Tuesday, May 7, 2019

Lamps Plus and Class Arbitration: A Journey Through Some South Carolina Past

But Bazzle Keeps Coming Back Up ....

Introduction: Class Arbitration Castles Burning ....

   

Years ago this platform discussed at some length how more than one United States Supreme Court (SCOTUS) decision has considered the South Carolina Supreme Court's decision in Bazzle: in the context of who decides issues of arbitrability, as well as whether arbitration agreements allow classwide arbitration.

(For that background, click here. For a broader survey of arbitration and class actions in the context of SCOTUS and South Carolina-- at least at that point in time-- click here).

SCOTUS recently took up the issue of class arbitration again, ruling in Lamps Plus that an ambiguous contract to arbitrate could not authorize class arbitration. Lamps Plus extended the rationale of Stolt-Nielsen, a 2010 SCOTUS decision concluding that an agreement that is "silent" on the question of class arbitration could not compel the parties to classwide arbitration.

As described in the posts linked above, Justice Alito's opinion in Stolt-Nielsen discussed the SCOTUS Bazzle opinion in some detail. And Chief Justice Roberts cited Bazzle in Lamps Plus as well.

Reading the Hidden Note: Silence and Ambiguity in Arbitration Contracts


A close reader may wonder what the difference between "silent" and "ambiguous" might be. After all, "silence" (the absence of a term) can often result in a contract being "ambiguous." As the South Carolina Court of Appeals has noted, where a contract is silent as to a particular matter, and ambiguity thereby arises, parol evidence may be admitted to supply the deficiency and establish the true intent.”Columbia East v. Bi-Lo

Stolt-Nielsen presented a unique instance of "silence," as the parties actually stipulated that their arbitration agreement did not speak to the question of class arbitration. In other words, that arbitration agreement was not susceptible to more than one interpretation on the issue of class arbitration because the parties agreed that the agreement was not susceptible of any interpretation on that point.

Lamps Plus: Everybody Knows Class Arbitration is Nowhere

 

Of note in Lamps Plus, the Opinion of the Court rejected the claim that the doctrine of contra preferentum, according to which a contractual ambiguity is construed against its drafter, could apply to compel class (rather than bilateral) arbitration. Previous SCOTUS opinions discussing the differences between bilateral and classwide arbitration (Concepcion, Epic Systems)  call into question whether there could ever be mutual consent to conduct classwide arbitration. Accordingly, because Lamps Plus could not have intended to consent to class arbitration, the fact that it may have drafted the arbitration agreement could not weigh in the balance. Chief Justice Roberts also characterized the canon as furthering public policy interests as opposed to discerning the parties' intent.  

This approach may strike South Carolina practitioners as passing strange, as we generally come to understand that 1) as described above, when an ambiguity arises in a contract, courts have the opportunity to determine the intent of the parties based in part upon the drafter of the contract; 2) if you are drafting a contract you get to put what you want in it; and 3) if you don't put a term (e.g. "no class arbitration") in a contract you're drafting, then whatever resulting ambiguity is on you.

That rationale certainly underscored the S.C. Supreme Court's decision in Bazzle:
Generally, if the terms of a contract are clear and unambiguous, this Court must enforce the contract according to its terms regardless of its wisdom or folly. Ambiguous language in a contract, however, should be construed liberally and interpreted strongly in favor of the non-drafting party. After all, the drafting party has the greater opportunity to prevent mistakes in meaning.  It is responsible for any ambiguity and should be the one to suffer from its shortcomings." (citations omitted).

Conclusion: When You're On the Losing End ...


Of course, SCOTUS vacated the S.C. Supreme Court's Bazzle decision, determining that the arbitrator (and not a court) should have determined whether class arbitration was warranted under the arbitration agreement. And the Lamps Plus rationale might foreclose class arbitration were Bazzle before a court today. 

Similarly, I am still trying to wrap my head around how the current SCOTUS would address Herron in the event that case arrived there under the right circumstances. Maybe I will try to work through that in a subsequent post.