Class Actions

• Publication year: 2019
• Author: By Jessica Riggin & Dylan Cowart

Class Actions

By Jessica Riggin & Dylan Cowart

It has been one additional year since the United States Supreme Court's 5-4 decision in Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018), which upheld class action waivers in arbitration agreements between employers and employees. In that year, arbitration—the no-longer-new frontier for class and mass action attorneys—has continued to play a dominant role on the Supreme Court's docket, as well as on the docket of other state and federal courts, with notable Rule 23 and state law traditional "class action" decisions dwindling somewhat. In a trio of decisions, the United States Supreme Court considered whether the Federal Arbitration Act (FAA) authorizes class arbitration where the arbitration agreement does not clearly provide for class arbitration; whether independent contractors in the transportation industry are bound by arbitration agreements given that the FAA excludes "contracts of employment" for transportation workers; and who determines whether a matter is arbitrable—the courts or arbitrators. California courts, for their part, have been faced with determining whether arbitration provisions are unconscionable as a matter of state law. The Supreme Court also ruled on jurisdictional appellate deadlines and—in a surprise—declined to address cy pres recovery after granting certiori on the issue. Meanwhile, the Ninth Circuit provided much-needed guidance on nationwide class action settlements. Absent some sea change, class and mass action practitioners should continue to familiarize themselves with the lay of the arbitration landscape, as well as remaining up to date on more traditional class action developments—which many times may develop as the result of successful challenges to arbitration provisions.

Class Arbitration: Lamps Plus v. Varela

In a contentious 5-4 decision, the U.S. Supreme Court held in Lamps Plus v. Varela, 139 S. Ct. 1407 (2019), that courts may not compel class-wide arbitration if an arbitration agreement is ambiguous as to whether the parties agreed to arbitrate on a class-wide basis. The dispute in Lamps Plus arose after the private tax information of over one thousand of the company's employees was compromised. Because the plaintiff employee who filed suit against Lamps Plus had signed an arbitration agreement as a condition of his employment, the district court granted the company's motion to compel arbitration but held the case could be arbitrated on a class-wide basis. The Ninth Circuit agreed, finding that the arbitration agreement was ambiguous and—applying state law contract principles—construed the ambiguity against Lamps Plus because it had drafted the arbitration agreement.

The Supreme Court, in an opinion authored by Chief Justice John Roberts, reversed, reasoning that there are "fundamental difference[s] between class arbitration and the individualized form of arbitration envisioned by the FAA" and courts should thus ensure there is no ambiguity as to whether the arbitration agreement allowed for class proceedings. The Court held that "[l]ike silence, ambiguity does not provide a sufficient basis to conclude that parties to an arbitration agreement agreed to sacrifice the principle advantage of arbitration."

The Court's decision generated dissenting opinions from Justices Ginsburg, Breyer, Sotomayor, and Kagan. Justice Kagan argued that the agreement authorized class arbitration because California's state law rule of construing ambiguities against the drafter is an even-handed rule that does not discriminate against arbitration. According to Justice Ginsburg, the majority's decision "underscores the irony of invoking the first principle that arbitration is strictly a matter of consent to justify imposing individual arbitration on employees who surely would not choose to proceed solo" and "Congressional correction of the Court's elevation of the FAA over the rights of employees and consumers to act in concern remains urgently in order."

Independent Contractors: New Prime v. Oliveira

In a unanimous decision, the Supreme Court ruled in New Prime v. Oliveira, 139 S. Ct. 532 (2019), that independent contractors in the transportation industry cannot be forced to arbitrate their wage and hour claims because Section 1 of the FAA excludes from arbitration "contracts of employment" for transportation workers.¹ That is, all transportation workers,—independent contractors and employees alike—are exempt from the FAA.

In Oliveira, a former truck driver who worked pursuant to an agreement describing him as an independent contractor brought a class action lawsuit alleging that he and other truck drivers were misclassified as an independent contractors and...