Provisions Requiring Arbitration With AT&T's Affiliates Did Not Apply To A Future Affiliate.
Plaintiff contracted with AT&T for service, and sued an affiliate DIRECTV acquired later by AT&T. The Court of Appeal had to "decide whether a satellite television company, which became an affiliate years after the agreement was signed, may use the wireless services agreement to compel arbitration in a suit brought against it under the Telephone Consumer Protection Act." Jeremy Revitch v. DIRECTV, LLC, No. 18-16823 (9th Cir. 9/30/20) ( O’Scannlain, McKeown; conc. O'Scannlain; dsst, Bennett).
The service agreement required arbitration with AT&T and its affiliates. However, both the district court and the 9th Circuit held that "affiliates" did not include DIRECTV, LLC, an affiliate acquired by AT&T after the service agreement was signed. The interesting part of the opinion is the analysis of California's "absurd results" rule of contract interpretation, providing, "The language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity.” (Cal. Civ. Code section 1639). The majority opinion explained that if "affiliates" was interpreted to include after-acquired affiliates, then Revitch could be required to arbitrate with a party who had not contracted with him, and who was acquired later, regardless of the affiliate's connection to the dispute.
Judge Bennett dissenting disagreeing that such an interpretation of the contract resulted in an absurd result. Judge Bennett argued that the word "affiliates" was clear and included DIRECTV, that if there was any ambiguity, it had to be interpreted to favor arbitration, and that agreeing to a broadly worded arbitration agreement was not an absurd result.
COMMENT: California's "absurd results" rule of contract interpretation is not preempted by the FAA, because the rule would apply to contracts in general, and thus would not unduly burden arbitration agreements.
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