SCOTUS Grants Certiorari in Yet Another Class Arbitration Dispute

The Supreme Court of the United States has granted certiorari in yet another class arbitration dispute in the labor context.   In Lamps Plus, Inc., et al. v. Varela, No. 17-988, a California man, Frank Varela, signed an agreement to arbitrate any future disputes with Lamps Plus as a condition of employment.  The agreement was silent on the issue of class arbitration.  Later, Varela filed a class-action lawsuit against his employer following a data breach that disclosed his personal information.

In response to Varela’s complaint, Lamps Plus filed a motion to compel the dispute to arbitration.  The Central District of California granted the company’s motion, but stated class arbitration was permitted due to ambiguity in the parties’ agreement to arbitrate.  Lamps Plus then filed an appeal with the nation’s Ninth Circuit.

In an unpublished opinion, a Ninth Circuit Court of Appeals panel affirmed the district court’s order.  In a 2-1 decision, the appellate court concluded:

Because the Agreement is capable of two reasonable constructions, the district court correctly found ambiguity. State contract principles require construction against Lamps Plus, the drafter of the adhesive Agreement. By accepting the construction posited by Varela – that the ambiguous Agreement permits class arbitration – the district court properly found the necessary “contractual basis” for agreement to class arbitration. Stolt-Nielsen, 559 U.S. at 684.

Despite the panel’s holding, Judge Fernandez authored a succinct dissent which stated:

I respectfully dissent because, as I see it, the Agreement was not ambiguous. We should not allow Varela to enlist us in this palpable evasion of Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 684–85, 130 S. Ct. 1758, 1775, 176 L. Ed. 2d 605 (2010).

Not long after the Ninth Circuit issued its decision, Lamps Plus filed a petition for certiorari with the United States Supreme Court.  According to the company’s petition for a writ of certiorari, the question presented in the case is:

Whether the Federal Arbitration Act forecloses a state-law interpretation of an arbitration agreement that would authorize class arbitration based solely on general language commonly used in arbitration agreements.

On Monday, the nation’s highest court granted the company’s petition.  The case will be argued during the October 2018 term.

Additionally, the Supreme Court is currently considering another trio of cases related to whether class arbitration waivers in an employment contract violate the National Labor Relations Act.  On October 2, 2017, oral argument was heard in Epic Systems Corp. v. Lewis, NLRB v. Murphy Oil USA, Inc., and Ernst & Young LLP v. Morris. The high court’s decision is still pending.

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