Lamps Plus, Inc. v. Varela
139 S. Ct. 1407
| SCOTUS | 2019Background
- Lamps Plus employee Frank Varela sued after a data breach, asserting class claims for compromised tax information.
- Varela had signed a mandatory arbitration agreement with Lamps Plus that did not explicitly address class arbitration; the agreement used broad phrases like “any and all disputes, claims or controversies.”
- District Court compelled arbitration but authorized classwide arbitration; it dismissed the suit. Lamps Plus appealed, challenging the class-arbitration ruling.
- Ninth Circuit held the contract ambiguous and applied California’s contra proferentem rule (construe ambiguity against the drafter) to permit class arbitration.
- Lamps Plus petitioned to the Supreme Court; the Court accepted and addressed whether ambiguity (and contra proferentem) can supply a contractual basis for class arbitration under the FAA.
Issues
| Issue | Plaintiff's Argument (Varela) | Defendant's Argument (Lamps Plus) | Held |
|---|---|---|---|
| Whether ambiguous arbitration clauses permit class arbitration | Ambiguity resolved against drafter; class arbitration allowed | Ambiguity insufficient; must be affirmative contractual basis for class arbitration | Ambiguity alone cannot authorize class arbitration under the FAA |
| Whether California’s contra proferentem is preempted by the FAA when it produces class arbitration | Rule is neutral and applies to all contracts; not preempted | Contra proferentem targets arbitration by yielding class arbitration; preempted | Contra proferentem cannot be used to compel class arbitration absent affirmative contractual basis |
| Appellate jurisdiction: was the order appealable? (jurisdictional challenge) | (Respondent argued Ninth Circuit lacked jurisdiction) | Lamps Plus invoked §16(a)(3) final-decision appealability because court dismissed case after compelling arbitration | Majority held Lamps Plus had standing and appealability (relied on Randolph) and reached merits; Breyer dissented on jurisdiction |
| Standard for inferring consent to class arbitration from contract language | Default contract rules (including contra proferentem) can supply consent | FAA requires clear, affirmative contractual basis; silence or ambiguity insufficient | FAA requires more than silence or ambiguity; cannot infer consent to class arbitration without clear contractual basis |
Key Cases Cited
- Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662 (class arbitration requires contractual basis; silence insufficient)
- Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (arbitration is matter of consent; class arbitration differs fundamentally)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (state rules cannot reshape arbitration to mandate class procedures without consent)
- Green Tree Financial Corp.-Ala. v. Randolph, 531 U.S. 79 (order compelling arbitration and dismissing claims can be a final decision under FAA §16)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (state contract principles govern interpretation of arbitration agreements)
- Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52 (application of contra proferentem in interpreting arbitration clauses)
- DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463 (limits on applying contract doctrines that effectively disfavour arbitration)
- Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (ambiguous scope of arbitration clauses resolved in favor of arbitration)