Frank Varela v. Lamps Plus, Inc.
701 F. App'x 670
9th Cir.2017Background
- Employee Frank Varela filed a class action after Lamps Plus disclosed employees’ personal information following a phishing scam, alleging negligence, breach of contract, invasion of privacy, and related claims.
- Lamps Plus sought to compel bilateral (individual) arbitration under an employment arbitration agreement Varela signed as a condition of employment.
- The district court found the Agreement to be an adhesive contract and ambiguous as to whether it authorized class arbitration, construed ambiguities against the drafter (Lamps Plus), and allowed class-wide arbitration to proceed.
- Lamps Plus appealed, arguing the parties never agreed to class arbitration and that the Agreement does not permit it.
- The Ninth Circuit affirmed, holding the Agreement was reasonably susceptible to an interpretation authorizing class arbitration and that ambiguity must be construed against the drafter, providing the contractual basis required to compel class arbitration under Stolt-Nielsen.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the arbitration Agreement authorizes class arbitration | The Agreement’s broad waivers of "any" lawsuit or "other civil proceeding" and authorization for remedies by applicable law encompass class proceedings | The Agreement does not expressly mention class arbitration; silence means no agreement to class arbitration | The Agreement is reasonably susceptible to a construction permitting class arbitration; affirmed that there is a contractual basis for class arbitration |
| Whether ambiguity should be resolved against the drafter (adhesive contract) | Ambiguities should be construed against Lamps Plus, the drafter, supporting class arbitration | Lamps Plus contends the Agreement is unambiguous and should not be read to authorize class procedures | Because the Agreement is ambiguous, California contract law and the rule against drafter-controlled ambiguities (particularly in adhesion contracts) require construing in favor of Varela, supporting class arbitration |
Key Cases Cited
- Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (Silence alone does not show agreement to class arbitration; contractual basis required to compel class arbitration)
- Oxford Health Plans LLC v. Sutter, 569 U.S. 564 (Parties may stipulate that silence means no agreement; analysis focuses on whether parties agreed)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (State law contract principles govern arbitration agreement interpretation)
- Powerine Oil Co. v. Super. Ct., 37 Cal.4th 377 (California: contract is ambiguous when reasonably susceptible to two constructions)
- Dore v. Arnold Worldwide, Inc., 39 Cal.4th 384 (Ambiguity may exist in a contract overall despite some clear terms)
- Sakkab v. Luxottica Retail N. Am., Inc., 803 F.3d 425 (Class action is a procedural device; arbitrator can award class-wide remedies)