Blog Banner Image

The Franchise Memorandum

Supreme Court Reiterates Strong Federal Policy Favoring Arbitration and Overturns California Appellate Court's Invalidation of Arbitration Agreement
Posted in Arbitration

The United States Supreme Court recently reaffirmed the strong federal policy favoring arbitration under the Federal Arbitration Act. In DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463 (U.S. Dec. 14, 2015), the court overturned a decision by a California Court of Appeals, which had invalidated an arbitration provision that included a class action waiver. In doing so, the court held that the arbitration agreement had to be enforced.

After DIRECTV customers commenced a putative class action seeking damages for violation of various California consumer protection laws, DIRECTV moved to compel arbitration pursuant to a provision in the service agreements at issue. The contracts expressly provided that the arbitration requirement would be voided if the applicable state law would render the waiver of class arbitration unenforceable. Ultimately, both the California trial court and appellate court refused to compel arbitration of the customers' claims on the grounds that the class action waiver that formed part of the arbitration provision was unenforceable under California law, thereby making the entire arbitration provision unenforceable according to its own terms.

Relying on its prior holding in AT&T Mobility v. Concepcion, 563 U.S. 333 (2011), the court held that the Federal Arbitration Act preempted any state law that attempted to invalidate class action waivers in arbitration provisions. Accordingly, the court determined that DIRECTV's class action waiver (and the arbitration provision as a whole) was valid and enforceable. Although this is not a franchise case, it marks yet another instance in which the Supreme Court has upheld arbitration provisions under the Federal Arbitration Act.

Email LinkedIn Twitter Facebook

The information contained in this post is provided to alert you to legal developments and should not be considered legal advice. It is not intended to and does not create an attorney-client relationship. Specific questions about how this information affects your particular situation should be addressed to one of the individuals listed. No representations or warranties are made with respect to this information, including, without limitation, as to its completeness, timeliness, or accuracy, and Lathrop GPM shall not be liable for any decision made in connection with the information. The choice of a lawyer is an important decision and should not be based solely on advertisements.

About this Publication

The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

To subscribe to monthly emails for The Franchise Memorandum, please click here


















Blog Authors