251 F. Supp. 3d 1328
C.D. Cal.2017Background
- Perez, owner of a Garden Grove beauty salon, was solicited in Spanish by a DirecTV representative on June 5, 2013, who installed equipment the same day and had her sign an English-language Equipment Lease Agreement (ELA).
- The ELA (small print) referenced a separate "DIRECTV Customer Agreement," but DirecTV did not provide that Customer Agreement until after installation and activation; Perez has limited English proficiency and the installer did not translate or give a Spanish form.
- The mailed Customer Agreement contains a broad arbitration clause but also carve-outs: Section 1(h) permits DirecTV to prosecute commercial-viewing/theft-of-service claims in court, and Section 9(d) exempts certain theft-of-service disputes from arbitration.
- DirecTV (through Lonstein Law Offices) later alleged Perez unlawfully displayed DirecTV in a commercial establishment and threatened litigation; Perez paid a settlement and then filed this putative class action alleging a scheme to sell residential service to small businesses then extort settlements.
- Defendants moved to compel arbitration based on the ELA and Customer Agreement; the court evaluated (1) whether there was mutual assent to arbitrate, (2) the scope of arbitration, and (3) unconscionability and severability under California law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether parties formed a valid agreement to arbitrate | Perez: no valid assent — only signed an English ELA she could not read; Customer Agreement was not provided at signing | DirecTV: ELA incorporates Customer Agreement; later receipt of Customer Agreement and continued service constitutes acceptance | Court: No valid mutual assent — Customer Agreement was not properly incorporated; signing ELA alone did not establish agreement to arbitrate |
| Whether Perez's silence/continued service bound her to later arbitration terms | Perez: silence does not constitute acceptance where contract terms were withheld and transaction occurred face-to-face | DirecTV: receiving service after being mailed the Customer Agreement constitutes acceptance by retention of benefit | Court: Silence/inaction did not establish assent; California law and facts (document withheld at sale; pressure from cancellation fee) defeat acceptance-by-silence |
| Whether the dispute falls within the arbitration clause's scope | Perez: claims center on alleged extortion/threats based on "theft of service" — which the Customer Agreement excepts from arbitration | DirecTV: claims arise from sale/classification and thus are arbitrable under the agreement | Court: Even if agreement existed, Perez’s claims fall within the theft-of-service/commercial-viewing carve-outs and are not subject to arbitration |
| Whether the arbitration provision is enforceable (unconscionability & severance) | Perez: procedural and substantive unconscionability (language barrier, withheld terms, one-sided carve-outs), and the agreement is not salvageable | DirecTV: provisions are permissible; FAA favors arbitration and carve-outs are a permissible margin of safety | Court: High procedural unconscionability and significant substantive one-sidedness; carve-outs render the arbitration clause unenforceable and not severable — motion denied |
Key Cases Cited
- CompuCredit Corp. v. Greenwood, 565 U.S. 95 (recognizes FAA’s purpose and storage of arbitration enforceability)
- Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126 (court determines existence and scope of arbitration agreement)
- Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (resolve doubts about arbitrability in favor of arbitration)
- AT&T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643 (arbitration is contractual; courts cannot compel arbitration of disputes parties haven't agreed to arbitrate)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (arbitration agreements may be invalidated by generally applicable contract defenses)
- Knutson v. Sirius XM Radio, Inc., 771 F.3d 559 (mutual assent required; party seeking arbitration bears burden to prove agreement exists)
- Armendariz v. Found. Health Psychcare Servs., Inc., 24 Cal.4th 83 (California unconscionability: procedural and substantive elements; sliding scale)
- Poublon v. C.H. Robinson Co., 846 F.3d 1251 (severability and unconscionability analysis; adhesive contracts and later-provided terms increase procedural unconscionability)