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A N 8 8 D 8 B 1 AR SINCE www. NYLJ.com Volume 259—NO. 105 Friday, June 1, 2018

Arbitration Expert Analysis High to Decide When a Is Ambiguous on Question of Arbitration

n May 21, the reasoned that the agree- Court handed down ment was an adhesion contract, its highly anticipated was ambiguous on the question decision in Epic Sys- of class arbitration, and that the tems v. Lewis, 584 ambiguity would be construed By And OU.S. ___ (2018). The court, in a Samuel Holly H. against the drafter, Lamps Plus. Estreicher Weiss 5-4 decision, upheld arbitration agreements that waive employ- breach, Frank Varela filed a class 'Stolt-Nielsen v. AnimalFeeds International' ees' rights to bring class arbi- action against it alleging tration against their employers. negligence, breach of contract, On appeal, the U.S. Court of Ap- On April 30, the Supreme Court invasion of privacy and other peals for the Ninth Circuit affirmed granted certiorari in Lamps Plus claims. Lamps Plus moved to the district court order compel- v. Varela, taking up for review compel arbitration because ling arbitration on a classwide the question of "whether the Fed- Varela had signed an arbitration eral Arbitration Act forecloses agreement which was required After his employer, Lamps a state- interpretation of an as a condition of employment. Plus, disclosed his personal arbitration agreement that would In that agreement, Varela agreed information in a data breach, authorize class arbitration based that "all claims or controver- Frank Varela filed a class action solely on general language com- sies ('claims'), past, present or lawsuit against it alleging neg- monly used in arbitration agree- future that I may have against ligence, breach of contract, ments." the company or against its offers, invasion of privacy and other After his employer, Lamps Plus, directors, employees or agents claims. Inc. (Lamps Plus) disclosed his or that the company may have personal information in a data against me" would be resolved basis. The panel acknowl- by arbitration. The district court edged that a party cannot be Samuel Estreicher is the Dwight D. Opper- man professor and director of the Center for Labor ordered that the case be arbi- compelled to submit to class and Employment Law at New York University trated, but that it be arbitrated arbitration under the Federal School of Law. Holly H. Weiss is a partner at Schulte Roth & Zabel. on a classwide basis. The district Arbitration Act "unless there is a Friday, June 1, 2018

­contractual basis for concluding us in this palpable evasion of ­existing state and federal law to that the party agreed to do so," Stolt-Nielsen." ambiguous contractual language, as in Stolt-Nielsen v. AnimalFeeds following an established proce- 'Envisioned by the FAA' International, 559 U.S. 662, 684 dure. It first "applied the FAA (2010) (emphasis in original). In its petition for certiorari, principle that class arbitration In the majority's view, although Lamps Plus argued that the Ninth is permissible only if there is a the agreement did not expressly Circuit's decision is in violation contractual basis for it, and then authorize class arbitration, "rea- of the Supreme Court's ruling in it turned to generally applicable sonable—and perhaps the most Stolt-Nielsen, which holds that state contract law to ascertain reasonable interpretation of the FAA prohibits inferring "an whether such a contractual basis the expansive language" requir- implicit agreement to authorize existed." ing Varela's assent to waiver of class-action arbitration from the In the wake of Epic Systems, "any right I may have to file a fact of the parties' agreement to Lamps Plus is likely to bring clar- lawsuit or other civil action," his arbitrate." Lamps Plus also relied ity as to precisely under which additional waiver of "any right on AT&T Mobility v. Concepcion, circumstances class arbitration I may have to resolve employ- 563 U.S. 333, 348 (2011), for the will remain an option for claim- ment disputes through by proposition that bilateral arbi- ants in an agreement ostensibly or ," and his agreeing tration is the form of arbitration silent on the question of class that "arbitration shall be in lieu "envisioned by the FAA." The arbitration. of any and all or other company cited both cases for civil legal proceedings relating to the proposition that the policy my employment majority" is that advantages of bilateral arbitra- "it authorizes class arbitration. tion are its reduced procedural It requires no action of interpre- rigor and resultant lower costs, tive acrobatics to include class greater efficiency and speed. proceedings as part of a 'lawsuit Thus, class arbitration is "not or other civil proceeding." Sec- arbitration as envisioned by the ondarily, since the agreement FAA" because it undercuts these was capable of two reasonable advantages. constructions—one permitting Lamps Plus also argued that class arbitration, one excluding while the parties had agreed to it, the district court properly arbitration "in lieu of any and all relied on the state-law doctrine lawsuits or other civil proceed- holding that contractual ambi- ings," they did not agree that guities should be construed arbitration would duplicate all against the drafter. The dissent procedures available in court, stated that the agreement was specifically, class actions.

Reprinted with permission from the June 1, 2018 edition of the NEW not ambiguous and that "we Varela argued that the Ninth YORK LAW JOURNAL © 2018 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For should not allow Varela to enlist Circuit had merely applied information, contact 877-257-3382 or [email protected]. # 070-06-18-03