The Supreme Court overturned the Ninth Circuit Court of Appeals' decision that the Federal Arbitration Act (FAA) exemption for transportation workers applies to all employment contracts. The case involved an employment application signed by Saint Clair Adams, which included a provision for final and binding arbitration of any claims arising from his employment or cessation of employment with Circuit City. The Ninth Circuit ruled that the FAA does not apply to contracts of employment, which was challenged by Circuit City in the Supreme Court. The Court applied the maxim ejusdem generis to conclude that the residual clause in the FAA's §1 exclusion provision should be read to give effect to the terms "seamen" and "railroad employees" and should be controlled and defined by reference to the enumerated categories of workers preceding it. The Court rejected the argument that all employment contracts are excluded from the FAA's §1 exclusion provision. The Court interpreted the phrases "affecting commerce" and "involving commerce" to indicate Congress' intent to regulate to the outer limits of its authority under the Commerce Clause. The Court consistently interpreted the phrases "in commerce" and "engaged in commerce" narrowly, rather than expansively, based on the objective and consistent significance of the words Congress uses when it defines the reach of a statute. The Court rejected arguments that the meaning of these phrases should vary depending on the date of adoption.

The dissenting opinion argues that the narrow interpretation of §1 of the Federal Arbitration Act (FAA) is inconsistent with the broad interpretation of §2. The exclusion of employment contracts from the scope of §2 was intended to respond to concerns of labor organizations that §2 might encompass employment contracts by exempting the labor agreements of "any other class of workers engaged in foreign or interstate commerce." The legislation was not intended to apply to employment contracts at all, both before and after the amendment to §1. The Supreme Court held that §301 of the LMRA provided the authority to compel arbitration in a suit brought under §301, rather than the FAA. The Court rejected the union's argument that the FAA authorized the enforcement of arbitration agreements in collective-bargaining agreements. While this interpretation does not set a legal precedent, it has gained support from Justice Marshall and other Justices. Recent Court of Appeals opinions have expanded the scope of the Act beyond what Congress intended, which Justices Stevens and O'Connor have previously dissented on.

The passage discusses the interpretation of the Federal Arbitration Act's exemption for employment contracts relating to seamen, railroad employees or workers engaged in foreign or interstate commerce. The Court rejects an interpretation of the exemption based on its evolution over time and instead limits its scope using the interpretive principle of ejusdem generis. This means that the exemption only applies to examples of the same category as the preceding named occupations, which excludes the respondent from the exemption's benefit as he is employed by a retail seller, not a carrier engaged in the transportation of goods. The Court does not examine the legislative history of the exclusion provision, which differs from previous cases in which legislative history and regulatory enforcement were taken into account to determine the meaning of similar phrases.