When It Comes To Arbitration Agreement Class Action Waivers, Concepcion Is Still The Law, Even In California

In 2014, we blogged about a California state appellate court decision invalidating the arbitration clause in DIRECTV's consumer contracts. We found that California decision to be noteworthy because it seemed to fly in the face of the U.S. Supreme Court's decision in AT&T Mobility v. Concepcion, 563 U.S. 333, 352 (2011), which invalidated California's ban on class action waivers in consumer arbitration agreements on the basis that California law was preempted by the Federal Arbitration Act (FAA). The Supreme Court thought so too, ruling last month in DIRECTV, Inc. v. Imburgia, No. 14-462 (December 14, 2015), that Concepcion dictates that the California Court of Appeal's interpretation of the DIRECTV contract is barred by the FAA.

The key contractual provision at issue in this case was an arbitration clause in DIRECTV's consumer contracts which mandated that all disputes arising out of the contract be arbitrated on an individual basis only and barred class arbitrations. The contractual arbitration clause provided that it was to be governed by the FAA but specified that "[i]f, however, the law of your state would find this agreement to dispense with class arbitration procedures unenforceable, then this entire [arbitration clause] is unenforceable." Affirming a lower court decision invalidating the arbitration clause, the California Court of Appeal held that under California state law at the time plaintiffs entered into their consumer contracts with DIRECTV, class arbitration waivers were unenforceable. That being the case, and notwithstanding Concepcion, the Court of Appeal found that under the "if, however" provision of the DIRECTV arbitration clause, the entire arbitration provision was unenforceable. Imburgia v. DIRECTV, Inc., 170 Cal. Rptr. 3d 190 (2014).

After the California Supreme Court denied discretionary review of the Court of Appeal's decision, DIRECTV filed a petition for certiorari in which it pointed out that the Ninth Circuit had reached the opposite conclusion on the same contract clause in Murphy v. DirecTV, Inc., 724 F. 3d 1218, 1226-28 (2013). The Supreme Court granted certiorari and reversed in a 6-3 decision.

The majority opinion, written by Justice Breyer, agreed with the Court of Appeal that under California law at the time plaintiffs entered into their agreements with DIRECTV in 2008, contractual provisions waiving classwide arbitration were unenforceable. However, the majority rejected the Court of Appeal's conclusion...