ScotusBlog Analyzes Oral Argument Under Caption, “Justices have scorching criticism for California court’s refusal to enforce arbitration agreement, but debate their authority to correct it.”
In his preview, Professor Mann leads: “If I start by telling you that DIRECTV includes an arbitration clause in agreements with its customers and that the California Court of Appeal in this case declined to order arbitration, it would be understandable if you immediately stopped reading and clicked back to look for another post: how far do you have to read to expect that my post is going to tell you that the Court is likely to reverse the California court and hold the agreement enforceable?”
In DIRECTV, the arbitration provisions contain a poison pill: “if the law of your state would find this agreement to dispense with class arbitration procedures unenforceable, then this entire [arbitration provision] is unenforceable.” What does “law of your state” mean?
The parties entered into the agreement when the Discover Bank rule applied in California, invalidating class action waivers, and before that rule had been overturned by AT&T v. Concepcion.
The question, as presented by DIRECTV’s petition for writ of certiorari to the Supreme Court is: “Whether the California Court of Appeal erred by holding, in direct conflict with the Ninth Circuit, that a reference to state law in an arbitration agreement governed by the Federal Arbitration Act requires the application of state law preempted by the Federal Arbitration Act.”
Thus, DIRECTV’s position is simply that the California courts flaunt federal law and preemption.
In contrast, Imburgia argues that this is a simple matter of contract interpretation: whether the reference to “the law of your state” refers to the rule in Discover Bank, or to the state of the law in California after Concepcion. Imburgia argues that contract interpretation should be left to state judges, and if the contract drafted by DIRECTV is ambiguous, then the well-known rule that ambiguous contracts are interpreted against the drafter must apply.
Prof. Mann concludes, “[I]t seems unlikely that five of the Justices will vote to affirm the California decision. But do we know exactly how they’ll explain their decision? For that I suppose we’ll have to wait a few months yet.”