{"id":895924,"date":"2019-05-28T13:55:26","date_gmt":"2019-05-28T19:55:26","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=895924"},"modified":"2019-05-28T13:55:33","modified_gmt":"2019-05-28T19:55:33","slug":"us-supreme-court-express-authorization-class-arbitration","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/us-supreme-court-express-authorization-class-arbitration\/","title":{"rendered":"U.S. Supreme Court Affirms the Necessity of Express Authorization for Class Arbitration"},"content":{"rendered":"\n

Micha Nandaraj Gallo | Covington & Burling<\/a> | April 25, 2019<\/p>\n\n\n\n

On April 24, 2019, the Supreme Court issued its\u00a0opinion\u00a0in\u00a0Lamps Plus, Inc., et al. v. Varela<\/em>, addressing the question of whether an ambiguous arbitration agreement can be read to compel class arbitration under the Federal Arbitration Act, 9 U.S.C. \u00a7\u00a7 1-16 (2000). Underscoring the controversial nature of this decision, the case was decided by a 5-4 split that included dissenting opinions authored by Justices Ginsburg, Breyer, Sotomayor, and Kagan. The majority opinion, authored by Chief Justice Roberts, held that contract ambiguity did not suffice to compel class arbitration.<\/p>\n\n\n\n

The Underlying Case<\/strong><\/p>\n\n\n\n

The underlying dispute in Lamps Plus <\/em>arose in 2016 when a Lamps Plus employee was the target of a phishing scam. The employee was tricked into disclosing approximately 1,300 other employees\u2019 tax information when a hacker contacted the employee and impersonated a company official. Frank Varela, an employee of Lamps Plus, initiated a suit against Lamps Plus after a fraudulent federal income tax return was filed on his behalf. The suit was brought \u201con behalf of a putative class of employees whose tax information had been compromised\u201d in the phishing scam. The California District Court granted Lamps Plus\u2019s motion to compel arbitration, but in doing so authorized a class arbitration. Lamps Plus subsequently appealed the order to the Ninth Circuit, which affirmed the district court\u2019s decision and laid the groundwork for the Court\u2019s decision here.<\/p>\n\n\n\n

The Court\u2019s Decision<\/strong><\/p>\n\n\n\n

The Lamps Plus<\/em> decision extends and clarifies the Court\u2019s earlier ruling in Stolt-Nielsen S.A. v. AnimalFeeds Int\u2019l Corp.<\/em>, where the Court held that \u201ccourts may not infer consent to participate in class arbitration absent an affirmative \u2018contractual basis for concluding that the party agreed <\/em>to do so.\u201d The 9th Circuit in Lamps Plus <\/em>declined to apply Stolt-Nielsen<\/em> because in that case \u201cthe parties had stipulated <\/em>that their agreement was silent about class arbitration.\u201d In contrast, in Lamps Plus <\/em>the Ninth Circuit found that the agreement included terms that were ambiguous as to whether class arbitration would be permitted.<\/p>\n\n\n\n

After determining that Stolt-Nielsen <\/em>did not apply, the Ninth Circuit proceeded to evaluate the terms of the ambiguous arbitration agreement by applying state contract law, specifically contra proferentem<\/em>. Under California\u2019s law on contra proferentem<\/em>, ambiguous contract terms are interpreted against the drafter\u2014in this case Lamps Plus. Applying this rule, the Ninth Circuit affirmed the lower court\u2019s decision to permit class arbitration.<\/p>\n\n\n\n

After granting cert, the Court reviewed the Ninth Circuit\u2019s decision and reversed. While the Court accepted the Ninth Circuit\u2019s finding that the underlying contract was ambiguous, it rejected the Ninth Circuit\u2019s ultimate conclusion. Specifically, the Court found that contra proferentem <\/em>only applies as a rule of \u201clast resort.\u201d Therefore, in this case, the Ninth Circuit should have looked to the FAA to construe the contract provisions before applying contra proferentem<\/em>.<\/p>\n\n\n\n

According to the Court, party consent to arbitrate is a fundamental tenet of the FAA, and courts may not infer consent to arbitrate on a classwide basis from an ambiguous agreement. Moreover, in the case of class arbitration where proceeding would \u201csacrifice[] the principal advantage of arbitration,\u201d the Court found ambiguity especially insufficient to compel class arbitration. The Court characterized this holding as consistent with its other cases addressing \u201cfundamental arbitration questions,\u201d in which it has also refused to infer consent.<\/p>\n","protected":false},"excerpt":{"rendered":"

Micha Nandaraj Gallo | Covington & Burling | April 25, 2019 On April 24, 2019, the Supreme Court issued its\u00a0opinion\u00a0in\u00a0Lamps Plus, Inc., et al. v. Varela, addressing the question of whether an ambiguous arbitration agreement can be read to compel class arbitration under the Federal Arbitration Act, 9 U.S.C. \u00a7\u00a7 1-16 (2000). Underscoring the controversial… Continue reading U.S. Supreme Court Affirms the Necessity of Express Authorization for Class Arbitration<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[41],"tags":[9895,42,10807,10806],"class_list":["post-895924","post","type-post","status-publish","format-standard","hentry","category-arbitration","tag-advise-consult","tag-arbitration-2","tag-arbitration-agreement","tag-class-arbitration","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nU.S. Supreme Court Affirms the Necessity of Express Authorization for Class Arbitration - 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