In 2016, Lamps Plus employee Frank Varela filed a class-action lawsuit after a data breach exposed sensitive tax information belonging to approximately 1,300 employees. The incident included Varela’s information and was followed by the filing of a fraudulent federal income-tax return in his name. Lamps Plus sought to enforce an employment-contract arbitration clause, and a lower court allowed the dispute to proceed through class arbitration rather than requiring individual claims.
In April 2019, the U.S. Supreme Court reversed the Ninth Circuit in Lamps Plus, Inc. v. Varela, 587 U.S. ___ (2019), ruling 5–4 that ambiguous arbitration language could not authorize classwide proceedings. Chief Justice John Roberts’s majority relied on Stolt-Nielsen, reasoning that class arbitration fundamentally differs from bilateral arbitration and affects absent claimants’ rights. The Court also rejected applying contra proferentem—the rule construing ambiguity against the drafter—to create consent to class procedures. Justice Ruth Bader Ginsburg and other dissenters argued that mandatory arbitration clauses can be oppressive because they prevent employees and consumers from joining together. The ruling reinforced a presumption favoring individual arbitration unless class arbitration is explicitly authorized.
