« Creepy Lamps: A Commentary by Tal Kastner | Main | The Contract Thicket; or The Sum is Larger than the Parts: Supra Addition in Contract Law »

Thursday, April 25, 2019

The Unbearable Darkness of Lamps Plus

I agree with my co-author Tal Kastner about how creepy yesterday's Lamps Plus decision was -- and how it exemplified our thesis in our forthcoming Georgetown Law Journal article Contract Creep too well.  Indeed, the opinion basically made our points for us: there is no way this is your grandma's Federal Arbitration Act that the majority was "interpreting" -- as they allowed a law for sophisticated parties creep outside that context -- nor was this your grandfather's contra proferentem rule that was there to help non-drafters on the receiving end of adhesion contracts.  The Court decided to pre-empt well-worn state contract law (that was surely around at the time the FAA was passed) in service of a new-fangled court-commitment to (now individualized rather than class) arbitration, which itself is supposed to be a product of contract.

There often seems to be at least one arbitration case every few years that I irrationally believe will be the one to break up the conservative bloc.  Although I didn't think Varela's lawyer did a very good job at oral argument, Kagan in dissent pretty much makes clear why this result is so deeply cynical.  The FAA was created to make sure courts weren't disfavoring arbitration or discriminating against arbitration agreements.  Put aside that the FAA drafters were focused on sophisticated party transactions (where consent and equal bargaining power was presumed) and that the Court has developed what amounts to a strong federal policy in favor of arbitration even in consumer and employment transactions (where consent is usually pretty thin in form contracts).  Yet the Court in Lamps Plus balked when it realized that its policy in favor of arbitration might actually lead to a company/employer rather than a consumer/employee being compelled to arbitrate.  The opinion relies on the deep need for consent from the drafting company that effectively controls the "consent" of the consumer/employee!  We are now supposed to worry about drafters' consent to arbitrate in class arbitrations, notwithstanding that the drafter has complete control over the arbitration agreement and is fully capable of drafting against a well-known and widely applied doctrine of core contract law.  This is dark and willful stuff.

When the California courts used unconscionability law somewhat selectively -- mostly to kill arbitration agreements but otherwise not do much else -- I could get myself to see how discriminatory applications of contract law could be in some tension with the FAA's core purpose not to have courts disfavoring arbitration agreements.  Preemption in such a context was plausible.  But contra proferentem is used broadly and commonly in the common law of contract with no discriminatory effect on arbitration.  Swiping it away because the Court's version of the FAA purportedly preempts it is deeply off-track.  I'm embarrassed to be surprised that the conservative bloc wants to displace state contract law when neither the text nor the purpose of the federal law requires it. 

Posted by Ethan Leib on April 25, 2019 at 09:24 AM | Permalink


The comments to this entry are closed.