Lamps Plus, Inc. v. Varela

*1412The Federal Arbitration Act requires courts to enforce covered arbitration agreements according to their terms. See 9 U.S.C. § 2. In Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp. , 559 U.S. 662, 130 S.Ct. 1758, 176 L.Ed.2d 605 (2010), we held that a court may not compel arbitration on a classwide basis when an agreement is "silent" on the availability of such arbitration. Because class arbitration fundamentally changes the nature of the "traditional individualized arbitration" envisioned by the FAA, Epic Systems Corp. v. Lewis , 584 U.S. ----, ----, 138 S.Ct. 1612, 1623, 200 L.Ed.2d 889 (2018), "a party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so," Stolt-Nielsen , 559 U.S. at 684, 130 S.Ct. 1758 (emphasis in original). We now consider whether the FAA similarly bars an order requiring class arbitration when an agreement is not silent, but rather "ambiguous" about the availability of such arbitration.

I

Petitioner Lamps Plus is a company that sells light fixtures and related products. In 2016, a hacker impersonating a company official tricked a Lamps Plus employee into disclosing the tax information of approximately 1,300 other employees. Soon after, a fraudulent federal income tax return was filed in the name of Frank Varela, a Lamps Plus employee and respondent here.

*1413Like most Lamps Plus employees, Varela had signed an arbitration agreement when he started work at the company. But after the data breach, he 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. Lamps Plus moved to compel arbitration on an individual rather than classwide basis, and to dismiss the lawsuit. In a single order, the District Court granted the motion to compel arbitration and dismissed Varela's claims without prejudice. But the court rejected Lamps Plus's request for individual arbitration, instead authorizing arbitration on a classwide basis. Lamps Plus appealed the order, arguing that the court erred by compelling class arbitration.

The Ninth Circuit affirmed. 701 Fed. Appx. 670 (2017). The court acknowledged that Stolt-Nielsen prohibits forcing a party "to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so" and that Varela's agreement "include[d] no express mention of class proceedings." 701 Fed. Appx., at 672. But that did not end the inquiry, the court reasoned, because the fact that the agreement "does not expressly refer to class arbitration is not the 'silence' contemplated in Stolt-Nielsen ." Ibid. In Stolt-Nielsen , the parties had stipulated that their agreement was silent about class arbitration. Because there was no such stipulation here, the court concluded that Stolt-Nielsen was not controlling.

The Ninth Circuit then determined that the agreement was ambiguous on the issue of class arbitration. On the one hand, as Lamps Plus argued, certain phrases in the agreement seemed to contemplate "purely binary claims." Ibid. At the same time, as Varela asserted, other phrases were capacious enough to include class arbitration, such as one stating that "arbitration shall be in lieu of any and all lawsuits or other civil legal proceedings relating to my employment." Ibid. The Ninth Circuit followed California law to construe the ambiguity against the drafter, a rule that "applies with peculiar force in the case of a contract of adhesion" such as this. Ibid. (quoting Sandquist v. Lebo Auto., Inc. , 1 Cal. 5th 233, 248, 205 Cal.Rptr.3d 359, 376 P.3d 506, 514 (2016) ). Because Lamps Plus had drafted the agreement, the court adopted Varela's interpretation authorizing class arbitration. Judge Fernandez dissented. In his view, the agreement was not ambiguous, and the majority's holding was a "palpable evasion of Stolt-Nielsen ." 701 Fed. Appx., at 673.

Lamps Plus petitioned for a writ of certiorari, arguing that the Ninth Circuit's decision contravened Stolt-Nielsen and created a conflict among the Courts of Appeals. In opposition, Varela not only disputed those contentions but also argued for the first time that the Ninth Circuit lacked jurisdiction over the appeal, and that this Court therefore lacked jurisdiction in turn. We granted certiorari. 584 U.S. ----, 138 S.Ct. 1697, 200 L.Ed.2d 948 (2018).

II

We begin with jurisdiction. Section 16 of the FAA governs appellate review of arbitration orders. 9 U.S.C. § 16. Varela contends that the Ninth Circuit lacked statutory jurisdiction because section 16 permits appeal from orders denying motions to compel arbitration, § 16(a)(1)(B), but not orders granting such motions, § 16(b)(2). Brief for Respondent 9-12; see also post , at ---- (BREYER, J., dissenting). This argument is beside the point, however, because Lamps Plus relies *1414for jurisdiction on a different provision of section 16, section 16(a)(3).

Section 16(a)(3) provides that an appeal may be taken from "a final decision with respect to an arbitration that is subject to this title." We construed that provision in Green Tree Financial Corp.-Ala. v. Randolph , 531 U.S. 79, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000), a case where, as here, the District Court had issued an order both compelling arbitration and dismissing the underlying claims. We held that such an order directing "the parties to proceed to arbitration, and dismiss[ing] all the claims before [the court], ... is 'final' within the meaning of § 16(a)(3), and therefore appealable." Id. , at 89, 121 S.Ct. 513.1

Varela attempts to distinguish Randolph on the ground that the appeal here was taken by the party who sought an order to dismiss the claim and compel arbitration, Lamps Plus. He claims the company "lacked standing to appeal the dismissal," because the District Court's order "provided precisely the relief Lamps Plus sought." Brief for Respondent 13, 15.

But Lamps Plus did not secure the relief it requested. It sought an order compelling individual arbitration. What it got was an order rejecting that relief and instead compelling arbitration on a classwide basis. We have explained-and will elaborate further below-that shifting from individual to class arbitration is a "fundamental" change, Stolt-Nielsen , 559 U.S. at 686, 130 S.Ct. 1758, 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, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011). Lamps Plus's interest in avoiding those consequences gives it the "necessary personal stake in the appeal" required by our precedent. Camreta v. Greene , 563 U.S. 692, 702, 131 S.Ct. 2020, 179 L.Ed.2d 1118 (2011).2

III

The Ninth Circuit applied California contract law to conclude that the parties' agreement was ambiguous on the availability of class arbitration. In California, an agreement is ambiguous "when it is capable of two or more constructions, both *1415of which are reasonable." 701 Fed. Appx., at 672 (quoting Powerine Oil Co. v. Superior Ct. , 37 Cal. 4th 377, 390, 33 Cal.Rptr.3d 562, 118 P.3d 589, 598 (2005) ). Following our normal practice, we defer to the Ninth Circuit's interpretation and application of state law and thus accept that the agreement should be regarded as ambiguous. See, e.g. , Expressions Hair Design v. Schneiderman , 581 U.S. ----, ----, 137 S.Ct. 1144, 1149-50, 197 L.Ed.2d 442 (2017).3

We therefore face the question whether, consistent with the FAA, an ambiguous agreement can provide the necessary "contractual basis" for compelling class arbitration. Stolt-Nielsen , 559 U.S. at 684, 130 S.Ct. 1758. We hold that it cannot-a conclusion that follows directly from our decision in Stolt-Nielsen . Class arbitration is not only markedly different from the "traditional individualized arbitration" contemplated by the FAA, it also undermines the most important benefits of that familiar form of arbitration. Epic Systems , 584 U.S., at ----, 138 S.Ct., at 1623 ; see Stolt-Nielsen , 559 U.S. at 686-687, 130 S.Ct. 1758. The statute therefore requires more than ambiguity to ensure that the parties actually agreed to arbitrate on a classwide basis.

A

The FAA requires courts to "enforce arbitration agreements according to their terms." Epic Systems , 584 U.S., at ----, 138 S.Ct., at 1621 (quoting American Express Co. v. Italian Colors Restaurant , 570 U.S. 228, 233, 133 S.Ct. 2304, 186 L.Ed.2d 417 (2013) ). Although courts may ordinarily accomplish that end by relying on state contract principles, First Options of Chicago, Inc. v. Kaplan , 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995), state law is preempted to the extent it "stands as an obstacle to the accomplishment and execution of the full purposes and objectives" of the FAA, Concepcion , 563 U.S. at 352, 131 S.Ct. 1740 (internal quotation marks omitted). At issue in this case is the interaction between a state contract principle for addressing ambiguity and a "rule[ ] of fundamental importance" under the FAA, namely, that arbitration "is a matter of consent, not coercion." Stolt-Nielsen , 559 U.S. at 681, 130 S.Ct. 1758 (internal quotation marks omitted).

"[T]he first principle that underscores all of our arbitration decisions" is that "[a]rbitration is strictly a matter of consent." Granite Rock Co. v. Teamsters , 561 U.S. 287, 299, 130 S.Ct. 2847, 177 L.Ed.2d 567 (2010) (internal quotation marks omitted). We have emphasized that "foundational FAA principle" many times. Stolt-Nielsen , 559 U.S. at 684, 130 S.Ct. 1758 ; see also, e.g. , Howsam v. Dean Witter Reynolds, Inc. , 537 U.S. 79, 83, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002) ; First Options , 514 U.S. at 943, 115 S.Ct. 1920 ; Mastrobuono v. Shearson Lehman Hutton, Inc. , 514 U.S. 52, 57, 115 S.Ct. 1212, 131 L.Ed.2d 76 (1995) ;

*1416Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ. , 489 U.S. 468, 479, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989) ; Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc. , 473 U.S. 614, 626, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985).

Consent is essential under the FAA because arbitrators wield only the authority they are given. That is, they derive their "powers from the parties' agreement to forgo the legal process and submit their disputes to private dispute resolution." Stolt-Nielsen , 559 U.S. at 682, 130 S.Ct. 1758. Parties may generally shape such agreements to their liking by specifying with whom they will arbitrate, the issues subject to arbitration, the rules by which they will arbitrate, and the arbitrators who will resolve their disputes. Id. , at 683-684, 130 S.Ct. 1758. Whatever they settle on, the task for courts and arbitrators at bottom remains the same: "to give effect to the intent of the parties." Id. , at 684, 130 S.Ct. 1758.

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. Epic Systems , 584 U.S., at ----, 138 S.Ct., at 1622-1623 ; see also Concepcion , 563 U.S. at 349, 351, 131 S.Ct. 1740 ; Stolt-Nielsen , 559 U.S. at 686-687, 130 S.Ct. 1758. In individual arbitration, "parties forgo the procedural rigor and appellate review of the courts in order to realize the benefits of private dispute resolution: lower costs, greater efficiency and speed, and the ability to choose expert adjudicators to resolve specialized disputes." Id. , at 685, 130 S.Ct. 1758. Class arbitration lacks those benefits. It "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, 131 S.Ct. 1740. Indeed, we recognized just last Term that with class arbitration "the virtues Congress originally saw in arbitration, its speed and simplicity and inexpensiveness, would be shorn away and arbitration would wind up looking like the litigation it was meant to displace." Epic Systems , 584 U.S., at ----, 138 S.Ct., at 1623. Class arbitration not only "introduce[s] new risks and costs for both sides," ibid. , it also raises serious due process concerns by adjudicating the rights of absent members of the plaintiff class-again, with only limited judicial review. See Concepcion , 563 U.S., at 349, 131 S.Ct. 1740 ; see also Stolt-Nielsen , 559 U.S. at 686, 130 S.Ct. 1758 (citing Ortiz v. Fibreboard Corp. , 527 U.S. 815, 846, 119 S.Ct. 2295, 144 L.Ed.2d 715 (1999) ).

Because of these "crucial differences" between individual and class arbitration, Stolt-Nielsen explained that there is "reason to doubt the parties' mutual consent to resolve disputes through classwide arbitration." 559 U.S. at 687, 685-686, 130 S.Ct. 1758. And for that reason, we 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, 130 S.Ct. 1758. Silence is not enough; the "FAA requires more." Id. , at 687, 130 S.Ct. 1758.

Our reasoning in Stolt-Nielsen controls the question we face today. 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, 131 S.Ct. 1740.

This conclusion aligns with our refusal to infer consent when it comes to other fundamental arbitration questions. For example, we presume that parties have not authorized arbitrators to resolve certain "gateway" questions, such as "whether the parties have a valid arbitration agreement at all or whether a concededly *1417binding arbitration clause applies to a certain type of controversy." Green Tree Financial Corp. v. Bazzle , 539 U.S. 444, 452, 123 S.Ct. 2402, 156 L.Ed.2d 414 (2003) (plurality opinion). Although parties are free to authorize arbitrators to resolve such questions, we will not conclude that they have done so based on "silence or ambiguity" in their agreement, because "doing so might too often force unwilling parties to arbitrate a matter they reasonably would have thought a judge, not an arbitrator, would decide." First Options , 514 U.S. at 945,