The Language of Arbitration Agreements and Availability of Class Arbitration: Focusing on the U.S. Supreme Court's Lamps Plus, Inc. v. Varela Decision

Arbitration is an alternative dispute resolution mechanism based on the parties’ agreement to resolve any disputes parties may have by arbitration rather than litigation in court. Parties’ consent to arbitrate, which must be manifest in the parties’ arbitration clause or agreement, is the foundation for arbitration; thus, the language of an arbitration agreement is often of utmost importance in determining the intent of the parties regarding many aspects of arbitration proceedings, such as, the scope of arbitral proceedings, arbitral seat, and authority of arbitral tribunals, among others. Recently, the U.S. Supreme Court held in Lamps Plus, Inc. v. Varela (2019) that ambiguity in arbitration agreement as to availability of class arbitration should be resolved in favor of individual arbitration, and therefore, class arbitration would be precluded. Such holding was met with criticism by four separate dissenting opinions, in which the dissenting Justices have disagreed with the majority’s interpretation of the arbitration agreement at issue, as well as, its rejection of application of state law in resolving contractual ambiguity. This article analyzes the Supreme Court’s decision and reviews the Court’s approach in construction of the arbitration agreement. Nevertheless, because the Supreme Court declined to provide clear guidelines as to precisely what contractual basis is required to permit class arbitration, either silence or ambiguity in arbitration agreements will be resolved by disallowing class arbitration.