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2018-2019 Term SCOTUS Arbitration Cases: What About Lamps Plus?

June 20th, 2019 Appellate Jurisdiction, Appellate Practice, Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Class Action Arbitration, Clause Construction Award, Consent to Class Arbitration, Contract Interpretation, Contract Interpretation Rules, Drafting Arbitration Agreements, FAA Preemption of State Law, Federal Policy in Favor of Arbitration, United States Court of Appeals for the Ninth Circuit, United States Supreme Court 2 Comments » By Philip J. Loree Jr.
Lamps Plus - Supreme Court Building
U.S. Supreme Court

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.  



         

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2 Responses to “2018-2019 Term SCOTUS Arbitration Cases: What About Lamps Plus?”

  1. Russ Bleemer says:

    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

  2. Russ, many thanks! You’re an excellent editor and a great friend!

    Phil

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