Friday, April 26, 2019

SCOTUS: No class action arbitration from ambiguous agreement

Sorry, I was out yesterday so I'm a day late to this party. On Wednesday, the Supreme Court released its opinion in Lamp Plus, Inc. v. Varela. A hacker stole employee data from Lamp Plus, which was used to file fraudulent tax returns. An employee, Varela, filed a putative class action in federal court.

One problem - the employee had an arbitration agreement. So, the court compelled arbitration. Here's the twist though - the court compelled class arbitration. The courts concluded that the arbitration agreements were ambiguous as to whether the parties consented to class arbitration. Under California law (comparable to most states' contract law I imagine), ambiguous contracts are interpreted against the drafter. So, the lower courts reasoned, Lamp Plus as the drafter could be compelled into class arbitration based on the ambiguous contracts.

The Supreme Court disagreed. "Courts may not infer from an ambiguous agreement that parties have consented to arbitrate on a classwide basis." Frankly, I'm not sure what this means procedurally. I think the district court will now reconsider the motion to compel arbitration on remand, and presumably conclude that the parties must arbitrate Varela's individual claim.

There are reasons an employer may or may not want to consent to class arbitration. This is just another topic that can be addressed in the language of the arbitration agreement itself though.

No comments:

Post a Comment