By: Christine Y. Dixon
On Monday, October 29, 2018, the U.S. Supreme Court heard arguments in Frank Varela v. Lamps Plus, Inc., No. 17-988, about whether employers can use arbitration provisions to bar class actions in both court and arbitration proceedings. The decision, expected sometime in the next year, will be important to employers because it may require the redrafting of arbitration agreements that employees sign as a condition of their employment.
In Varela v. Lamps Plus, Inc., No. 17-988, (“Varela”) Lamps Plus asked the Supreme Court to reverse the order approving the trial court’s decision to compel class wide arbitration of Mr. Varela’s claims. Lamps Plus had released Mr. Varela’s personal information in response to a phishing scam. Mr. Varela later filed a class action complaint over alleged damages from the dissemination of his personal information. Lamps Plus moved to compel arbitration pursuant to their employee arbitration agreement.
The trial court found the arbitration agreement was ambiguous as to whether class wide claims were subject to the agreement and construed the ambiguity against Lamps Plus. The trial court ordered the arbitration of all claims, including the class action claims. In the Ninth Circuit, Lamps Plus argued the parties did not agree to class arbitration, but the Ninth Circuit disagreed and affirmed the trial court’s decision. The Ninth Circuit, which includes California, found broad language in the arbitration agreement supported a finding that class arbitration was authorized.
California employers who want to avoid the risk of class wide arbitration proceedings should have their employees’ arbitration agreements modified to reflect an express waiver of class wide arbitration. Contact Dunn DeSantis Walt & Kendrick, LLP if you would like certainty that your arbitration provision comports with Varela.