The U.S. Supreme Court voted to hear an appeal of the Ninth Circuit’s decision in Varela v. Lamps Plus, Inc. The Court is expected to decide whether workers can pursue their claims through class-wide arbitration when the underlying arbitration agreement is silent on the issue. The case could have wide-reaching consequences for employers who use arbitration agreements.
Last week, in American Express Co. v. Italian Colors Restaurant, the United States Supreme Court, in a 5-3 ruling, reversed the Second Circuit and held that a contractual waiver of class arbitration is enforceable under the Federal Arbitration Act (FAA) even if the cost of proving an individual claim in arbitration exceeds the potential recovery. In holding that a class action waiver in an arbitration agreement is enforceable, even as to federal anti-trust claims, this decision builds upon the trend set in Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010), AT & T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), and CompuCredit Corp. v. Greenwood, 132 S. Ct. 665 (2012) – that arbitration agreements should be enforced according to their terms even for claims under federal statutes.
The Supreme Court has unanimously upheld an arbitrator’s ruling that a contract that required arbitration of “any dispute” constituted an agreement to class-wide arbitration. The Court’s narrow ruling turns on the parties’ express agreement to allow the arbitrator to decide whether their contract, which contained an arbitration provision but did not mention class proceedings, authorized class arbitration. However, the opinion has significant implications for companies desiring to avoid class arbitration—and class actions generally—through provisions in their consumer, business, and employment contracts.