Express Language in Agreement Required for Arbitration of Class Actions

Express Language in Agreement Required for Arbitration of Class Actions

On April 24, 2019, the U.S. Supreme Court in Lamps Plus, Inc. v. Varela held that judges may compel class action arbitration only where the parties have expressly agreed to do so in their arbitration agreement. Reversing a decision of the Ninth Circuit Court of Appeals, five justices ruled that the Federal Arbitration Act requires courts “to enforce arbitration agreements according to their terms,” and “therefore requires more than ambiguity to ensure that the parties actually agreed to arbitrate on a classwide basis.”

The decision of the high court in Lamps Plus comes on the heels of its earlier decision this year in Epic Systems Corp. v. Lewis where it held that mandatory class action waivers in an arbitration agreement were enforceable in a wage and hour dispute. Presently, many states have enacted or are in the process of passing legislation to prohibit employers from requiring employees to sign pre-dispute arbitration agreements. In California, Assembly Bill 51 would prohibit employers from requiring their employees to bring employment-related claims in arbitration instead of court. Given the recent holdings of the U.S. Supreme Court, however, any such state laws will likely be challenged on the ground of FAA preemption.