On April 24, 2019, in Lamps Plus, Inc. v. Varela, the US Supreme Court held that, under the Federal Arbitration Act (FAA), an ambiguous arbitration agreement cannot provide the necessary contractual basis for a court to conclude that the parties agreed to submit to class arbitration. The Court also held that an order that both compels arbitration and dismisses the underlying complaint qualifies as "a final decision with respect to an arbitration" within the meaning of 9 U.S.C. §16(a)(3). ( (Apr. 24, 2019).)

Respondent Frank Varela's personnel data was compromised by a hacker who tricked an employee into disclosing the tax information of 1,300 other employees of Lamps Plus. Varela sued Lamps Plus after a fraudulent tax return was filed in his name. Like most Lamps Plus employees, Varela signed an arbitration agreement when he started with the company. Varela brought state and federal claims against Lamps Plus in California district court on behalf of a putative class of employees whose information had been similarly compromised. Lamps Plus moved to compel arbitration on an individual rather than classwide basis, and to dismiss the suit. The district court granted the motion to compel arbitration, but ordered classwide arbitration rather than individual. Lamps Plus appealed.

The US Court of Appeals for the Ninth Circuit affirmed. The court acknowledged that the Supreme Court in Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662 (2010) held that a court may not compel arbitration on a classwide basis when the parties concede that an arbitration agreement did not contemplate classwide arbitration. However, the court reasoned that Stolt-Nielsen did not apply because Varela asserted that the agreement allowed for class arbitration. Applying state contract principles, the Court held that the arbitration agreement was ambiguous on the issue of class arbitration. In accordance with California contract interpretation rules, it construed the ambiguity against the drafter and adopted Varela's interpretation authorizing class arbitration. Lamps Plus again appealed, and in his opposition, Varela argued that the Ninth Circuit lacked jurisdiction over the appeal.

The Supreme Court first addressed the jurisdiction issue and held that it had jurisdiction. Lamps Plus relied on 9 U.S.C. §16(a)(3) for jurisdiction, which provides that an appeal may be taken from "a final decision with respect to an arbitration that is subject to this title." The Court held that an order directing the parties to proceed to arbitration and dismissing all the claims before the court is "final" within the meaning of §16(a)(3) and is therefore appealable.

Next, the Court relied on Stolt-Nielsen to hold that ambiguous or silent agreements cannot provide the contractual basis necessary to permit class arbitration. It deferred to the Ninth Circuit's application of state contract law principles to conclude that the agreement was ambiguous. It then held that an ambiguous agreement cannot compel class arbitration because: