The U.S. Supreme Court recently granted a petition for review of a data breach lawsuit addressing the issue of whether parties can pursue a class arbitration when the language in the arbitration agreement does not explicitly allow for such, Lamps Plus, Inc. v. Varela , No. 17-988, certiorari granted April 30, 2018. The Court will have the opportunity to clarify its 2010 decision in Stolt-Nielsen v. AnimalFeeds International Corp., 559 U.S. 662 (2010) in which the Court ruled that parties cannot be forced into class arbitration, “unless there is contractual basis for concluding [they] agreed to do so”.

The petition for a writ of certiorari brought by Lamps Plus, a lighting retailer, presented the issue, “[w]hether the Federal Arbitration Act (FAA) forecloses a state-law interpretation of an arbitration agreement that would authorize class arbitration based solely on general language commonly used in arbitration agreements.” Lamps Plus argues that the 9th Circuit panel erred in ruling that the company must participate in a class arbitration of an employee’s claims when the employment agreement did not state that class arbitration was available. The employee’s claims arise from an incident of identity theft, as the result of a phishing attack, in which a third party impersonating a Lamps Plus employee convinced a fellow Lamps Plus colleague to send copies of W-2 forms for multiple Lamps Plus employees.

The employment agreement between the named plaintiff, Frank Varela, and his employer, Lamps Plus, included an arbitration clause, however it was silent on whether the clause also allowed for class arbitration. The 9th Circuit majority ruling stated that “perhaps the most reasonable” interpretation of that agreement allows for class arbitration. The circuit court analogized how Varela waiving his “right…to file a lawsuit or other civil action or proceeding” and “any right…to resolve employment disputes through trial by judge or jury,” clearly also includes waiving his right to class action lawsuits, even though the agreement does not explicitly state such.

In its petition to the Supreme Court, Lamps Plus emphasized that, “This court could not have been clearer that, in light of the fundamental differences between class and individual arbitration, the FAA prohibits exactly what the panel below did here: inferring ‘[a]n implicit agreement to authorize class action arbitration from the fact of the parties’ agreement to arbitrate,”.

Varela, on the other hand, relying on the 9th Circuit analysis, argued that the circuit court decision is consistent with the high court’s decision in Stolt-Nielsen, the FAA, and California contract law principles. “The decision creates no inter-circuit conflict and does not threaten to impose class arbitration wholesale on parties who did not agree to it. It offers only a reasonable interpretation of a single contract to determine the parties’ intent in light of background principles of state contract law,” Varela stated.

The Supreme Court will now clarify its decision in Stolt-Nielsen, and will settle an ongoing circuit split over whether, irrespective of state contract law, an agreement that does not explicitly include class arbitration can nonetheless authorize it. The Court’s decision will have major implications for employers, well beyond the data breach context. Regardless of how the Court ultimately rules, companies are advised to include unambiguous language in their employment agreements on whether class arbitration is available. For additional insight regarding class actions, including class arbitration and waivers, please visit the Class and Collective Action Update.

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Photo of Jason C. Gavejian Jason C. Gavejian

Jason C. Gavejian is a principal in the Berkeley Heights, New Jersey, office of Jackson Lewis P.C. and co-leader of the firm’s Privacy, Data and Cybersecurity practice group. Jason is also a Certified Information Privacy Professional (CIPP/US) with the International Association of Privacy…

Jason C. Gavejian is a principal in the Berkeley Heights, New Jersey, office of Jackson Lewis P.C. and co-leader of the firm’s Privacy, Data and Cybersecurity practice group. Jason is also a Certified Information Privacy Professional (CIPP/US) with the International Association of Privacy Professionals.

As a Certified Information Privacy Professional (CIPP/US), Jason focuses on the matrix of laws governing privacy, security, and management of data. Jason is co-editor of, and a regular contributor to, the firm’s Workplace Privacy, Data Management & Security Report blog.

Jason’s work in the area of privacy and data security includes counseling international, national, and regional companies on the vast array of privacy and security mandates, preventive measures, policies, procedures, and best practices. This includes, but is not limited to, the privacy and security requirements under state, federal, and international law (e.g., HIPAA/HITECH, GDPR, California Consumer Privacy Act (CCPA), FTC Act, ECPA, SCA, GLBA etc.). Jason helps companies in all industries to assess information risk and security as part of the development and implementation of comprehensive data security safeguards including written information security programs (WISP). Additionally, Jason assists companies in analyzing issues related to: electronic communications, social media, electronic signatures (ESIGN/UETA), monitoring and recording (GPS, video, audio, etc.), biometrics, and bring your own device (BYOD) and company owned personally enabled device (COPE) programs, including policies and procedures to address same. He regularly advises clients on compliance issues under the Telephone Consumer Protection Act (TCPA) and has represented clients in suits, including class actions, brought in various jurisdictions throughout the country under the TCPA.

Jason represents companies with respect to inquiries from the HHS/OCR, state attorneys general, and other agencies alleging wrongful disclosure of personal/protected information. He negotiates vendor agreements and other data privacy and security agreements, including business associate agreements. His work in the area of privacy and data security includes counseling and coaching clients through the process of investigating and responding to breaches of the personally identifiable information (PII) or protected health information (PHI) they maintain about consumers, customers, employees, patients, and others, while also assisting clients in implementing policies, practices, and procedures to prevent future data incidents.

Jason represents management exclusively in all aspects of employment litigation, including restrictive covenants, class-actions, harassment, retaliation, discrimination, and wage and hour claims in both federal and state courts. He regularly appears before administrative agencies, including the Equal Employment Opportunity Commission (EEOC), the Office for Civil Rights (OCR), the New Jersey Division of Civil Rights, and the New Jersey Department of Labor. Jason’s practice also focuses on advising/counseling employers regarding daily workplace issues.

Jason’s litigation experience, coupled with his privacy practice, provides him with a unique view of many workplace issues and the impact privacy, data security, and social media may play in actual or threatened lawsuits.

Jason regularly provides training to both executives and employees and regularly speaks on current privacy, data security, monitoring, recording, BYOD/COPE, biometrics (BIPA), social media, TCPA, and information management issues. His views on these topics have been discussed in multiple publications, including the Washington Post, Chicago Tribune, San Francisco Chronicle (SFGATE), National Law Review, Bloomberg BNA, Inc.com, @Law Magazine, Risk and Insurance Magazine, LXBN TV, Business Insurance Magazine, and HR.BLR.com.

Jason is the co-leader of Jackson Lewis’ Hispanic Attorney resource group, a group committed to increasing the firm’s visibility among Hispanic-American and other minority attorneys, as well as mentoring the firm’s attorneys to assist in their training and development. He also previously served on the National Leadership Committee of the Hispanic National Bar Association (HNBA) and regularly volunteers his time for pro bono matters.

Prior to joining Jackson Lewis, Jason served as a judicial law clerk for the Honorable Richard J. Donohue on the Superior Court of New Jersey, Bergen County.