Supreme Court: Classwide Arbitration Requires Explicit Consent - The Temple 10-Q

David Laurent, co-chair of the firm's Labor & Employment section, Michael Bootier, counsel in Litigation, and Shane Simon, associate in Litigation, authored an article on the Supreme Court's recent decision wherein the Court held that an ambiguous agreement cannot provide the requisite contractual basis to support a finding that the parties agreed to submit a dispute to class arbitration. 

The underlying dispute arose when a hacker gained access to the confidential tax information of about 1,300 Lamps Plus employees. Thereafter, a fraudulent income tax return was filed on behalf of Frank Varela, a Lamps Plus employee. Mr. Varela brought suit against Lamps Plus in Federal District Court in California, setting forth a variety of claims on behalf of a putative class of Lamps Plus employees whose tax information had also been exposed in the data breach.

Lamps Plus moved to compel individual arbitrations pursuant to arbitration agreements signed by Mr. Varela – and most other Lamps Plus employees – when they were hired. The District Court granted Lamps Plus’s motion to compel arbitration and dismissed Varela’s claims without prejudice, but rejected the request for individual arbitration; instead permitting classwide arbitration. Lamps Plus appealed, arguing that the order allowing classwide arbitration was in error.

The Ninth Circuit affirmed the District Court’s decision, distinguishing the Supreme Court’s decision in Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010), which permits class arbitration only if all parties specifically agreed to class arbitration. The Ninth Circuit concluded that the Lamps Plus agreement was ambiguous as to class arbitration but, applying California law and the doctrine of contra proferentem (construing ambiguities against the drafter), the Ninth Circuit adopted Varela’s interpretation permitting class arbitration. Lamps Plus sought certiorari, arguing that the Ninth Circuit’s decision was contrary to Stolt-Nielsen and created a circuit split. The Supreme Court granted certiorari.

Read the full article, "Supreme Court: Classwide Arbitration Requires Explicit Consent" in The Temple 10-Q, Temple University's business law magazine.