Reading Between the Lines: What Lamps Plus v. Varela Teaches Us About Language and Power in Arbitration

Sometimes the most important parts of a contract are not the ones we expect. We think of numbers, dates, obligations. But often, it is the quiet, generic-looking arbitration clause that carries the real weight. In Lamps Plus v. Varela, the Supreme Court showed just how much hinges on a few lines that many people never notice.

The case began with a serious problem: a data breach at Lamps Plus exposed the tax information of over a thousand employees. One of them, Frank Varela, had a fraudulent tax return filed in his name. He sued the company through a class action, but Lamps Plus responded by pointing to the arbitration agreement in his employment contract and asked the court to send the matter to private arbitration.

Here is where things turned. The agreement did not clearly say whether class arbitration was allowed or not. It was vague. The lower courts interpreted that ambiguity as leaving the door open to class arbitration. The Supreme Court, however, disagreed.

According to the majority, an ambiguous agreement is not enough. There has to be a clear, affirmative agreement to arbitrate on a classwide basis. Otherwise, the court cannot infer that both sides intended to give up the more streamlined, individualized arbitration process. The decision leaned heavily on the idea that arbitration is supposed to be based on consent. That principle, they argued, would be undermined if silence or vagueness could lead to such a major shift in process.

But the deeper issue is not just procedural. It is about who gets the benefit of unclear language. In ordinary contract law, the rule of contra proferentem often steps in. This doctrine says that if one side wrote the contract and there is doubt about what it means, the interpretation should go against the drafter. In this case, that would likely mean favoring the employee.

The Court said that rule does not apply here, at least not when it affects the structure of arbitration under federal law. That choice had consequences. It gave more interpretive power to employers, who often control the wording of arbitration clauses. The risk of writing a vague clause shifted to the party with less bargaining power.

Justice Kagan pushed back on this in dissent. She argued that the Court ignored fundamental principles of contract law. She viewed the majority’s approach as one that favored formalism over fairness, especially in situations where employees are not negotiating these terms at all.

What stands out most from Lamps Plus is not just the legal outcome. It is the message that language, even when unclear, can still carry a result. And that result does not always protect the more vulnerable party. In practice, this means that the absence of clarity does not create space for fairness. Instead, it can solidify an imbalance.

For anyone drafting, reviewing, or relying on contracts, this case is a reminder. Ambiguity is not neutral. It tends to serve the party with more leverage. That is not always obvious on first read, but in disputes, especially over arbitration, it can shape the entire path forward.