Lamps Plus, Inc. v. Varela

139 S.Ct. 1407 (2019)

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Nature of the Case

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Facts

Lamps Plus (D) is a company that sells light fixtures and related products. A hacker impersonating a company official tricked a D employee into disclosing the tax information of approximately 1,300 other employees. A fraudulent federal income tax return was filed in the name of Frank Varela (P), a D employee. P had signed an arbitration agreement when he started work at the company. P sued D bringing state and federal claims on behalf of a putative class of employees whose tax information had been compromised. D moved to compel arbitration on an individual rather than classwide basis and to dismiss the lawsuit. The District Court granted the motion to compel arbitration and dismissed P’s claims without prejudice. The court rejected D’s request for individual arbitration, instead authorizing arbitration on a classwide basis. D appealed the order, arguing that the court erred by compelling class arbitration. The Ninth Circuit affirmed. The court reasoned because the fact that the agreement “does not expressly refer to class arbitration is not the ‘silence’ contemplated in Stolt-Nielsen.” The court determined that the agreement was ambiguous on the issue of class arbitration. The Ninth Circuit followed California law to construe the ambiguity against the drafter, a rule that “applies with peculiar force in the case of a contract of adhesion” such as this. D had drafted the agreement. The court adopted P’s interpretation authorizing class arbitration. D appealed.