Lamps Plus, Inc. v. Frank Varela

by the Supreme Court of the United States

Note: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.

SUPREME COURT OF THE UNITED STATES

Syllabus

LAMPS PLUS, INC., ET AL. v. VARELA
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
No. 17–988. Argued October 29, 2018—Decided April 24, 2019

In 2016, a hacker tricked an employee of petitioner Lamps Plus, Inc., into disclosing tax information of about 1,300 company employees. After a fraudulent federal income tax return was filed in the name of respondent Frank Varela, a Lamps Plus employee, Varela filed a putative class action against Lamps Plus in Federal District Court on behalf of employees whose information had been compromised. Relying on the arbitration agreement in Varela’s employment contract, Lamps Plus sought to compel arbitration—on an individual rather than a classwide basis—and to dismiss the suit. The District Court rejected the individual arbitration request, but authorized class arbitration and dismissed Varela’s claims. Lamps Plus appealed, arguing that the District Court erred by compelling class arbitration, but the Ninth Circuit affirmed. This Court had held in Stolt-Nielsen S. A. v. AnimalFeeds Int’l Corp., 559 U. S. 662, that a court may not compel classwide arbitration when an agreement is silent on the availability of such arbitration. The Ninth Circuit ruled that Stolt-Nielsen was not controlling because the agreement in this case was ambiguous rather than silent on the issue of class arbitration.

Held:

1. This Court has jurisdiction. An order that both compels arbitration and dismisses the underlying claims qualifies as “a final decision with respect to an arbitration” within the meaning of 9 U. S. C. §16(a)(3), the jurisdictional provision on which Lamps Plus relies. See Green Tree Financial Corp.-Ala. v. Randolph, 531 U. S. 79, 89. Varela attempts to distinguish Randolph on the ground that the appeal here was taken by the party who had already secured the relief it requested, i. e., Lamps Plus had already obtained an order dismissing the claim and compelling arbitration. But Lamps Plus did not secure the relief it requested, since it sought individual rather than class arbitration. The shift from individual to class arbitration is a “fundamental” change, Stolt-Nielsen, 559 U. S., at 686, that “sacrifices the principal advantage of arbitration” and “greatly increases risks to defendants,” AT&T Mobility LLC v. Concepcion, 563 U. S. 333, 348, 350. Avoiding these consequences gives Lamps Plus the “necessary personal stake” to appeal. Camreta v. Greene, 563 U. S. 692, 702. Pp. 3–5.

2. Under the Federal Arbitration Act, an ambiguous agreement cannot provide the necessary contractual basis for concluding that the parties agreed to submit to class arbitration. Pp. 5–12.

(a) “Arbitration is strictly a matter of consent,” Granite Rock Co. v. Teamsters, 561 U. S. 287, 299 (internal quotation marks omitted), and the task for courts and arbitrators is “to give effect to the intent of the parties,” Stolt-Nielsen, 559 U. S., 684. In carrying out that responsibility, it is important to recognize the “fundamental” difference between class arbitration and the individualized form of arbitration envisioned by the FAA. Class arbitration “sacrifices the principal advantage of arbitration—its informality—and makes the process slower, more costly, and more likely to generate procedural morass than final judgment.” Concepcion, 563 U. S., at 348. Because of such “crucial differences,” Stolt-Nielsen, 559 U. S., at 687, this Court has held that courts may not infer consent to participate in class arbitration absent an affirmative “contractual basis for concluding that the party agreed to do so,” id., at 684. Silence is not enough. Id., at 687. That reasoning controls here. Like silence, ambiguity does not provide a sufficient basis to conclude that parties to an arbitration agreement agreed to “sacrifice[] the principal advantage of arbitration.” Concepcion, 563 U. S., at 348. This conclusion aligns with the Court’s refusal to infer consent when it comes to other fundamental arbitration questions. See, e. g., First Options of Chicago, Inc. v. Kaplan, 514 U. S. 938, 945. Pp. 6–9.

(b) The Ninth Circuit’s contrary conclusion was based on the state law contra proferentem doctrine, which counsels that contractual ambiguities should be construed against the drafter. That default rule is based on public policy considerations and seeks ends other than the intent of the parties. Such an approach is flatly inconsistent with “the foundational FAA principle that arbitration is a matter of consent.” Stolt-Nielsen, 559 U. S., at 684. Varela claims that the rule is nondiscriminatory and gives equal treatment to arbitration agreements and other contracts alike, but an equal treatment principle cannot save from preemption general rules “that target arbitration either by name or by more subtle methods, such as by ‘interfer[ing] with fundamental attributes of arbitration,’” Epic Systems Corp. v. Lewis, 584 U. S. ___, ___. This conclusion is consistent with the Court’s precedents holding that the FAA provides the default rule for resolving certain ambiguities in arbitration agreements. See, e. g., Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U. S. 614, 626. Pp. 9–12.

701 Fed. Appx. 670, reversed and remanded.

Roberts, C. J., delivered the opinion of the Court, in which Thomas, Alito, Gorsuch, and Kavanaugh, JJ., joined. Thomas, J., filed a concurring opinion. Ginsburg, J., filed a dissenting opinion, in which Breyer and Sotomayor, JJ., joined. Breyer, J., and Sotomayor, J., filed dissenting opinions. Kagan, J., filed a dissenting opinion, in which Ginsburg and Breyer, JJ., joined, and in which Sotomayor, J., joined as to Part II.