Last month, the U.S. Supreme Court reversed a California state court’s refusal to enforce a contract’s arbitration clause that included a class action waiver, finding that the California decision was a violation of the Federal Arbitration Act.
In DirecTV Inc. v Imbrurgia, two DirecTV customers filed suit against the company in California, saying that DirecTV’s early termination fees violated California law. A provision in DirecTV’s customer agreement required that all disputes be handled through binding arbitration and prohibited the consolidation of any claims in arbitration. However, the agreement also stated that the arbitration provision would be unenforceable if the “law of your state” voided the prohibition against class arbitration.
DirecTV sought to compel arbitration on the grounds that the U.S. Supreme Court’s landmark 2011 decision in AT&T Mobility LLC v. Concepcion — which found that the FAA preempts all state-law rules that prohibit arbitration of a specific type of claim — superseded California law.
A California trial court denied DirecTV’s motion to compel arbitration, and the California Court of Appeal affirmed. DirecTV appealed to the California Supreme Court, which denied discretionary review, and then to the U.S. Supreme Court.
The issue before the high court was whether California law made class action waivers unenforceable. Since the court’s Concepcion ruling had already pre-empted a 2005 California Supreme Court decision in Discover Bank v. Superior Court that class action waivers in consumer contracts were unenforceable, the Supreme Court ruled 6-3 that DirecTV’s arbitration clause was valid and that the class action waiver was enforceable.
The Court noted that, “the view that state law retains independent force even after it has been authoritatively invalidated by this Court is one courts are unlikely to accept as a general matter and to apply in other contexts.”
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