Class Arbitration Attacked Again

Recent rulings from the U.S. Supreme Court have supported the underlying concept codified in the Federal Arbitration Act (FAA), but have demanded clarity in the drafting of agreements seeking implementation of an arbitration process through which to dispose of disputes. Recently, in Lamps Plus, Inc. v. Varela, the Court found neither silence nor ambiguity in an arbitration agreement regarding the permissibility of class arbitration enables a court to find that the parties agreed to permit class arbitration. According to the Court, consent is fundamental to arbitration. Arbitration agreements must be express and unambiguous because it would so drastically alter the nature of the proceeding from the simple bilateral process that was envisioned in the FAA. Rules of ADR organizations such as JAMS or AAA incorporated by reference into the agreement that contain ancillary rules under which arbitrators could conduct class proceedings had no effect on the Court’s decision. This implies that mere incorporation of other procedural rules is not a sufficient basis to infer an agreement to permit class arbitration either. The Court emphasized that class arbitration proceedings are fundamentally different in nature from bilateral arbitrations envisioned by the FAA. Class arbitrations sacrifice the informality of the contemplated bilateral process, as well as its speed, simplicity, and relative inexpensiveness, and instead produce a slower, more costly, and more complex process that looks like “the litigation it was meant to displace." See full analysis here-- https://bit.ly/2HlFvdW and opinion here-- https://bit.ly/2GvzOZm