Case No. 17-988 | 9th Cir.
Preview by Aaron J. Aber
The issue presented in Lamps Plus, Inc. v. Varela is whether an employee waived his right to class arbitration when he signed an agreement that that did not explicitly prohibit class arbitration. The case arose after an employee of Lamps Plus, Frank Varela, filed a class action suit against the company for damages associated with a computer hack.
The district court denied Lamp Plus’s motion to compel bilateral arbitration, finding that the arbitration agreement Varela signed “[was] a contract of adhesion and ambiguous as to class arbitration.” Varela v. Lamps Plus, Inc., 701 F. App’x 670, 671 (9th Cir. 2017). The Ninth Circuit affirmed, relying on the holding of Stolt Nielsen S.A. v. AnimalFeeds International Corp. that a party “may not be compelled under the [Federal Arbitration Act] to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so.” 559 U.S. 662, 684 (2010). Applying California state contract law that “require[d] construction against Lamps Plus, the drafter,” the Ninth Circuit concluded the language of the agreement was ambiguous and supported an interpretation that a contractual basis existed for an agreement to class arbitration. Lamps Plus, Inc., 701 F. App’x at 673.
On appeal, Lamps Plus argues the Ninth Circuit erred by interpreting “language found in virtually any standard arbitration clause” as an agreement by Lamps Plus to engage in class arbitration. Brief for Petitioners at 3, Lamps Plus Inc. v. Varela, No. 17-988 (U.S. filed Jan. 10, 2018). They argue that the language on which the Ninth Circuit relied was not enough to support the “contractual basis” for agreeing to class arbitration that the Supreme Court required in Stolt Nielsen. Id. at 8–9. Varela argues the Ninth Circuit acted appropriately when it used “ordinary state-law principles” to interpret the arbitration agreement. Brief for Respondent at 54, Lamps Plus Inc. v. Varela, No. 17-988 (U.S. filed Mar. 14, 2018) (quoting First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995)).
This case purports to “reflect[] the Supreme Court’s continuing interest in arbitration,” and could “decide whether the [Federal Arbitration Act] trumps the National Labor Relations Act so as to allow class action waivers in employment agreements.” Alan S. Kaplinsky & Mark J. Levin, U.S. Supreme Court Decision in Lamps Plus Will Shed More Light on Class Arbitration, Nat’l L. Rev. (May 3, 2018), https://www.natlawreview.com/article/us-supreme-court-decision-lamps-plus-will-shed-more-light-class-arbitration.