U.S. SC to decide DirecTV case over arbitration agreement

On Monday, the nation’s high court granted DirecTV’s petition for a writ of certiorari in DirecTV Inc. v. Amy Imburgia, et al.

The company filed its petition with the Supreme Court in October, after the California Court of Appeal, Second District, ruled against DirecTV.

The appeals court said in its decision, issued nearly a year ago, that California law forbids arbitration agreements that include a class-action waiver. The California Supreme Court denied to review the ruling, and therefore upheld it.

But DirecTV, citing another U.S. Supreme Court ruling, argues that the Federal Arbitration Act preempts state law.

The FAA, originally passed by Congress in 1925, says states must apply the same rules to arbitration as they do to normal court cases.

In 2012, the nation’s high court ruled in AT&T Mobility v. Concepcion that companies can enforce contracts that bar class-action lawsuits.

“The California Court of Appeal’s decision in this case does precisely what Concepcion prohibits: it applies state law to invalidate an arbitration agreement solely because that agreement includes a class-action waiver,” lawyers for DirecTV wrote in the company’s 18-page petition. “The Court of Appeal purported to reconcile that result with Concepcion by holding that the parties here contractually opted out of FAA preemption, even though they specified that their arbitration agreement ‘shall be governed by the Federal Arbitration Act.’

“Ironically, the Court based that holding on a ‘non-severability’ clause designed to prevent class arbitration. Under that clause, the parties agreed that the arbitration agreement as a whole would be unenforceable if ‘the law of [the customer’s] state’ would find the class-action waiver unenforceable.”

DirecTV argues that the appeals court “seized” on that clause to declare that the parties intended to rely on state law preempted by the FAA to avoid enforcement of an arbitration agreement governed by the FAA.

“The FAA, as this Court has stated time and again, establishes a substantive federal policy in favor of arbitration, which requires both federal and state courts to enforce arbitration agreements according to their terms and to resolve any doubts in favor of arbitration,” lawyers for the company wrote to the Supreme Court.

“The California Court of Appeal made a mockery of that federal policy, and this Court’s recent decision in Concepcion, by refusing to enforce federal arbitration rights here on a theory that the (U.S. Court of Appeals for the) Ninth Circuit has described as ‘nonsensical.’”

The Supreme Court will hear arguments in the case in the fall.

From Legal Newsline: Reach Jessica Karmasek by email at [email protected].