John Murphy v. Directv, Inc.
724 F.3d 1218
| 9th Cir. | 2013Background
- Consumers bought DirecTV equipment at Best Buy that plaintiffs allege was presented as a sale but in fact was treated by defendants as a lease with onerous terms and fees.
- DirecTV’s standard Customer Agreement (Section 9) requires binding arbitration and contains a class-action waiver; it also contains a "jettison" clause stating Section 9 is unenforceable if the law of the customer’s state disallows class-waivers.
- The complaint asserts UCL and CLRA claims against DirecTV and Best Buy for deceptive sales practices and receipts saying "SALE." Only Roberta Weiss remained as a plaintiff against Best Buy after earlier dismissals.
- Pre-Concepcion California law (Discover Bank) had rendered class-waivers unenforceable; after the Supreme Court decided AT&T Mobility v. Concepcion, DirecTV and Best Buy moved to compel arbitration based on the Customer Agreement.
- The district court compelled arbitration as to both DirecTV and Best Buy; the Ninth Circuit affirmed arbitration against DirecTV (holding Concepcion preempts the Discover Bank rule and the jettison clause cannot rely on state law to avoid FAA preemption) but reversed as to Best Buy because Best Buy, a nonsignatory, could not enforce arbitration under California doctrines (equitable estoppel, agency, or third‑party beneficiary).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Concepcion applies retroactively to render DirecTV’s class-waiver enforceable despite the Customer Agreement’s jettison clause invoking state law | Murphy et al.: California law (Discover Bank) governed and made the class-waiver unenforceable, triggering the jettison clause | DirecTV: Concepcion interprets FAA §2 as preempting state rules like Discover Bank, so the class waiver is enforceable and the jettison clause does not save plaintiffs | Held: Concepcion applies; FAA preempts Discover Bank and the arbitration provision (including class waiver) is enforceable against plaintiffs |
| Whether the Customer Agreement’s choice-of-law language can bind parties to state law that conflicts with the FAA | Plaintiffs: Parties agreed state law would govern enforceability; that agreement should allow application of Discover Bank | DirecTV: Federal supremacy and FAA preemption mean state law cannot defeat an FAA-consistent arbitration clause | Held: Reference to state law does not override federal law; FAA (as interpreted in Concepcion) controls |
| Whether Best Buy (a nonsignatory) can compel arbitration via equitable estoppel because claims are intertwined with DirecTV’s agreements | Plaintiffs: Claims are independent consumer-protection claims about point-of-sale misrepresentations, not based on the Customer Agreement | Best Buy: Claims are intertwined or founded on the Customer Agreement, or allege concerted misconduct making arbitration appropriate | Held: Denied—California equitable-estoppel doctrine requires claims be founded in the contract; here claims are statutory consumer-protection claims not sufficiently intertwined with DirecTV agreements |
| Whether Best Buy can compel arbitration as DirecTV’s agent or as a third-party beneficiary | Plaintiffs: No agency or intended third-party beneficiary status; Independent Retailer Agreement disavows agency | Best Buy: Retailer relationship and contract provisions suffice to treat Best Buy as agent or beneficiary entitled to arbitration | Held: Denied—record and Independent Retailer Agreement disavow agency; Customer Agreement does not show intent to benefit Best Buy, so no third-party beneficiary right to compel arbitration |
Key Cases Cited
- AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) (FAA preempts state rules that invalidate class‑waivers in arbitration agreements)
- Discover Bank v. Superior Court, 113 P.3d 1100 (Cal. 2005) (California rule invalidating consumer class-waivers as unconscionable)
- Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) (FAA embodies a liberal federal policy favoring arbitration)
- Rent-A-Center, West, Inc. v. Jackson, 130 S. Ct. 2772 (2010) (arbitration is a matter of contract; courts enforce arbitration agreements according to their terms)
- Fidelity Fed. Sav. & Loan Ass’n v. de la Cuesta, 458 U.S. 141 (1982) (federal law is part of the law of every state for choice-of-law purposes)
- Volt Info. Scis., Inc. v. Board of Trustees of Leland Stanford Jr. Univ., 489 U.S. 468 (1989) (choice-of-law clauses normally govern arbitration procedure, but federal law can preempt state rules that conflict with the FAA)
- American Airlines, Inc. v. Wolens, 513 U.S. 219 (1995) (parties can enforce private contractual undertakings even where federal law displaces related state regulation)
- Kramer v. Toyota Motor Corp., 705 F.3d 1122 (9th Cir. 2013) (summary of California equitable‑estoppel rules permitting nonsignatory enforcement of arbitration clauses in narrow circumstances)
- Goldman v. KPMG LLP, 92 Cal. Rptr. 3d 534 (Cal. Ct. App. 2009) (California test for equitable estoppel: reliance on the contract or interdependent/concerted misconduct tied to contract obligations)