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Class Action Waiver In DIRECTV Service Agreement Is Enforceable

In DIRECTV, Inc. v. Imburgia, the U.S. Supreme Court held that class action waivers were enforceable. The company and its customers entered into a service agreement that included a binding arbitration provision with a class-arbitration waiver. It specified that the entire arbitration provision was unenforceable if the “law of your state” made class-arbitration waivers unenforceable. The agreement also declared that the arbi¬tration clause was governed by the Federal Arbitration Act. At the time that respondents, California residents, entered into that agree¬ment with DIRECTV, California law made class-arbitration waivers unenforceable.  Later, the Supreme Court held in AT&T Mobility LLC v. Concepcion, however, that California’s Discover Bank rule was pre-empted by the Federal Arbitration Act.  When respondents sued petitioner, the trial court denied DIRECTV’s request to order the matter to arbitration, and the Cali¬fornia Court of Appeal affirmed. The court thought that California law would render class-arbitration waivers unenforceable, so it held the entire arbitration provision was unenforceable under the agree¬ment. The fact that the Federal Arbitration Act pre-empted that Cal¬ifornia law did not change the result, the court said, because the par¬ties were free to refer in the contract to California law as it would have been absent federal pre-emption. The court reasoned that the phrase “law of your state” was both a specific provision that should govern more general provisions and an ambiguous provision that should be construed against the drafter. Therefore, the court held, the parties had in fact included California law as it would have been without federal pre-emption.  The Supreme Court reversed.

The U.S. Supreme Court stated that because the California Court of Appeal’s interpretation is pre¬empted by the Federal Arbitration Act, that court must enforce the arbitration agreement.

For more information, or if you need legal assistance, please contact the Wagner Legal Group at info@wagnerlegalgroup.com or (310) 857-5293.

 

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