Opinions of the United
2007 Decisions States Court of Appeals
for the Third Circuit
2-28-2007
Sutter v. Oxford Health Plans
Precedential or Non-Precedential: Non-Precedential
Docket No. 05-5223
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Recommended Citation
"Sutter v. Oxford Health Plans" (2007). 2007 Decisions. Paper 1555.
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 05-5223
JOHN IVAN SUTTER, M.D.,
Appellee
v.
OXFORD HEALTH PLANS LLC,
Appellant
On Appeal from the United States District Court
for the District of New Jersey
(D.C. Civil No. 05-cv-02198)
District Court Judge: Honorable Joseph A. Greenaway, Jr.
Submitted pursuant to Third Circuit L.A.R. 34.1(a)
June 30, 2006
_____
Before: BARRY, VAN ANTWERPEN and JOHN R. GIBSON,* Circuit Judges.
(Filed February 28, 2007)
OPINION OF THE COURT
*
The Honorable John R. Gibson, Senior Circuit Judge, United States Court of Appeals
for the Eighth Circuit.
JOHN R. GIBSON, Senior Circuit Judge:
This is an appeal from a denial of a motion to vacate an arbitration award. Oxford
Health Plans LLC appeals the arbitrator's partial final class determination award
certifying a class action in a dispute between Oxford and John Ivan Sutter, M.D. Oxford
argues that the District Court erred in the standard of review used to analyze the
arbitrator's decision and erred in concluding that the arbitrator did not exceed his powers
or manifestly disregard the law. For the following reasons, we affirm the decision by the
District Court.
Sutter is a New Jersey pediatrician and on April 12, 2002, filed a class action
complaint against Oxford and other health insurers in the Superior Court of New Jersey.
The case was severed as to each defendant, and on October 25, 2002, the New Jersey
Superior Court granted Oxford's motion to compel arbitration. Sutter's cases against three
of the insurers, Cigna, United Healthcare, and HealthNet, were removed to federal court
and transferred to a Multi-District Litigation in the Southern District of Florida as
"Provider Track Tag-Along" actions. It was regarding this related dispute that the
Eleventh Circuit issued its opinion in Klay v. Humana, Inc., 382 F.3d 1241 (11th Cir.
2004), cert denied, 543 U.S. 1081 (2005).
On December 11, 2002, Sutter and Oxford began arbitration before a single
arbitrator, William L.D. Barrett. In the dispute between Sutter and the health carriers,
Sutter alleged that the carriers failed to pay medical claims timely and correctly under
New Jersey law. Specifically, Sutter argued that the carriers did the following: (1) failed
to make prompt and timely payment of medical claims; (2) refused to provide
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compensation for procedures performed by improperly "bundling" them with other
procedures; (3) reduced payments by changing or "downcoding" claims to reflect less
expensive procedures; and (4) refused to provide appropriate compensation where
additional medical services are required–known as the refusal to recognize "modifiers."
In the arbitration with Oxford, Sutter sought class certification so as to represent all
physicians who provided services to any person covered by Oxford during a specific
eight-year period. On March 25, 2005, Barrett issued a partial final class determination
award, where he defined the class of claimants and certified the class. On April 25, 2005,
Oxford filed a motion in the United States District Court for the District of New Jersey to
vacate the arbitration award together with a motion to stay pending transfer, both of
which the District Court denied. Oxford now brings the present appeal.
I.
We review a district court's ruling on a motion to vacate an arbitration award de
novo. See Kaplan v. First Options of Chicago, Inc., 19 F.3d 1503, 1509 (3d Cir. 1994).
As a threshold matter, Oxford argues that the District Court used the wrong standard of
review in deciding Oxford's motion to vacate. Normally, our review of arbitration awards
is "extremely deferential." Dluhos v. Strasberg, 321 F.3d 365, 370 (3d Cir. 2003).
Parties, however, may agree to vacatur standards other than those specified in the Federal
Arbitration Act ("FAA"). Roadway Package Sys. Inc. v. Kayser, 257 F.3d 287, 293 (3d
Cir. 2001). In order for a court to recognize a standard other than that specified in the
FAA, the parties must manifest a clear intent. Id.
In the instant case, the agreement between Sutter and Oxford specified that all
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disputes "shall be submitted to final and binding arbitration in New Jersey, pursuant to the
rules of the American Arbitration Association." The American Arbitration Association's
Supplementary Rules for Class Arbitrations ("AAA Rules") allow for "judicial review"
within 30 days of a class determination award. The AAA Rules also require that class
determinations be set forth in a "reasoned, partial final award." Oxford argues that, "[a]s
a matter of logic, these rules envision de novo review at least as to whether proper legal
standards have been applied and followed." (Appellant's Brief at 23).
Oxford's argument is not persuasive. While the AAA Rules call for judicial
review, they never specify what standard of review the courts should use. Considering
the silence of the AAA Rules on this issue, we are unable to conclude that the parties
manifested a clear intent to opt out of the FAA rules. See Roadway, 257 F.3d at 293.
("We do not believe that [an arbitration clause and a generic choice of law clause]
demonstrate a clear intent to displace the FAA's vacatur standards and replace them with
ones borrowed from Pennsylvania law."); see also Mastrobuono v. Shearson Lehman
Hutton, Inc., 514 U.S. 52, 62 (1995) ("At most, the choice-of-law clause introduces an
ambiguity into an arbitration agreement that would otherwise allow punitive damages
awards."). We therefore conclude that the District Court did not err in applying a highly
deferential standard of review.
II.
Oxford argues that the arbitrator’s award both exceeded his authority and was a
manifest disregard of the law by failing to perform the required predominance analysis
and by allowing Sutter to relitigate already decided issues. When determining whether an
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arbitrator exceeded his authority, we have used a two-step process: (1) we must be able
to rationally derive the form of the award either from the agreement between the parties
or from their submissions to the arbitrators, and (2) the terms of the arbitral award must
not be completely irrational. Mut. Fire, Marine & Inland Ins. Co. v. Norad Reinsurance
Co., 868 F.2d 52, 56 (3d Cir. 1989). Similarly, an award may not be vacated simply
because the arbitrator made an error of law, but only because "the arbitrator's decision
evidences manifest disregard for the law." Local 863 Int'l Bhd. of Teamsters v. Jersey
Coast Egg Producers, Inc., 773 F.2d 530, 533 (3d Cir. 1985).
Here, the arbitrator neither exceeded his authority nor evidenced manifest
disregard for the law. The arbitrator individually went through each requirement for a
class action set forth in Rule 4 of the AAA Rules. He examined the effect of the Klay
decision at length before deciding that it was not directly applicable to the present case.
Finally, he analyzed the issue of collateral estoppel and provided extensive reasoning for
why it was not applicable. Reviewing the arbitrator's decision, there is no basis for
determining that the decision was irrational or evidenced manifest disregard for the law.
We AFFIRM the judgment of the District Court.
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