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U.S. Supreme Court Upholds Arbitrator's Interpretation of Scope of Arbitration Agreement

A New Jersey doctor entered into a contract with a health plan to provide health care to its insureds. Included in the contract was an arbitration agreement which, in part, stated that “No civil action concerning any dispute arising under this Agreement shall be instituted before any court," with any such disputes to be subject to arbitration. The doctor than attempted to sue the health plan in state court, alleging that it had not paid him and a class of other physicians money that they were owed under the contract. The health plan was successful in compelling arbitration and taking the dispute out of the state court system. Ultimately, although not specifically referenced in the arbitration agreement, the arbitrator interpreted the agreement to require that class actions, as a type of "civil action," be arbitrated and thus removed from the potential purview of a jury. Because of this interpretation, the arbitrator further found that, although they would not be able to take their case before a jury, the agreement did allow for the doctors to arbitrate as a class.

In a decision issued today, the U.S. Supreme Court upheld the arbitrator's decision, finding that it fell within the scope of an interpretation of the parties' intent in entering into the contract and arbitration agreement. In reaching its decision, the Court referenced the high burden of overturning an arbitrator's decision based not on wrongness or error, but on whether the arbitrator exceeded the scope of his or her powers granted under the arbitration agreement. In sum, today's decision tends to fall in line with the generally broad and inclusive interpretation given the Federal Arbitration Act and deference given to the decisions of arbitrators. 

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