On Monday, the U.S. Supreme Court issued its highly-anticipated opinion in DirecTV, Inc. v. Imburgia et al., 577 U.S. ___ (2015), which reaffirmed its ruling in AT&T Mobility LLC v. Concepcion, 56 U.S. 333 (2011), dealing yet another blow to California Courts’ attempts to invalidate class action waivers.
The plaintiffs in Imburgia filed their lawsuit in 2008, arguing that class action arbitration waivers were per se unenforceable in California under Discover Bank v. Super. Ct., 36 Cal. 4th 148, 162-163 (2005). Under the Discover Bank rule, California courts were free to find such provisions, when contained consumer contracts of adhesion, unconscionable and to rule that they should not be enforced. Id.
The DirecTV service agreement at issue in Imburgia provided for arbitration of customer disputes and included a class action waiver but also stated that “[i]f . . . the law of your state would find this agreement to dispense with class arbitration procedures unenforceable, then this entire [arbitration waiver] is unenforceable.” While the Imburgia case was pending, the Supreme Court issued its decision in Concepcion, which ruled that the Discover Bank rule was preempted by the Federal Arbitration Act (“FAA”). Despite Concepcion, the California Court of Appeals still found the class action waiver provision in the DirecTV service agreement unenforceable under the theory that the parties had chosen the law of California to govern at the time of drafting and, absent federal preemption, California law would not enforce such provisions.
Justice Breyer delivered the opinion of the Court, which began with this “elementary” lesson: “The Federal Arbitration Act is the law of the United States, and Concepcion is an authoritative interpretation of that Act. Consequently, the judges of every State must follow it.” (Slip Op. at 5). Unsurprisingly, the Supreme Court went on to rule that the California Court’s failure to do so indicated that it was not placing arbitration contracts “on equal footing with other contracts” and had therefore run afoul of the FAA. (Id. at 10-11).
Justice Ginsburg and Justice Sotomayor dissented, opining that, given the specific language of the service agreement and the fact that it was drafted before Concepcion, the state court was free to interpret the contract as it had, and to find the class action arbitration waiver unenforceable. (See Ginsburg Dissent at 3). They also lamented that the Court’s recent decisions in Concepcion and Italian Colors had effectively deprived “consumers’ rights to seek redress for losses” and “insulated powerful economic interests.” (Id. at 10-11).
Imburgia eliminates any doubt as to the enforceability of class action arbitration waivers. Retailers and service providers wishing to avoid class action claims are encouraged to include them in their contracts and to be aggressive in enforcing them in litigation, even in the face of arguably ambiguous language.