On Wednesday, the U.S. Supreme Court handed down a 5-4 decision in Lamps Plus v. Varela, restricting class-action arbitration for aggrieved workers and consumers. This decision represents the latest in a trend of adverse decisions by the Court for class arbitration and has widespread implications for consumer and employee rights going forward.
The Court’s decision overruled the Ninth Circuit Court of Appeals’ order requiring electronics retailer Lamps Plus to arbitrate class action claims brought by its employees who alleged that the retailer failed to sufficiently protect the workers’ personal information. In its opinion, the conservative majority of the Court reasoned that the parties’ agreement was not clear enough to determine whether there was consent to class action arbitration. The majority considered mutual assent to class action arbitration to be vital and reasoned that both parties must assent clearly in writing to authorize class arbitration.
Consequentially, the Court held that arbitration agreements must contain clear unambiguous language explicitly indicating that the parties agree to class action arbitration. In reaching its decision, the Court rejected the Ninth Circuit’s application of state law contract principles that construed the ambiguity against the commercial drafter, Lamps Plus.
The Court extended the holding in Stolt-Nielsen, a 2010 case that held class action litigation cannot be authorized where the parties’ agreement is silent regarding class arbitration. Parties to agreements that authorize arbitration but use ambiguous language regarding class action arbitration will now be barred from enforcing it under Lamps Plus.
This precedent is an unequivocal victory for big business at the expense of the individual. It allows the drafters of commercial agreements and employment contracts to strategically provide for individual arbitration, which saves large businesses and employers time and money, while eliminating the risk of potential class action arbitration, which allows plaintiffs with relatively low value claims to band together where bringing their claims individually would be impractical as an economic reality. Unfortunately, the Court’s new precedent will likely lead to a large number of individuals’ claims going without adjudication in the future.