’s the situation: You’re facing a class action in federal court in which the plaintiffs define the putative class so broadly as to encompass many people who weren’t injured by the alleged wrongdoing. For example, consider a false-advertising class action on behalf of “all purchasers” of a product that the vast majority of purchasers would have used without any problem whatsoever, meaning that the alleged rarely occurring (or entirely hypothetical) defect that the defendant failed to disclose makes no difference to them. What’s the best way to attack this weakness in the complaint?

One option would be to characterize the problem as a lack of Article III standing. Article III allows courts to hear a case only if the plaintiff has suffered an injury in fact that is fairly traceable to the defendant’s conduct and that could be redressed by a favorable decision from the court. In our hypo, the defendant could move to strike the class allegations on the ground that virtually all of the alleged class members lack standing.

This approach, however, has potential pitfalls. For example, some courts have held that Article III requires merely that the named plaintiffs have standing, a rule that (as plaintiffs argue with some success) allows a class action to go forward even though the putative class includes people who themselves lack standing and thus could not bring their own individual actions. See, e.g., Stearns v. Ticketmaster Corp., 655 F.3d 1013, 1021 (9th Cir. 2011). But see, e.g., Avritt v. Reliastar Life Ins. Co., 615 F.3d 1023, 1034 (8th Cir. 2010); Denney v. Deutsche Bank AG, 443 F.3d 253, 263-64 (2d Cir. 2006). In the wrong jurisdiction, the court will simply deny the motion to strike as foreclosed by circuit precedent.

To avoid this difficulty, the defendant can move to strike the class allegations, using the fact that most class members are uninjured to challenge commonality, typicality, adequacy, and predominance. Of course, because courts are divided over the standing issue, that issue is ripe for eventual Supreme Court review. Defendants therefore should consider raising the standing defect in the alternative in order to preserve the issue (though insofar as standing is jurisdictional, it should be possible to raise it at any time even if it has not been raised before).

But what if the named plaintiffs themselves appear to be uninjured because they didn’t experience the alleged product defect either? The defendant could challenge their standing in a motion to dismiss for lack of subject matter jurisdiction. But there is a risk to doing so. Some federal courts believe that the proper course when the named plaintiffs lack standing is to remand the case to state court, where laxer concepts of standing, more lenient class-certification standards, and antipathy toward out-of-state businesses may hamstring the defendant’s ability to defend itself. To make matters worse, the Tenth Circuit recently held that a district court decision remanding a class action to state court for lack of “standing” is non-reviewable under 28 U.S.C. § 1447(d). See Hill v. Vanderbilt Capital Advisors LLC (pdf), No. 11-2213 (10th Cir. Dec. 27, 2012). Accordingly, unless there is clear Circuit precedent indicating that the district court should not remand in this situation or the state court to which the case would be remanded is not hostile to business defendants, companies confronted with such a dilemma may be better served challenging the merits of the plaintiffs’ claims rather than their standing to assert them.

California Trial Court Rejects “Trial by Formula” Approach to False-Advertising Class Action and Sets Aside Verdict

By Kevin Ranlett on Posted in Class Certification, Motions Practice

In state courts, sometimes you lose even when you win. In a recent false-advertising class action, a California Superior Court entered an order concluding that the testimony of the plaintiffs’ expert—who was the linchpin of the case for class certification and on the merits—was inadmissible, which meant that the defendant was entitled to judgment as a matter of law. See Wallace v. Monier, LLC (pdf), No. S-CV-0016410 (Cal. Super. Ct. Placer Cty. Jan. 28, 2013).

Sounds great, right—so what’s the problem? The judge waited to decide these issues until after a jury trial on the class claims in which the plaintiffs were seeking damages in excess of $500 million, plus an additional amount in punitive damages. That’s a huge waste of the parties’ and the court’s resources. Many businesses would have lacked the fortitude to endure that gauntlet and agreed to a blackmail settlement in order to mitigate the enormous risk presented by the inappropriate class-action jury trial.

The case involved false-advertising claims under California law against the maker of “slurry coated” roofing tiles, which the plaintiffs alleged were prone to developing cosmetic defects during their 50-year life. To support class certification and to prove liability and damages, the plaintiffs relied on the testimony of 22 homeowners, who were selected by a statistician from the more than 100,000 who had purchased and installed the roofing tiles. The plaintiffs proposed to extrapolate from the sample homeowners’ experiences to make findings regarding liability and damages for the rest of the class.

The defendant raised numerous challenges to the admissibility of the statistician’s testimony and plaintiffs’ proposed trial plan, but these challenges were deferred until after trial. (The court heard testimony about the challenges during breaks in the trial.) Following an eight-week trial, the jury returned a verdict of $7.41 million for the plaintiff.

The trial court then finally turned to the defendant’s legal challenges. Relying on an analogy to the U.S. Supreme Court’s rejection of “Trial by Formula” in Wal-Mart Stores, Inc. v. Dukes, the trial court excluded the statistician’s testimony on the ground that his sampling techniques were neither reliable nor generally accepted by recognized authorities in the field. Because the plaintiffs’ case for class certification and liability hinged on that testimony, the court threw out the verdict and granted the defendant judgment as a matter of law. The court then denied the defendant’s motion for decertification as moot (though it is apparent from the court’s reasoning that no class should have been certified).

Although the end result was a defense victory, it was achieved at a much higher cost than necessary. There is no reason that the defendant’s legal and evidentiary challenges were postponed until post-trial motions. And although it is not categorically the case that defendants are better off in federal court, it seems less likely that a federal court would have deferred some of the key evidentiary and legal issues until after a jury verdict. Here, the defendants in Wallace had no choice; the case predated the 2005 enactment of the Class Action Fairness Act.

Supreme Court Reverses Certification of Antitrust Class Action Where Class Failed To Prove That Damages Could Be Determined On A Classwide Basis

By Archis A. Parasharami and Kevin Ranlett on Posted in Antitrust, Class Certification, Predominance, U.S. Supreme Court

An important and recurring issue in class actions is whether a district court must consider particular merits issues when deciding whether to certify a class under Federal Rule of Civil Procedure 23. Today, in Comcast Corp. v. Behrend (pdf), No. 11-864, the Supreme Court reversed the certification of an antitrust class action because the district court failed to conduct a “rigorous analysis” of whether the testimony of the plaintiffs’ damages expert satisfies Rule 23(b)(3)’s requirement that “questions of law or fact common to class members predominate” over individualized questions. The lower courts had concluded that they were unable to scrutinize the expert’s damages model because that would involve examining the merits of the underlying antitrust claims.

The plaintiffs in Behrend had sought to certify a class action involving federal antitrust claims against Comcast. Rule 23(b)(3), which governs class actions for money damages, requires a plaintiff to show that common questions of law or fact predominate over individualized questions. Accordingly, the plaintiffs were required to show that the “antitrust impact” of the alleged violation could be proved at trial through evidence common to the class and that the damages could be measured on a classwide basis through a “common methodology.” Although the plaintiffs presented four theories of antitrust impact, the district court accepted only one. And although the plaintiffs’ damages expert conceded that his economic model for damages did not measure damages flowing from that single theory of antitrust impact, the district court nonetheless certified the class. The Third Circuit affirmed, declining to consider Comcast’s objection to the expert’s model because doing so would require delving into the merits of the underlying claims.

The Supreme Court reversed by a 5-4 vote, holding that the plaintiffs had failed to satisfy Rule 23(b)(3)’s predominance requirement. Writing for the majority, Justice Scalia explained that the Third Circuit erred in refusing to take a “close look” at the methodology underlying the proposed classwide-damages model. As the Court explained, courts must consider challenges to class certification even if those challenges would also be pertinent to the merits. The majority noted that district courts considering whether a plaintiff has satisfied Rule 23(b)(3) must conduct a “rigorous analysis” that will frequently “overlap with the merits of the plaintiff’s underlying claim,” because determining whether common questions predominate over individualized ones “generally involves considerations that are enmeshed in the factual and legal issues comprising the plaintiff’s cause of action.” The majority then explained that because the plaintiffs’ damages model in this case failed to measure only those damages that would be attributable to the sole theory of classwide antitrust liability, the plaintiffs had failed to prove that damages could be measured on a classwide basis. Because “[q]uestions of individual damage calculations will inevitably overwhelm questions common to the class,” the majority held that class certification was improper.

Justices Ginsburg and Breyer, joined by Justices Sotomayor and Kagan, dissented. They first explained that they believed that review had been improvidently granted because the Court had granted certiorari to consider a question—whether Daubert objections to expert testimony must be resolved at the class-certification stage—that in their view had not been preserved for review. The dissenting justices next expressed their view that the reach of the Court’s holding is limited because the plaintiffs had failed to argue that predominance would be satisfied even if damages could not be shown on a classwide basis. Finally, the dissenting justices explained their view that, as a matter of substantive antitrust law, the plaintiffs’ damages methodology was sufficient to support class certification.

The Behrend decision is important for any business that may be the target of class actions. Among other things, Behrend confirms that district courts must scrutinize plaintiffs’ evidentiary showing that common questions will predominate over individualized ones—including questions relating to damages—even if any challenges to that showing overlap with the merits of the underlying claims.

Supreme Court Hears Argument In Class Arbitration Case, Oxford Health Plans v. Sutter

By Archis A. Parasharami on Posted in Arbitration, U.S. Supreme Court

The Supreme Court heard oral argument earlier today in Oxford Health Plans LLC v. Sutter, No. 12-135, on whether the Federal Arbitration Act (“FAA”) allows an arbitrator to interpret an arbitration agreement that does not affirmatively authorize class arbitration to permit use of that procedure.

For some background on Oxford, please see our prior blog post.  My takeaway from the argument (transcript here) is that two competing principles under the FAA were in play.  On the one hand, class arbitration is highly disfavored:  The Supreme Court has previously explained—both in Stolt-Nielsen S.A. v. AnimalFeeds International Corp. and AT&T Mobility LLC v. Concepcion—that class arbitration is not the type of arbitration envisioned by the FAA because, like jury trials and full-blown discovery, class proceedings are incompatible with the benefits of arbitration.  On the other hand, courts generally review an arbitrator’s decision with a great deal of deference.  In particular, review of the substance of an arbitrator’s award ordinarily is limited to whether an arbitrator exceeded his or her powers or engaged in “manifest disregard of the law.”

How will the Court balance these principles?  From the argument, it’s hard to tell how the Court will rule.  It seemed that most of the Justices viewed the arbitrator’s decision to be legally incorrect in light of Stolt-Nielsen.  But there was considerable disagreement over whether a federal court can remedy that error.  Some Justices’ questions appeared to signal that, so long as the arbitrator had been trying to interpret the language of the arbitration clause, that interpretation—even if terribly mistaken—cannot be overturned given the limited standard of review for arbitral awards.  But other Justices appeared to believe that the arbitrator’s reading of the agreement was so implausible—especially in the face of Stolt-Nielsen—that it could be overturned even under a deferential standard of review, just as the Court held in Stolt-Nielsen itself.  And Chief Justice Roberts discussed whether to chart a different path, noting that some of the Court’s precedents had applied de novo (that is, non-deferential) review when the issue an arbitrator has determined is whether a particular individual or entity is bound by an arbitration agreement.  As questions by Justice Alito highlighted, the effect of the arbitrator’s ruling in this case did not just affect Oxford and the named plaintiff, Dr. Sutter, but also some 20,000 other physicians who Dr. Sutter purported to represent.

Businesses should watch for the Supreme Court’s decision in this case for a number of reasons.  First, the case will affect those businesses that are parties to arbitration agreements that do not address class arbitration explicitly.  If the Court rules against Oxford, businesses may be at a greater risk of being forced into class arbitrations to which they never intended to agree.  Second, it seems likely that the Court will address the standard of review applicable to arbitral awards—an issue that could arise in a wide variety of arbitration-related settings.

At the same time, Oxford may have a limited shelf life.  Going forward, most companies should be able to avoid the issues presented in this case by expressly addressing (and precluding) class arbitration in their arbitration agreements.  In addition, companies may wish to consider revising any existing arbitration agreements that do not address class arbitration to make their intentions clear.