2. Class arbitration and individual arbitration are fundamentally different.
In reversing the lower court’s determination that class arbitration could be compelled, the Court relied heavily on the idea that there is a “fundamental difference” between class arbitration and the individualized form of arbitration “envisioned by the FAA.” Individual arbitration, the Court noted, is intended to confer certain benefits: “lower costs, greater efficiency and speed, and the ability to choose expert adjudicators to resolve specialized disputes.” Class arbitration, however, sacrifices these benefits. It makes the process “slower, more costly, and more likely to generate procedural morass than final judgment.” Rather than confer the advantages envisioned by the FAA, class arbitration instead shears away efficiency and “wind[s] up looking like the litigation it was meant to displace.” The court found that due to these “crucial differences,” there was reason to doubt that the parties mutually consented to resolve disputes through classwide arbitration.
The Court failed to elaborate on the specifics of these “crucial differences,” and at first glance, it is unclear how dozens (or hundreds) of individual arbitrations would be preferable class arbitration. However, the Court cites to an earlier opinion, Stolt-Nielsen S.A. v. AnimalFeeds International Corp., which provides some insight. In Stolt-Nielson, the Court described the differences between traditional bilateral arbitration and class arbitration under the American Arbitration Association’s Class Action Rules. First, “[u]nder the Class Rules, the presumption of privacy and confidentiality that applies in many bilateral arbitrations shall not apply in class arbitrations . . . thus potentially frustrating the parties’ assumptions.” The Stolt-Nielsen
Court also expressed concern that in class arbitration “the arbitrator’s award no longer purports to bind just the parties to a single arbitration, but adjudicates the rights of absent parties as well.” Finally, the Court noted that while the commercial stakes of class action arbitration are comparable to those of class action litigation, the scope of judicial review is much more limited. Based on these distinctions, the Court in Stolt-Nielsen held that “the parties’ mere silence” on the issue of class action arbitration was insufficient to constitute consent.
Operating against this backdrop, the Lamps Plus Court reaffirmed that “silence is not enough” to infer consent to participate in class arbitration. Going a step further, the Court found that “[l]ike silence, ambiguity does not provide a sufficient basis to conclude that parties to an arbitration agreement agreed to sacrifice the principal advantage of arbitration.” The Court therefore held that “neither silence nor ambiguity provides a sufficient basis to undermine the central benefits of arbitration itself.” This holding provides an important lesson for those charged with drafting arbitration provisions, especially those who intend to include class arbitration within the scope of the provision. In light of the reputed pro-business Roberts Court’s hypersensitivity to consent in the class arbitration context, the parties’ intent to submit to class arbitration should be made completely unambiguous. An arbitration provision that does not expressly mention class arbitration does not evince the parties’ consent to arbitrate on a classwide basis.
As Justice Kagan notes in her dissenting opinion, the arbitration provision in Varela’s contract contained broad language, stating that “any and all disputes, claims or controversies arising out of or relating to the employment relationship between the parties shall be resolved by final and binding arbitration.” The provision further stated that the arbitrator may “award any remedy allowed by applicable law.” Nevertheless, the Court held that class arbitration was not encompassed in the scope of the agreement. The breadth of this provision highlights the specificity that is required to compel class arbitration under Lamps Plus.