In dissent, Justice Kagan said the majority hadnullified a “plain-vanilla rule of contract interpretation” that inCalifornia and other states requires an ambiguous agreement be readto favor the side that didn't write it. (Photo: Bloomberg)

(Bloomberg) –An ideologically divided U.S. Supreme Court gavebusinesses more power to channel disputes into individualarbitration proceedings, siding with a lighting retailer trying toprevent its employees from pressing group claims stemming from aphishing attack.

The 5-4 ruling said courts shouldn't allow class arbitrationunless an agreement clearly authorizes that type of proceeding.

It's the latest in a line of Supreme Court decisions that havebacked arbitration and helped companies avoid the prospect ofcostly class actions filed by workers and consumers.

“Neither silence nor ambiguity provides a sufficient basis forconcluding that parties to an arbitration agreement agreed toundermine the central benefits of arbitration itself,” ChiefJustice John Roberts wrote for the court.

Donald Trump's two appointees, Justices Neil Gorsuch and BrettKavanaugh, joined the majority, along with Justices Clarence Thomasand Samuel Alito. As with the earlier rulings, Roberts pointed tothe 1925 Federal Arbitration Act, which says arbitration agreementsmust be enforced like any other contract.

In dissent, Justice Elena Kagan said the majority had gone wellbeyond those previous rulings. She said the majority had nullifieda “plain-vanilla rule of contract interpretation” that inCalifornia and other states requires an ambiguous agreement be readto favor the side that didn't write it.

“Today's opinion is rooted instead in the majority's belief thatclass arbitration 'undermines the central benefits of arbitrationitself,'” Kagan wrote. “But that policy view — of a piece with themajority's ideas about class litigation — cannot justify displacinggenerally applicable state law about how to interpret ambiguouscontracts.”

The ruling is a victory for Lamps Plus Inc., reversing anappeals court ruling that interpreted its accord with its workersas allowing class arbitration.

The phishing attack took place in 2016, when a Lamps Plusemployee received what appeared to be an email from a colleaguerequesting copies of worker W-2 tax withholding forms. The dupedemployee responded by sending the forms of 1,300 workers. Thecompany told the workers about the attack and offered a year ofcredit-monitoring services and identity counseling.

But one of the workers, Frank Varela, said a fraudulent 2015federal income tax return was filed in his name. Varela sued infederal court in California and sought class action status onbehalf of his fellow workers.

A federal trial judge said Varela had to take his claims toarbitration but could do so on a class basis. A federal appealscourt affirmed, saying California state law required reading thecontract to include the possibility of class arbitration.

The case is Lamps Plus v. Varela, 17-988.

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