Directv, Inc. v. Imburgia
193 L. Ed. 2d 365
| SCOTUS | 2015Background
- DIRECTV's 2007 customer service agreement required arbitration of disputes and contained a clause waiving class arbitration; it further stated that if "the law of your state" made that waiver unenforceable, the entire arbitration provision would be unenforceable.
- Respondents (Imburgia & Greiner) sued in California state court alleging unlawful early-termination fees and sought class relief; DIRECTV moved to compel arbitration after this Court's decision in Concepcion.
- The California Court of Appeal held the clause meant to incorporate California law as it existed (including Discover Bank), so the class-waiver was unenforceable and thus the whole arbitration clause was unenforceable.
- DIRECTV petitioned to the U.S. Supreme Court; the Ninth Circuit had addressed the same interpretive question differently in Murphy v. DIRECTV.
- The Supreme Court reversed, holding the California Court of Appeal’s interpretation was preempted by the Federal Arbitration Act (FAA) because it treated arbitration contracts differently than ordinary contracts.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the phrase "law of your state" in the arbitration clause incorporates state law as it existed even if that state law was later held invalid under federal law | Imburgia: It incorporates California law as applied at the time (including Discover Bank), so the class-waiver is unenforceable and voids arbitration | DIRECTV: The phrase should be read to incorporate valid state law subject to federal preemption (i.e., Concepcion), making the arbitration clause enforceable | Held: Reversed. The Court held the California court's interpretation treated arbitration contracts unequally and was preempted by the FAA; arbitration agreement must be enforced |
| Whether state courts can treat arbitration contracts differently from other contracts when determining enforceability | Imburgia: California contract‑interpretation rules (including contra proferentem for adhesion contracts) justify a ruling favoring the consumer | DIRECTV: Arbitration provisions must be given no different treatment than other contracts; FAA preempts state rules that single out arbitration | Held: The FAA preempts the California Court of Appeal’s approach because it applied a special rule to arbitration agreements, not ordinary contracts |
| Whether Concepcion controls lower courts despite being a divided decision | Imburgia: State courts may interpret contracts under state law and apply ordinary rules; dissent argued for deference to state contract rules | DIRECTV: Concepcion is binding federal law under the Supremacy Clause and requires enforcement of class-waiver provisions not invalidated by neutral contract rules | Held: Concepcion is binding; state courts must follow it and cannot apply California rules to arbitration contracts in a way that nullifies FAA preemption |
| Proper interpretive canons for ambiguous arbitration contract terms (e.g., contra proferentem) | Imburgia: Ambiguities should be construed against the drafter (DIRECTV) in adhesion-contract context, supporting nonenforcement | DIRECTV: The clause is not ambiguous and should be read in favor of arbitrability and FAA effect | Held: Court found the clause not reasonably read to incorporate state law rendered invalid by federal court decisions and rejected applying a drafter‑against canon to treat arbitration clauses uniquely |
Key Cases Cited
- AT & T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (FAA preempts state rules that invalidate class‑action waivers in arbitration agreements)
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006) (arbitration contracts are to be placed on equal footing with other contracts)
- Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Univ., 489 U.S. 468 (1989) (interpretation of private arbitration agreements is ordinarily governed by state contract law)
- Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52 (1995) (ambiguous contract language may be construed against the drafter)
- Perry v. Thomas, 482 U.S. 483 (1987) (FAA preemption can invalidate state rules that single out arbitration)
- Discover Bank v. Superior Court, 36 Cal.4th 148 (2005) (California rule holding certain class‑waiver provisions in consumer adhesion contracts unconscionable)
- Sanchez v. Valencia Holding Co., LLC, 61 Cal.4th 899 (2015) (California Supreme Court recognizing Concepcion’s preemptive effect on Discover Bank rule)