Section 10(a)(4) of the Federal Arbitration Act (FAA) provides that a court may vacate an award where the arbitrators exceeded their powers, or so imperfectly executed them, that a mutual, final, and definite award upon the subject matter submitted was not made.

John Sutter, a physician, brought a class action in New Jersey Superior Court against Oxford Health Plan for failure to make full and prompt payment to doctors pursuant to an agreement between Sutter and the health insurance company. Oxford moved to compel arbitration based on an arbitration clause in the agreement and the superior court granted Oxford's motion.

During the arbitration, the parties agreed to grant the arbitrator the power to decide whether the contract authorised class arbitration. The arbitrator found that the arbitration clause permitted class arbitration. Oxford responded by filing a motion to vacate the arbitrator's decision in federal court on the ground that the arbitrator had exceeded his power under section 10(a)(4) of the FAA. The district court denied the motion and the Third Circuit Court of Appeals affirmed.

Following the Supreme Court's decision in Stolt Nielson SA v AnimalFeeds Int'l Corp., 559 U.S. 662 (2009) (see Legal update, Supreme Court rules class arbitration is unavailable when agreement is silent), which held that a party cannot be compelled to submit to class arbitration unless there is a contractual basis to bind the party, Oxford requested the arbitrator to reconsider his decision on class arbitration in light of Stolt Nielson. When the arbitrator affirmed that the parties had agreed to class arbitration, Oxford filed another motion to vacate the arbitrator's decision based on section 10(a)(4) of the FAA. Once again, the district court denied the motion, and the Third Circuit Court of Appeals affirmed. The Supreme Court granted certiorari in 2012 to decide whether that section "allows a court to vacate an arbitral award in similar circumstances."

The Supreme Court noted that a party seeking relief under section 10(a)(4) of the FAA bears a heavy burden. Unlike in Stolt Nielson, the Supreme Court upheld the arbitral decision here because there was a contractual basis for allowing the claimants to proceed with class arbitration. The Supreme Court distinguished Stolt Nielson by highlighting the parties' stipulation in that case that "they had never reached an agreement on class arbitration." Thus, the arbitrator could not have determined the parties' intent regarding class arbitration based on the arbitration clause. Furthermore, the Supreme Court stated that the issue in Stolt Nielson was that the arbitrators "abandoned their interpretative role," not that they had misinterpreted the contract.

Here, Oxford sought to vacate the arbitrator's decision on the basis of a misinterpretation of the parties' intent. However, the Supreme Court asserted that section 10(a)(4) prevents a court from vacating an arbitral decision on the basis that the arbitrator "misinterpreted" the contract. Rather, section 10(a)(4) limits judicial review to cases in which the arbitrator "strayed from his delegated task of interpreting the contract." Because the arbitrator in this case had the authority to interpret whether the contract permitted class arbitration, the motion to vacate under section 10(a)(4) of the FAA was properly denied.

This case demonstrates the limited judicial review of an arbitrator's decision under section 10(a)(4) of the FAA and the high burden that must be met to vacate an arbitrator's decision under that provision.