With its last opinion of 2015, the Supreme Court added DIRECTV v. Imburgia to the ever-growing line of decisions reversing California courts refusal to enforce provisions in arbitration agreements that barred class arbitration. Imburgia presents the Court’s second look at the hostility of California law to waivers of class wide arbitration. Three years ago, after California courts refused to enforce provisions in arbitration agreements that barred class arbitration (on the ground that the provisions were unconscionable), a closely divided court in AT&T Mobility v. Concepcion disagreed, holding that the Federal Arbitration Agreement (“FAA”) preempted the California doctrine invalidating those waivers.
Imburgia involves the agreements that petitioner DIRECTV was using after California adopted the prohibition on class action waivers, but before the Supreme Court rejected that prohibition. Trying to avoid classwide arbitration, the form agreement at that time included a provision indicating that “if the law of your state would find this agreement to dispense with class arbitration procedures unenforceable, then this entire [arbitration provision] is unenforceable.” After Concepcion, DIRECTV assumed that it could resume arbitrations in California. But in this case the California Court of Appeal held that the provision still barred arbitration, reasoning that whatever the Supreme Court might have said about federal law, the law of California (“your state”) would find the agreement to dispense with class arbitration unconscionable.
The Supreme Court reversed the California Court of Appeal, holding that the Federal Arbitration Agreement preempted the California doctrine invalidating those waivers. The practical implications of the ruling are that opponents of bans on class actions are not going to find refuge in the Supreme Court. The opinion sends message that there’s no way to get avoid FAA preemption other than Congress acting. Read more on SCOTUSblog.