Lamps Plus, Inc. v. Varela

In Lamps Plus, Inc. v. Varela, a 5-4 Supreme Court decision issued on April 24, 2019, the Court addressed whether an ambiguous arbitration agreement could authorize class arbitration under the Federal Arbitration Act (FAA). After a data breach exposed the personal information of Lamps Plus employees, Frank Varela brought a class action in federal court. Lamps Plus sought to compel individual arbitration, relying on the employment agreement. The district court compelled arbitration but allowed it to proceed on a class basis. The Ninth Circuit affirmed, construing the ambiguous agreement against the drafter. The Supreme Court reversed, holding that an ambiguous agreement is insufficient to establish consent to class arbitration under the FAA. The FAA’s “consent” principle requires a clear contractual basis. The ruling reinforced the pro-arbitration federal policy and limited employees’ ability to proceed collectively in arbitration.

The Supreme Court reversed the Ninth Circuit, ruling 5-4 that an ambiguous arbitration agreement does not provide a sufficient contractual basis for class arbitration.

Whether the Federal Arbitration Act permits class arbitration when the underlying arbitration agreement is ambiguous regarding class proceedings.

The decision strengthened the enforcement of arbitration agreements as written, making it harder for employees and consumers to pursue class-wide relief in arbitration. It underscored that silence or ambiguity cannot be construed to compel class arbitration, thus expanding corporate reliance on individual arbitration clauses.