MONTH-IN-BRIEF (Apr 2019)
Banking Law
U.S. Supreme Court Holds that Clear Consent is Required for Classwide Arbitration
By Nora Udell, Hudson Cook, LLP
On April 24, 2019, in Lamps Plus v. Varela, the United States Supreme Court held in a 5-4 decision reversing the Court of Appeals for the Ninth Circuit, that courts may no longer infer from an ambiguous arbitration agreement that parties have consented to classwide arbitration. Rather, there must be an “affirmative contractual basis for concluding that the parties agreed to class arbitration.” The Court explained that consent is the touchstone of an agreement to arbitrate. For this reason, California’s default rule that ambiguity in a contract must be construed against the drafter, could not be applied to impose classwide arbitration. The Court explained that the general applicability of the contra proferentem rule could not save it from preemption under the Federal Arbitration Act because the rule’s effect was to force a party into classwide arbitration, without the party’s consent. The holding in Lamps Plus follows Stolt-Nielsen S.A. v. Animal Feeds Int’l Corp., in which the Court held that courts cannot compel classwide arbitration when an agreement is silent on its availability.
