A petition for a writ of certiorari was granted March 23, 2015, in DIRECTV, Inc. v. Amy Imburgia, ___ S.Ct. ___, 83 USLW 3267, 2015 WL 1280237(2015). DIRECTV’s appeal of California decisions that refused to enforce DIRECTV’s contractual arbitration provision and class action waiver is now to be reviewed by the United States Supreme Court.
The provisions at issue state in part that a claim will first be addressed through an informal process and, if the claim is not resolved informally, then only by binding arbitration under JAMS rules, but that neither side may arbitrate any claim as a representative member of a class or in a private attorney general capacity. Thus it was agreed that the JAMS Class Action Procedures do not apply. The contract also stated that if the law of the claimant’s state would find this portion of the agreement (to dispense with class arbitration procedures) unenforceable, then the entire section was unenforceable.
DIRECTV argued that the U.S. Supreme Court's review is warranted at this time and that the Imburgia decision below conflicts with the Ninth Circuit's decision in Murphy v. DIRECTV, Inc., 724 F.3d 1218 (9th Cir. 2013), which enforced the same arbitration agreement and found “nonsensical” the reasoning adopted by the court below.
The respondents argued that the case pertains simply to an intermediate state court decision about state contract law, and that there is not a sufficiently important federal question to warrant review. In their Opposition Brief they framed the issues in terms of “a state Court of Appeal's application of neutral, nondiscriminatory state law”, and whether “the Court of Appeal erred in finding that the parties could select state law to the exclusion of federal law to determine the enforceability of a class action waiver?”
A Petition for discretionary review had been denied by the California Supreme Court July 23, 2014. On April 7, 2014, the California Court of Appeal had affirmed the Superior Court of Los Angeles County in denying DIRECTV’s motion to dismiss or stay the class action litigation and to compel arbitration. Imburgia v. DIRECTV, Inc., 225 Cal.App.4th 338 (2014).
The underlying case was filed as two class action complaints against DIRECTV, alleging it had improperly charged early termination fees to its customers. The two named plaintiffs then jointly filed a first amended complaint. The cases proceeded at the same time as multidistrict litigation in federal court involving similar claims. DIRECTV moved to stay the plaintiffs’ state court litigation pending the outcome of the multidistrict litigation, and the California Superior Court denied the motion. Plaintiffs moved for class certification, which was granted in part and denied it in part. A class was certified as to one of plaintiffs’ theories but not as to others.
Just one week after the class certification, on April 27, 2011, the United States Supreme Court decided AT&T Mobility LLC v. Concepcion 563 U.S. __ , 131 S.Ct. 1740 (2011). This decision significantly impacted DIRECTV’s strategy in theImburgia litigation. The Concepcion case held that the Federal Arbitration Act (“FAA”) (9 U.S.C. § 1 et seq.) preempted California law which had previously held that, under certain circumstances, class action waivers in consumer contracts are unenforceable as unconscionable. With that unfavorable law preempted, about three weeks later DIRECTV moved to stay or dismiss the Imburgia plaintiffs’ action, decertify the class, and compel arbitration. The Superior Court denied this motion, and DIRECTV appealed.
The Court of Appeal agreed with the plaintiffs, however, that the parties’ entire arbitration agreement was unenforceable under its terms discussed above, because the law of plaintiffs’ state, California, would find the class action waiver unenforceable, and the arbitration agreement was to be governed under California law (the state where service was provided), as well as the FAA. But the Court of Appeal found that California law governed here without considering the preemptive effect, if any, of the FAA. Thus the Court of Appeal agreed with the Superior Court’s denial of the motion to compel arbitration in Imburgia. And, the California Supreme Court declined to take the case.
So stay tuned. DIRECTV argued in favor of certiorarithat if the interpretation and enforcement of arbitration agreements governed by the FAA were purely a matter of state law, the FAA would be a nullity, such that hostile courts could defeat agreed-upon arbitration by citation to state contract law. In its Petition it framed the question presented as “Whether the California Court of Appeal erred by holding, in direct conflict with the Ninth Circuit, that a reference to state law in an arbitration agreement governed by the Federal Arbitration Act requires the application of state law preempted by the Federal Arbitration Act.” It argued that the court below ignored the preemption required by Concepcion and did precisely whatConcepcion prohibits.” Certiorari has been granted, so we may soon learn the view of the United States Supreme Court.