DirecTV, Inc. v. Imburgia: U.S. Supreme Court Rejects California Court’s Attempt to Invalidate Class-Arbitration Waivers

Sullivan & Cromwell LLP - December 14, 2015

The U.S. Supreme Court reiterated today in DirecTV, Inc. v. Imburgia that the Federal Arbitration Act (FAA) preempts state-law judicial interpretations that do not place arbitration contracts on an equal footing with other types of contracts.  The contract at issue provided that the arbitration provision would be unenforceable if the “law of [the customer’s] state” declared a class-arbitration waiver unenforceable.  The California Court of Appeal held that California law made class-arbitration waivers unenforceable under Discover Bank v. Superior Court, 113 P.3d 1100 (Cal. 2005), even though the Supreme Court had held the Discover Bank rule preempted in AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011).  In other words, the California Court of Appeal interpreted the parties’ contract to incorporate even invalid state law.  The Supreme Court accepted that state-law interpretation of the contract, but held it preempted by the FAA because California courts would not interpret contracts other than arbitration contracts in the same way.  The Court’s decision continues to push back against judicial hostility toward arbitration provisions generally and class-arbitration waivers specifically, and it may signal greater scrutiny of state-court interpretation of such provisions.