U.S. Supreme Court Makes California Favor Arbitration over Class-Actions

Tuesday, December 15, 2015
(photo: Paul Taggart, Bloomberg via Getty Images)

In case DirecTV customers in California weren't up to speed on their diminished rights when contesting charges and actions by their digital provider, the U.S. Supreme Court laid it out for them.

In a 6-3 ruling (pdf) Monday, the justices reiterated that when a corporation says it will only settle disputes via arbitration, thousands of mutually-aggrieved customers cannot file a class-action lawsuit. They must individually, and expensively, engage with the company, before an arbitrator not of their choosing.

That's the way the high court has ruled for years in rulings that critics say make it harder to pursue cases against companies for fraud and defective products. 

Dissenting Justice Ruth Bader Ginsburg wrote, “These decisions have predictably resulted in the deprivation of consumers’ rights to seek redress for losses, and, turning the coin, they have insulated powerful economic interests from liability for violations of consumer protection laws.”

The New York Times pointed out in its coverage of the case, “It is becoming increasingly impossible to apply for cable or Internet service, shop online or buy a car without agreeing to private arbitration. . . . Companies say arbitration provides a less costly and more efficient process for consumers to resolve disputes than going to court, but support for those assertions is largely anecdotal.”

The case, DirecTV v. Imburgia, was pursued in California state courts by two customers in 2008 who complained about the company's fees for early termination that ran as high as $480. They noted that a provision in the contract they signed for service from the satellite TV provider compelling arbitration of disputes said it was not applicable in states that forbid the clause. California is one of them.

But the Supreme Court majority said its 2011 decision, AT&T Mobility v. Concepcion (pdf), made clear that companies always have the power to put arbitration requirements in their contracts, taking precedence over California law. It was one in string of decisions that have limited the use of class-action lawsuits.

Justice Stephen G. Breyer, who wrote the majority decision in the DirecTV case, had been in the minority of the 2011 ruling. Breyer chastised lower courts for ignoring the high court's ruling on arbitration and supporters of the decision thought it would be effective.

“As a result of today’s decision, arbitration will continue to thrive as an attractive and effective alternative to costly and time-consuming litigation,” Cory Andrews of the Washington Legal Foundation told the Washington Post.

Yes it will, to the chagrin of Harvey Rosenfield, founder of Consumer Watchdog and a litigant in the case. He told the Post:

“This is another troubling day for American consumers who are ripped off by corporate greed and malfeasance, whether it’s a satellite TV system that doesn’t work, unlawful credit card fees, or a defective vehicle. The Supreme Court has taken away Americans’ only right to obtain justice: their day in court. The more the U.S. Supreme Court allows big corporations to evade accountability, the less confidence Americans have in the judicial branch and the rule of law.”   

‒Ken Broder


To Learn More:

Supreme Court Upholds Arbitration in DirectTV Case (by Adam Liptak, New York Times)

Supreme Court Rejects Class-Action Suit Against DirecTV (by Robert Barnes, Washington Post)

Justices Upend DirecTV Class Action in California (by Barbara Leonard, Courthouse News Service)

Supreme Court Says Binding Arbitration Clauses in Consumer Contracts Trump California Law (by David G. Savage, Los Angeles Times)

DirecTV, Inc. v. Imburgia et al (U.S. Supreme Court) (pdf)

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