United States: United States Supreme Court Holds That Class Arbitration Must Be Explicitly Authorized
Last Updated: May 13 2019

(April 25, 2019) - On April 24, 2019, the United States Supreme Court issued its opinion in Lamps Plus Inc., v. Varela, ___ 587 U.S. ___ (2019), clarifying whether a court can compel class action arbitration when the arbitration agreement is ambiguous concerning class action arbitration. In a 5-4 opinion, the Court held that "under the Federal Arbitration Act, an ambiguous agreement cannot provide the necessary contractual basis for concluding that the parties agreed to submit to class arbitration." The opinion was written by Chief Justice Roberts for the majority, with a separate concurring opinion by Justice Thomas, and dissenting opinions by Justices Breyer, Ginsberg, Kagan, and Sotomayor.

In Varela, a hacker tricked an employee of Lamps Plus into divulging the tax information of 1,300 of its employees. After a fraudulent tax return was filed in Varela's name, he joined with his fellow employees to file a class action lawsuit against Lamps Plus. Lamps Plus moved to compel individual arbitration and dismiss the suit. Id. The district court rejected individual arbitration, but found the agreement was ambiguous as to class arbitration and allowed class-wide arbitration to proceed. On appeal, the Ninth Circuit affirmed the district court's order stating that the Supreme Court's controlling case on the issue - Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662 (2010) - did not apply because the arbitration agreement was ambiguous as to class action arbitration, rather than silent as it was in Stolt-Nielsen.

The Supreme Court reversed. It ruled that there was a fundamental difference between individual arbitration and class action arbitration, noting that many of the benefits of individual arbitration are not present in class action arbitration. The Supreme Court ruled that parties cannot be compelled to enter class action arbitration unless there is an "affirmative contractual basis for concluding that the party agreed to do so." The Court also ruled that ambiguity, like silence, is not enough to show that the parties wanted to forego the advantages of individual arbitration and enter into class arbitration. In addition, the Court ruled that California's contra proferentemdoctrine, stating that "contractual ambiguities would be construed against the drafter," is inconsistent with the Federal Arbitration Act's principle that arbitration is a matter of consent. 

In his concurring opinion, Justice Thomas noted that the underlying contract was silent, rather than ambiguous, with regards to class action arbitration. In his dissenting opinion, Justice Breyer found the Court lacked jurisdiction because the district court's arbitration order was interlocutory and therefore not appealable. Justice Ginsberg, in her dissenting opinion, stated that class action arbitration is fundamentally compatible with individual arbitration and workers should be allowed to band together to arbitrate. Justice Sotomayor stated in her dissenting opinion that the FAA should not preempt the neutral concept of state contract law. Lastly, Justice Kagan's dissent emphasized that state law should be controlling as long as it treats other types of contracts in the same manner.

The key takeaway from the Lamps Plus decision is consent. All contracts, employment or otherwise, must establish by their terms that both parties consented to class arbitration. With this recent decision by the nation's highest court, ambiguity in contract terms as to class arbitration is insufficient; there must be clear assent by the parties.

This is not a license for laziness in drafting arbitration provisions, however. Employers and business owners must still mean what they say and say what they mean in drafting arbitration agreements. Clarity increases the chances of avoiding court. Businesses and employers should set forth in unequivocal terms that arbitration provisions apply only to the individual and that class actions have been waived.

Lewis Brisbois congratulates Class Action & Mass Tort Practice Partners Eric Y. Kizirian and Michael Grimaldi, and Appellate Practice Partners Jeffry A. Miller and Brittany Bartold Sutton, who successfully represented Lamps Plus Inc. in this matter.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Press Releases from this Firm
Recent Content from this Firm
By Tiffany Truffo, Mary A. Smigielski, Daniel Cetina
By Bindu Nair, Elizabeth Dill
By Nicholas Hurzeler, Eileen Budd
By Lindsey Smith, Elizabeth Dill, David B. Sherman
By Peter Shapiro, Jeffrey Spiegel
By Steven Gatley
By Jade McKenzie
By Elisaveta Dolghih, Ashley Voli
By Ezra Finkle
By Elisaveta Dolghih, Sean Driscoll
Tools
Print
Font Size:
Translation
Channels
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions