On April 24, 2019 in Lamps Plus Inc. v. Varela, 587 U.S. ___, No. 17-998 (April 24, 2019), the United States Supreme Court considered whether whether consent to class arbitration may be inferred from ambiguous contract language.
In a 5-4 opinion written by Chief Justice John G. Roberts Jr. the Court held that ambiguity in and of itself was not enough to infer party consent to class arbitration. Parties would have to clearly express their consent to class arbitration before courts could impose it on them under the Federal Arbitration Act.
Nearly a decade after determining in Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010) that consent to class arbitration was fundamental, the Lamps Plus Court further held that class-arbitration decision makers can’t infer consent using a policy—not intent—based contract construction rule. Lamps Plus overturned a Ninth Circuit decision, which had used the California state default contract construction rule of contra proferentem to interpret against the drafter a contract that was ambiguous on class-arbitration consent.
The Lamps Plus Presumption Against Consent to Class Arbitration
Lamps Plus extended Stolt-Nielsen’s scope substantially by establishing a new federal arbitration-law rule, and a presumption against consent to class arbitration: “Courts may not infer from an ambiguous agreement that parties have consented to arbitrate on a classwide basis.” Slip op. at 12.
This new Stolt-Nielsen/Lamps Plus presumption is a federal common-law rule that applies in both state and federal court. The Court held that it preempts the rule of contra proferentem, under which ambiguous contracts are interpreted against the drafter: “[t]he doctrine of contra proferentem cannot substitute for the requisite affirmative ‘contractual basis for concluding that the part[ies] agreed to [class arbitration].’” Slip op. at 12-13 (quoting Stolt-Nielsen, 559 U.S. at 684).
The presumption requires much more than simply “a contractual basis” for finding consent to class arbitration. It means, as a practical matter, that the parties must clearly and unmistakably consent to class arbitration.
Our CPR Alternatives Article on Lamps Plus
Lamps Plus was the third of three arbitration law cases the United States Supreme Court heard during the Court’s 2018-2019 Term. Earlier this year we reported on the first two of the three, Schein v. Archer & White Sales, Inc., 586 U.S. ___, No. 17–1272, slip op. (January 8, 2019), and New Prime Inc. v. Oliveira, 586 U.S. ___, No. 17–340, slip op. (Jan. 15, 2019). (See here, here, and here.)
But we did not publish a post (or series of posts) on Lamps Plus because we decided instead to write a full-length trade-press article on the case, which we recently published in the June 2019 edition of our favorite ADR trade press publication, Alternatives to The High Cost of Litigation (“Alternatives”). Alternatives is the newsletter of the International Institute for Conflict Prevention & Resolution (“CPR”) and is published by John Wiley & Sons, Inc.
CPR’s website quite accurately and appropriately describes Alternatives as “an international newsletter covering cutting-edge dispute resolution trends[,] and “an authoritative guide for using ADR at companies, within law firms and in the courts.” Each monthly issue “focuses on new ADR developments, techniques and court practices.” (See CPR Website, here.)
The article—Philip J. Loree Jr., SCOTUS Introduces a New Federal Arbitration Act Presumption Against Consent to Class Arbitration, 37 Alternatives to the High Cost of Litigation 83-89 (June 2019)—discusses Lamps Plus’s Stolt-Nielsen background, and the case’s facts and procedural history, and walks the reader through the reasoning of the majority opinion. It summarizes Associate Justice Clarence Thomas’s concurring opinion, and the dissenting opinions of Associate Justices Ruth Bader Ginsburg, Sonia M. Sotomayor, and Stephen G. Breyer. It discusses and analyzes the new presumption against class arbitration and explains how it will likely be applied in practice. It also discusses issues that the decision leaves open and explains why we believe the decision’s effect on outcomes will be most significant in cases where clause construction determinations are made by courts rather than by arbitrators.
While CPR members receive Alternatives as a membership perk, John Wiley & Sons makes copies of articles or issues available to members of the public on a read-only or download basis for a reasonable fee. If you would like to obtain a copy of our Lamps Plus article, please visit the Wiley Online website here.
A Shout out to CPR Alternatives Editor Russ Bleemer
We’d like to take this opportunity to thank our good friend Russ Bleemer, the long-time editor of Alternatives, who did a great job editing and perfecting the article. We’ve written a number of articles for Alternatives over the last ten years or so, and Russ has played a key role in each. His keen editorial insights and skills, and his boundless interest in, and enthusiasm for, the subject matter, are invaluable.
Russ is also blog master of CPR Speaks, the blog of The CPR Institute, where he (sometimes with the assistance of CPR interns) blogs about a broad range of ADR-related topics. You can follow CPR Speaks here.
Photo Acknowledgement
The photo featured in this post was licensed from Yay Images and is subject to copyright protection under applicable law.
Tags: ADR, Alternatives, Ambiguous Contract, California Law, Class Arbitration, Consent to Class Arbitration, Contra Proferentum, CPR Speaks, First Principle, International Institute for Conflict Prevention & Resolution, John Wiley & Sons, Lamps Plus, Lamps Plus Inc. v. Varela, New Prime, New Prime Inc. v. Oliveira, Presumption against Consent to Class Arbitration, Russ Bleemer, Schein v. Archer & White Sales, SCOTUS, Stolt-Nielsen, United States Supreme Court
Thanks for the great write up and even greater contribution to our work and the ADR/arbitration field, Phil! And thank you for the very kind words.
Russ
Russ, many thanks! You’re an excellent editor and a great friend!
Phil