Class Action Waiver Renders Arbitration Clause In DIRECTV’s Customer Agreement Unenforceable

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Imburgia v. DIRECTV Inc., No. B239361 (Cal. Ct. App. Apr. 7, 2014)

The California Court of Appeal ruled that the trial court properly denied DIRECTV’s motion to compel arbitration of customers’ claims challenging the legality of early termination fees. The entire agreement was unenforceable by the express terms of its choice of law provision governing enforceability of the class action waiver.

Amy Imburgia and Kathy Greiner filed a class action complaint against DIRECTV, alleging the corporation improperly charged early termination fees to them and other customers. The complaint asserted claims for unjust enrichment, false advertising and violation of the Consumer Legal Remedies Act (CLRA). The district court granted class certification.

Following the AT & T Mobility L.L.C. v. Concepcion (see 11 Cl.Act.L.Mon. 99, Apr. 30, 2011) decision, DIRECTV moved to compel arbitration. In Concepcion, the U.S. Supreme Court held the Federal Arbitration Act (FAA) preempts state laws that condition enforceability of arbitration agreements on the ability to pursue class claims.

Section 9 of DIRECTV’s customer agreement provided that disputes would be subject to binding arbitration and neither party to the arbitration would be able to consolidate claims or arbitrate any claims as a representative member of a class. Section 9 also provided that if the law of a customer’s state would find the class action waiver unenforceable, the entirety of section 9 was unenforceable.

The trial court denied DIRECTV’s motion to compel arbitration. DIRECTV appealed. The court of appeal concluded the entire arbitration agreement was unenforceable because the law of California would find the class action waiver unenforceable. The CLRA precludes waiver of the right to bring a class action under the statute.

Specific language in agreement controls.

DIRECTV pointed out that the arbitration agreement stated that section 9 was governed by the FAA and there was a strong federal policy in favor of arbitration. The court of appeal found that the more specific language regarding “the law of your state” was an exception to the arbitration agreement’s general adoption of the FAA.

Parties to a contract are free to choose the law under which the enforceability of a class action waiver is to be determined. DIRECTV could not compel arbitration under California law.

Judge : Frances Rothschild

Counsel for plaintiffs : Paul D. Stevens, Mayo L. Makarczyk, Shireen Mohsenzadegan, Milstein Adelman L.L.P., 310-396-9600, Santa Monica, Cal.; Harvey Rosenfield, Pamela Pressley, Consumer Watchdog, 310-392-0522, Los Angeles; Ingrid Maria Evans, Evans Law Firm, 415-441-8669, San Francisco; F. Edie Mermelstein, Law Offices of F. Edie Mermelstein, 714-596-0137, Huntington Beach, Cal.

Counsel for DIRECTV : Melissa D. Ingalls, Robyn E. Bladow, Kirkland & Ellis L.L.P., 213-680-8552, Los Angeles.

Source: Class Action Law Monitor, 05/15/2014

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