Clyde Snow

Class Claims Not Allowed in Arbitration Unless Expressly Authorized

by | Apr 24, 2019

Earlier today, the U.S. Supreme Court held in Lamps Plus Inc. v. Varela (No. 17-988) that when an arbitration agreement covers the subject-matter of a dispute, the plaintiff’s claims may be arbitrated only on an individual basis unless the agreement expressly permits arbitration of class claims. As a practical matter, this means that most arbitration agreements also operate as class action waivers.

In Lamps Plus Inc. v. Varela, the plaintiff sued his employer after the personal information of approximately 1,300 employees was wrongly released in a data breach. Varela asserted class claims on behalf of all affected employees. Based on an arbitration agreement Varela signed when he started work at Lamps Plus, the trial court dismissed his claims but held that the class claims could be asserted in arbitration. Lamps Plus appealed this decision, maintaining that arbitration should be limited to Varela’s individual claims.  

The question on appeal centered on the fact that the language of the arbitration agreement did not directly address whether the employee could bring a class action. Rather, the agreement stated generally that “arbitration shall be in lieu of any and all lawsuits or other civil legal proceedings relating to [Varela’s] employment.” The Ninth Circuit found this language to be ambiguous and construed it against Lamps Plus as the drafter of the document, with the result that Varela be permitted to assert class claims in arbitration. However, the Supreme Court rejected the Ninth Circuit’s approach, holding that when parties consent to arbitration, they are consenting to individual arbitration unless otherwise indicated. Ambiguous language, like that of Varela’s arbitration agreement, “does not provide a sufficient basis to conclude that parties to an arbitration agreement agreed to sacrifice the principal advantage of arbitration,” namely, “its informality.” (Lamps Plus, Inc. v. Varela, Majority Slip Opinion at p. 8, quoting Concepcion, 563 U.S. at 348.)

In dissent, Justice Kagan criticized the majority opinion for depriving Varela of any ability to bring class claims in any venue, based on an arbitration agreement that “carries no hint of consent to surrender . . . the ability to bring a class proceeding.” (Id., Kagan, J., dissenting, at p. 2.)

Although this opinion will likely generate significant policy and jurisprudential debate, the practical result for employers is straightforward: Your existing arbitration agreements likely serve as class action waivers even if they do not say so expressly.

If you have questions about this decision or any other employment law matter, please contact Ms. McNeill at slm@clydesnow.com or any of the attorneys in Clyde Snow’s Labor & Employment Group at 801.322.2516.

Sign up for our latest updates.


Recent Posts

Ripple Effect 157: Fresh-Water Micro-Invertebrates

Robert Walsh of Australian Water Life joins us to discuss the importance of micro-invertebrates in our fresh water system. Great discussion that reaches back into our 7th grade taxonomy skills and understanding the real world impacts of overlooking these little...

Ripple Effect 156: All the Water Books!

Justin Scott-Coe, General Manager of Monte-Vista Water District, joins us to discuss his new Podcast and collaboration with Maven’s Notebook - the Water Shelf. The Water Shelf is the just the place for that certain co-hort of water lovers and book lovers. Justin talks...

Ripple Effect 155: Great Salt Lake Trust

Marcelle Shoop – Executive Director, and Adam Wickline of the Great Salt Lake Watershed Enhancement Trust join us to talk about the Trust’s mission to protect and preserve water for the Great Salt Lake. We discuss their water transactions program, their wetland...

Ripple Effect 154: 2024 Legislative Recap

Jeff Gittins of Smith Hartvigsen joins us to discuss the water bills passed during the 2024 Legislative Session. Jeff does a great job of explaining updates to saved water, new long-term planning efforts, and hot items to be watching out for.

Ripple Effect 153: UDAF Ag. Water Optimization Program

Amber Brown, Director of Government and Legislative Affairs, and Hannah Freeze, Program Manager, join us to discuss the Utah Department of Agriculture and Food’s Agricultural Water Optimization program. The State of Utah has invested heavily in studying and employing...

Ripple Effect 151: Discover Ag. Podcast

Tara Vander Dussen, Co-Host of the Discover Ag. Podcast, joins us for a lively and informative discussion about agricultural news and information. We dive into the presence and impact of social media, themes and trends, and why the new “food curious” movement is...

Related Posts