139 S. Ct. 1407 (2019)
In 2016, a hacker impersonating a company official tricked a Lamps Plus employee into disclosing the tax information of approximately 1,300 other employees.1 Soon after, a fraudulent federal income tax return was filed in the name of Frank Varela, a Lamps Plus employee and respondent here.2 Like most Lamps Plus employees, Varela had signed an arbitration agreement when he started work at the company.3 After the data breach, Varela sued Lamps Plus in Federal District Court in California, bringing state and federal claims on behalf of a putative class of employees whose tax information had been compromised.4
The arbitration agreement provided that Varela’s claims would be resolved by final and binding arbitration, that the arbitrator would have the exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of the agreement, and that the agreement was intended to cover all disputes that may arise out of or relate to Varela’s employment.5 The agreement contained no mention of class arbitration.6 Lamps Plus moved to compel arbitration on an individual rather than classwide basis and to dismiss the lawsuit.7 In a single order, the District Court granted the motion to compel arbitration and dismissed Varela’s claims without prejudice, but rejected Lamps Plus’s request for individual arbitration and instead authorized arbitration on a classwide basis.8
Lamps Plus appealed, arguing that the court erred by compelling class arbitration.9 The Ninth Circuit affirmed.10 The court acknowledged that the agreement included no express mention of class proceedings but determined that the agreement was ambiguous on the issue of class arbitration.11 The Ninth Circuit followed California law to construe the ambiguity against the drafter and adopted Varela’s interpretation authorizing class arbitration.12 Lamps Plus petitioned for a writ of certiorari.13 The Supreme Court granted certiorari.14
Whether an order compelling arbitration and dismissing the underlying claims qualifies as a final decision with respect to an arbitration appealable under 9 U.S.C. § 16(a)(3)?15
Yes. After the data breach, Varela filed a putative class action in federal district court.18 Lamps Plus moved to compel individual arbitration and dismiss the suit.19 The District Court compelled class arbitration and dismissed the claims without prejudice in a single order.20
Lamps Plus appealed, the Ninth Circuit affirmed, and the Supreme Court granted certiorari. This order qualifies as final under Green Tree Financial Corp.-Ala. v. Randolph because it directs the parties to arbitration and ends the litigation in court.21 Lamps Plus did not receive the individual arbitration it requested and therefore possesses the necessary personal stake to appeal.22
The order is a final decision appealable under 9 U.S.C. § 16(a)(3).23
Related opinions on this issue
Justice Breyer dissented on jurisdiction grounds. He argued that the District Court order was interlocutory because it granted the motion to compel arbitration under 9 U.S.C. § 4, making it unappealable under § 16(b)(2).24 An improper dismissal cannot create appellate jurisdiction.25
Breyer explained that the FAA’s appellate scheme favors arbitration by limiting interlocutory appeals, requiring parties to await the end of arbitration before seeking review.26 He contended that Lamps Plus could not transform an unappealable interlocutory order into a final judgment simply by obtaining a dismissal in the same order.27 Citing Microsoft Corp. v. Baker, Breyer maintained that such maneuvers undermine the finality principles designed to prevent piecemeal appeals.28
He concluded that the Court lacked jurisdiction and should have dismissed the case on that basis alone.29
Whether the Federal Arbitration Act permits a court to compel class arbitration when an arbitration agreement is ambiguous rather than silent on the availability of class arbitration?30
The FAA requires arbitration agreements to be enforced according to their terms and treats arbitration as a matter of consent.31 Class arbitration may not be compelled absent an affirmative contractual basis showing the parties agreed to it.32 Ambiguity does not supply that basis, and state-law rules such as contra proferentem that construe ambiguity against the drafter to authorize class arbitration are preempted.33
No. Varela signed an arbitration agreement that contained no mention of class arbitration.34 The Ninth Circuit found the agreement ambiguous on class arbitration and applied California’s contra proferentem rule to construe the ambiguity against Lamps Plus, the drafter, thereby compelling class arbitration.35 Under Stolt-Nielsen, class arbitration is fundamentally different from bilateral arbitration because it sacrifices informality, increases costs, and raises due-process concerns.36 Neither silence nor ambiguity provides a sufficient contractual basis for concluding that the parties agreed to class arbitration.37
The California rule is preempted because it interferes with the fundamental attributes of arbitration and creates a scheme inconsistent with the FAA’s objectives.38
The Federal Arbitration Act does not permit a court to compel class arbitration when an agreement is ambiguous on the availability of class arbitration.39
Related opinions on this issue
Justice Thomas concurred in the judgment. He noted that the agreement repeatedly uses singular personal pronouns and waives the right to file a lawsuit, indicating the parties contemplated only bilateral arbitration and providing no contractual basis for class arbitration.40 Thomas emphasized that the FAA requires federal courts to enforce arbitration agreements just as they would ordinary contracts, applying background principles of state contract law.41
He observed that the agreement’s language, including mutual consent provisions using “I” and “my,” suggests bilateral proceedings only.42 Thomas would have reversed on that basis without reaching the preemption question.43 He joined the Court’s opinion because it correctly applied FAA precedents despite his skepticism of implied preemption doctrine.44
Joined by Justices Breyer And Sotomayor
Justice Ginsburg dissented. She argued that the FAA requires enforcement according to the agreement’s terms and that state contract law should fill gaps when the agreement is silent.45 California’s rule construing ambiguities against the drafter should therefore permit class arbitration, and the majority improperly expanded the FAA’s preemptive reach.46
Ginsburg emphasized that Congress enacted the FAA to enable merchants of roughly equal bargaining power to arbitrate commercial disputes, not to govern adhesive employment contracts.47 She detailed how the Court’s FAA jurisprudence has denied employees effective relief against powerful entities by enforcing mandatory individual arbitration.48 Ginsburg concluded that the decision underscores the irony of invoking consent to impose individual arbitration on employees who lack bargaining power to resist such clauses.49
Justice Breyer joined Justice Ginsburg’s and Justice Kagan’s dissents on the merits. He added that the decision will make it more difficult for employees to vindicate rights because class actions are often the only practical means to challenge widespread violations.50 Breyer noted that expenses in mounting individual claims frequently outweigh potential recoveries, leaving employees without effective vindication of their legal rights.51
He observed that the majority’s requirement of explicit consent to class arbitration insulates employers from liability for systemic harms.52 Breyer reiterated that class actions serve as a procedural device essential for addressing collective injuries in the employment context.53
Justice Sotomayor joined Justice Ginsburg’s dissent in full and Part II of Justice Kagan’s dissent. She observed that the agreement’s language supports class arbitration and criticized the majority for displacing neutral state contract law without first determining whether the contract is truly ambiguous.54 Sotomayor maintained that a class action is merely a procedural device allowing aggregation of claims and that employees signing broad arbitration clauses should not be presumed to surrender access to that device.55
She argued that the majority reached its holding without agreeing the contract is ambiguous and invaded California contract law with undue haste.56 Sotomayor concluded that the Court’s approach creates new federal common law hostile to class proceedings.57
Joined by Justices Ginsburg And Breyer
Justice Kagan dissented. She maintained that the agreement’s broad language covering any and all disputes, claims, or controversies arising out of employment is best read to authorize class arbitration or, at minimum, that the neutral anti-drafter rule supplies the contractual basis without offending the FAA because it applies equally to all contracts.58 Kagan explained that the FAA does not federalize contract law and that state interpretive rules control unless they discriminate against arbitration.59
She demonstrated through textual analysis that the agreement’s phrases encompass class disputes and that the anti-drafter canon, applied neutrally, permits class arbitration.60 Kagan accused the majority of substituting its policy preference against class proceedings for the parties’ actual agreement as construed under state law.61