## Facts

- Frank Varela began working for Lamps Plus, Inc. and signed an arbitration agreement.
- The agreement required arbitration of “any and all disputes, claims or controversies arising out of or relating to the employment relationship between the parties.”
- It also stated that arbitration “shall be in lieu of any and all lawsuits or other civil legal proceedings relating to my employment.”
- The agreement authorized the arbitrator to award “any remedy allowed by applicable law.”
- A hacker tricked a Lamps Plus employee into disclosing tax information for about 1,300 Lamps Plus employees.
- After the breach, a fraudulent federal income tax return was filed in Varela’s name.
- Varela filed a putative class action in federal court on behalf of the employees whose information was disclosed, asserting employment-related claims based on the breach.
- Lamps Plus moved to compel arbitration on an individual basis and sought dismissal of the court action.
- The district court ordered arbitration on a classwide basis and dismissed Varela’s claims in court.
- The Ninth Circuit affirmed, reasoning that the agreement was ambiguous about class arbitration and, applying California’s contra proferentem rule (and treating the agreement as adhesive), construed the ambiguity against Lamps Plus to permit class arbitration.
- Lamps Plus petitioned for Supreme Court review, arguing that ambiguity cannot supply the contractual basis required to compel class arbitration under the Federal Arbitration Act (FAA).

## Issues

1. Whether a district court order that compels arbitration and dismisses the underlying claims is a “final decision with respect to an arbitration” appealable under 9 U.S.C. § 16(a)(3).
2. Whether the FAA permits a court to compel class arbitration when the arbitration agreement is ambiguous regarding class procedures.
3. Whether a state contract interpretation rule such as contra proferentem may be used to infer consent to class arbitration from contractual ambiguity.

## Decision

- The Supreme Court held it had appellate jurisdiction because an order that compels arbitration and dismisses the case is a “final decision with respect to an arbitration” under 9 U.S.C. § 16(a)(3).
- The Court reversed the Ninth Circuit and remanded.
- The Court held that the FAA does not allow courts to compel class arbitration unless there is an affirmative contractual basis to conclude the parties agreed to class procedures.
- The Court ruled that ambiguity about class arbitration, like silence, is not enough to show the parties agreed to class arbitration.
- The Court held that applying contra proferentem to impose class arbitration in the face of ambiguity cannot substitute for actual agreement to class procedures and conflicts with the FAA’s requirement that arbitration remain based on party agreement.

## Legal Principles

- Under the FAA, arbitration is based on the parties’ agreement; courts must enforce arbitration agreements according to their terms.
- Class arbitration differs in fundamental ways from bilateral arbitration and cannot be required unless the contract clearly authorizes class procedures.
- Silence or ambiguity about class arbitration does not supply the affirmative contractual basis needed to compel class arbitration.
- State contract rules may not be applied in a way that effectively creates consent to class arbitration when the agreement does not clearly provide it, because that result conflicts with the FAA.

## Conclusion

The Supreme Court held that an order compelling arbitration while dismissing the lawsuit is immediately appealable under 9 U.S.C. § 16(a)(3), and it further held that the FAA bars compelling class arbitration absent clear contractual authorization; ambiguity cannot establish consent, and contra proferentem cannot be used to impose class arbitration where the agreement does not plainly provide for it.


Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407 (2019)