FEDERAL ARBITRATION ACT-CLASS ARBITRATION-AMBIGUITY

May 3rd, 2019 by Rieders Travis in Arbitration

Lamps Plus, Inc., et al v. Varela, 2019 Supreme Court (April 24, 2019) Roberts, C.J.-The Federal Arbitration Act requires courts to enforce covered arbitration agreements according to their terms. See 9 U.S.C. §2. In Stolt-Nielsen, S.A. v. Animal Feeds Int’l Corp., 599 U.S. 662 (2010), we held that a court may not compel arbitration on a classwide basis when an agreement is “silent” on the availability of such arbitrations. Because class arbitration fundamentally changes the nature of the “traditional individualized arbitration” envisioned by the FAA, Epic Systems Corp. v. Lewis, 584 U.S. ___, ____ (2018) (slip op., at 8), “ a party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so,” Stolt-Nielsen, 559 U.S., at 684 (emphasis in original). We now consider whether the FAA similarly bars an order requiring class arbitration when an agreement is not silent, but rather “ambiguous” about the availability of such arbitration. “[T]he first principle that underscores all of our arbitration decisions” is that “[a]rbitration is strictly a matter of consent.” Granite Rock Co. v. Teamsters, 561 U.S. 287, 299 (2010) (internal quotation marks omitted). We have emphasized that “foundational FAA principle” many times. Stolt-Nielsen, 559 U.S., at 684; see also, e.g., Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002); First Options, 514 U.S. at 934; Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S., at 52, 57 (1995); Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ.,  489 U.S. 468, 479 (1989); Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985). Consent is essential under the FAA because arbitrators wield only the authority they are given. That is, they derive their “powers from the parties’ agreement to forgo the legal process and submit their disputes to private dispute resolution.” Stolt-Nielsen, 559 U.S. at 682. Parties may generally shape such agreements to their liking by specifying with whom they will arbitrate the issues subject to arbitration, the rules by which they will arbitrate, and the arbitrators who will resolve their disputes. Id., at 683-684. Whatever they settled on, the task for courts and arbitrators at bottom remains the same: “to give effect to the intent of the parties.” Id., at 684. Our opinion today is far from the watershed JUSTICE KAGAN claims it to be. Rather, it is consistent with a long line of cases holding that the FAA provides the default rule for resolving certain ambiguities in arbitration agreements. For example, we have repeatedly held that ambiguities about the scope of an arbitration agreement must be resolved in favor of arbitration. See, e.g., Mitsubishi Motors Corp., 473 U.S. at 626; Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983). In those cases, we did not seek to resolve the ambiguity by asking who drafted the agreement. Instead, we held that the FAA itself provided the rule. As in those cases, the FAA provides the default rule for resolving ambiguity here. Courts may not infer from an ambiguous agreement that parties have consented to arbitrate on a classwide basis.