Arbitration, Class Action Waiver: SCOTUS Grants Certiorari To Review Whether Generalized Language In Arbitration Agreements Forecloses A State Law Interpretation Authorizing Class Arbitration Under The FAA

Issue Deals With Whether Generalized Language Was Akin To Silence Under Stolt-Nielsen.

            In Stolt-Nielsen v. AnimalFeeds International Corp., 55 U.S. 662, 684, 687 (2010), the U.S. Supreme Court (SCOTUS) held that the differences between bilateral and class-action arbitration are too great to presume the parties’ mere silence on the issue of class-action arbitration constitutes a consent to class-action arbitration.

            On April 30, 2018, SCOTUS granted certiorari to an unpublished Ninth Circuit opinion, Varela v. Lamps Plus, Inc., No. 16-56085 (9^th Cir. Aug. 3, 2017; now No. 17-988 (U.S. Sup.), which will confront this issue: “Whether the Federal Arbitration (FAA) forecloses a state-law interpretation of an arbitration agreement that would authorize class arbitration based solely on general language commonly used in arbitration agreements.”

            The arbitration case at issue in Varela was an arbitration clause which did not mention class arbitration. A divided Ninth Circuit, over a dissent by Circuit Judge Fernandez, inferred mutual assent to class arbitration from such standard language as the parties’ agreement that “arbitration shall be in lieu of any and all lawsuits or other civil legal proceedings.” “arbitrable claims are those that would have been available to the parties by law,” and “[the arbitrator was authorized to] award any remedy allowed by applicable law.” The Ninth Circuit majority used inferential logic to find class arbitration was permitted, placing special emphasis on the “in lieu of” and “claims” language. (interestingly enough, plaintiffs themselves argued for class arbitration after filing a federal class action and after employer Lamps Plus moved to compel arbitration.) In contrast, Circuit Judge Fernandez found that “[w]e should not allow Varela to enlist us in this palpable evasion of Stolt-Nielsen . . . .”

            This case is set for argument in the October 2018 term. At least one commentator believes that the Ninth Circuit engaged in undue “hair-splitting” in light of Stolt-Nielsen’s reasoning.

           BLOG OBSERVATION—Mike Hensley, co-contributor on the calattorneysfees.com blog, at Marc’s invitation, will be posting from time to time to Marc’s California mediation/arbitration blog.