Although 2013′s U.S. Supreme Court decision in Oxford Health Plans v. Sutter has not received a lot of business commentary, it should be a real eye-opener to businesses entering into arbitration agreements. The court held that, because of the extremely limited judicial review given to an arbitrator’s decision, as long as the arbitrator “even arguably” interprets the contract, the decision will not be second guessed by courts “however good, bad, or ugly.” Thus, “convincing a court of an arbitrator’s error—even his grave error—is not enough.” Nine justices may have disagreed with the arbitrator’s decision, but that was immaterial; the parties contracted for the arbitrator to construe the contract, so they were stuck with that decision.
While business clients are often encouraged to adopt arbitration, it is important that they do so consciously by thinking about the benefits and drawbacks of a particular method of dispute resolution. Despite the Supreme Court’s blunt words, parties do not often enter arbitration agreements understanding the benefits and risks.
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