The Supreme Court recently granted certiorari in Lamps Plus Inc. v. Varela, No. 17-988. The question presented in the petition for certiorari 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.”

The Court will review the Ninth Circuit’s unpublished decision in Varela v. Lamps Plus, Inc., No. 16-56085 (9th Cir. Aug. 3, 2017), which affirmed the district court’s order compelling a class-wide arbitration. The Ninth Circuit opinion explained that the Supreme Court’s decision in Stolt-Nielsen S.A. v. Animal Feeds Int’l Corp., 559 U.S. 662 (2010) “accepted the parties’ stipulation that silence meant ‘there’s been no agreement that has been reached,” and concluded that the fact that an arbitration clause “does not expressly refer to class arbitration is not the ‘silence’ contemplated in Stolt-Nielsen.” The arbitration clause at issue provided that “arbitration shall be in lieu of any and all lawsuits or other civil legal proceedings relating to my employment.” The Ninth Circuit held that “[a] reasonable – and perhaps the most reasonable – interpretation of this expansive language is that it authorizes class arbitration.” (Emphasis in original.) The Ninth Circuit further concluded that, where the court found two reasonable interpretations of the agreement, it was ambiguous, and should be construed against the defendant based on California principles of contract construction. Judge Fernandez dissented, stating simply that in his view the agreement was not ambiguous, and that the plaintiff’s position was a “palpable evasion” of Stolt-Nielsen. The petition for certiorari argues that the Ninth Circuit decision was contrary to the Court’s reasoning in Stolt-Nielsen as well as Oxford Health Plans LLC v. Sutter, 569 U.S. 564 (2013) (blog post) and AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (blog post).

The Court’s decision in Lamps Plus is unlikely to impact arbitration provisions that many companies currently have in use, which specifically preclude a classwide arbitration procedure. This case will be closely watched, however, by companies that have issued contracts with arbitration provisions that do not specifically preclude classwide arbitration.

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