DIRECTV v. Imburgia

Amy Imburgia brought a class action on behalf of herself and other DIRECTV subcribers claiming that DIRECTV charged early-termination fees in violation of California consumer protection laws. Imburgia’s contract with DIRECTV contained an arbitration clause that purported to ban class actions, but also provided that if the class-action ban was unenforceable under the law of the state where the consumer lived (in this case California), then the whole arbitration clause would also be unenforceable. At the time Imburgia brought suit, DIRECTV conceded that the class-action ban was unenforceable under California law and thus did not try to enforce the arbitration clause. After the U.S. Supreme Court ruled in AT&T Mobility v. Concepcion that the Federal Arbitration Act (FAA) preempted California court decisions holding class actions unenforceable, DIRECTV changed its tune and sought arbitration. A California appellate court ruled that the language of the contract made California law determinative of whether the arbitration clause could be enforced, even though the state’s law would otherwise be preempted. Because California law still would provide that the class-action ban was unenforceable, denying arbitration would properly give effect to the contract’s terms (as required by the FAA itself).

DIRECTV unsuccessfully sought review in the California Supreme Court and then filed a successful petition for certiorari in the U.S. Supreme Court, arguing among other things that giving effect to the contract’s language selecting California state law to govern the issue of the enforceability of the class action ban would violate principles of federal preemption. Public Citizen filed an amicus brief on the merits supporting Ms. Imburgia, arguing that the case raises no genuine issue of federal preemption, but only a question of contract interpretation. In December 2015, the Supreme Court reversed the California court’s decision. Although the Supreme Court acknowledged that whether the arbitration clause’s reference to “state law” referred to state law with or without regard to the preemptive effect of Concepcion is an issue of contract interpretation, it held that the state court’s interpretation was so unusual that it must reflect “hostility” to arbitration and thus be preempted by the FAA.