His Opinion Analysis Is Titled, “Justices rebuke California courts (again) for refusal to enforce arbitration agreement” -- And That About Says It All.
On December 14, 2015, the United States Supreme Court decided DirecTV v. Imburgia, The SCOTUS syllabus states the holding: “Because the California Court of Appeal’s interpretation is pre-empted by the Federal Arbitration Act, that court must enforce the arbitration agreement.” Professor Ronald Mann of Columbia previewed the case earlier on SCOTUSBlog, and I recommend his post-opinion analysis for its brevity and clarity.
The arbitration agreement between DirecTV, a satellite television provider, and two of its customers, provided for binding arbitration and waiver of class arbitration, unless the “law of your state” made waiver of class arbitration unenforceable. In case the waiver of class arbitration was unenforceable, then the entire arbitration provision became unenforceable.
When the plaintiff entered into the arbitration agreement, existing California law (Discover Bank), made class action waivers unenforceable, in those situations where it would have been simply infeasible for a single aggrieved party to pursue rights in arbitration. Since then, however, SCOTUS has made it clear in Concepcion and other cases that state laws placing arbitration agreements on an unequal footing with other contracts will be preempted by the Federal Arbitration Act (assuming interstate commerce is involved). And the FAA requires that arbitration agreements be enforced according to their terms – even though pragmatically, this can be harsh, leaving would-be plaintiffs with rights, but without an effective remedy. Who will bother to arbitrate over a very small monetary dispute, unless it can be aggregated with similar disputes in a class arbitration or lawsuit?
The majority opinion makes it clear that the reference to state law means “valid state law” – not state law that has been preempted by SCOTUS.
Justice Breyer was assigned to write the opinion – an interesting choice, given that he was one of the dissenters in Concepcion, the case that spearheaded the current FAA preemption juggernaut.
Justices Ginsburg and Sotomayor dissented, on the ground that the reference to state law was at best ambiguous, and that an ambiguous agreement should be interpreted against the drafter, DirecTV. Ever feisty, Justice Ginsburg wrote: “Demeaning that [state] court’s judgment through harsh construction, this Court has again expanded the scope of the FAA, further degrading the rights of consumers and further insulating already powerful economic entities from liability for unlawful acts.”
In a three-sentence dissent, Justice Thomas propounded his view that the FAA does not apply to state court proceedings.