Supreme Court Overturns California Court’s Holding that Class Action Arbitration Waiver is Unenforceable
In the recent case of DirectTV, Inc. v. Imburgia, the Supreme Court issued a key decision interpreting the scope of arbitration agreements under the Federal Arbitration Act. In the lawsuit, the plaintiffs sought to enforce a class action arbitration waiver, which included a provision providing that the entire clause was not enforceable if the law in the signing party’s state dictated that class action waivers are not enforceable. When the defendants executed the contract, California law stated that class action waivers were not enforceable. The lower court ultimately ruled that the class action arbitration waiver was unconscionable and refused to enforce it.
In reaching this holding, the California courts relied on the language in the contract that said “the law of your state,” finding that this allowed the court a basis for avoiding preemption pursuant to the Federal Arbitration Act. The lower court determined that Sections 1751 and 1781 of the California Remedies Act required the provision to be deemed invalid, notwithstanding the application of the Federal Arbitration Act.