DIRECTV, Inc. v. Imburgia

• Citation: 193 L.Ed.2d 365,136 S.Ct. 463,577 U.S. 47
• Decision Date: 14 December 2015
• Docket Number: No. 14–462.,14–462.
• Parties: DIRECTV, INC., Petitioner v. Amy IMBURGIA et al.
• Court: U.S. Supreme Court

577 U.S. 47

136 S.Ct. 463

193 L.Ed.2d 365

DIRECTV, INC., Petitioner

v.Amy IMBURGIA et al.

No. 14–462.

Supreme Court of the United States

Argued Oct. 6, 2015.

Decided Dec. 14, 2015.

Christopher Landau, Washington, DC, for Petitioner.

Thomas C. Goldstein, Bethesda, MD, for Respondents.

Melissa D. Ingalls, Robyn E. Bladow, Shaun Paisley, Kirkland & Ellis LLP, Los Angeles, CA, Christopher Landau, P.C. Kirkland & Ellis LLP, Washington, DC, for Petitioner.

F. Edie Mermelstein, Law Offices of F. Edie Mermelstein, Huntington Beach, CA, Paul D. Stevens, Milstein Adelman, LLP, Santa Monica, CA, Ingrid Maria Evans, Evans Law Firm, Inc., San Francisco, CA, Thomas C. Goldstein, Counsel of Record, Goldstein & Russell, P.C., Bethesda, MD, Harvey Rosenfield, Pamela Pressley, Consumer Watchdog, Santa Monica, CA, for Respondents.

Justice BREYER delivered the opinion of the Court.

The Federal Arbitration Act states that a "written provision" in a contract providing for "settle[ment] by arbitration" of "a controversy ... arising out of" that "contract ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. We here consider a California court's refusal to enforce an arbitration provision in a contract. In our view, that decision does not rest "upon such grounds as exist ... for the revocation of any contract," and we consequently set that judgment aside.

I

DIRECTV, Inc., the petitioner, entered into a service agreement with its customers, including respondents Amy Imburgia and Kathy Greiner. Section 9 of that contract provides that "any Claim either of us asserts will be resolved only by binding arbitration." App. 128. It then sets forth a waiver of class arbitration, stating that "[n]either you nor we shall be entitled to join or consolidate claims in arbitration." Id., at 128–129. It adds that if the "law of your state" makes the waiver of class arbitration unenforceable, then the entire arbitration provision "is unenforceable." Id., at 129. Section 10 of the contract states that § 9, the arbitration provision, "shall be governed by the Federal Arbitration Act." Ibid.

In 2008, the two respondents brought this lawsuit against DIRECTV in a California state court. They seek damages for early termination fees that they believe violate California law. After various proceedings not here relevant, DIRECTV, pointing to the arbitration provision, asked the court to send the matter to arbitration. The state trial court denied that request, and DIRECTV appealed.

The California Court of Appeal thought that the critical legal question concerned the meaning of the contractual phrase "law of your state," in this case the law of California. Does the law of California make the contract's class-arbitration waiver unenforceable? If so, as the contract provides, the entire arbitration provision is unenforceable. Or does California law permit the parties to agree to waive the right to proceed as a class in arbitration? If so, the arbitration provision is enforceable.

At one point, the law of California would have made the contract's class-arbitration waiver unenforceable. In 2005, the California Supreme Court held in Discover Bank v. Superior Court, 36 Cal.4th 148, 162–163, 30 Cal.Rptr.3d 76, 113 P.3d 1100, 1110, that a "waiver" of class arbitration in a "consumer contract of adhesion" that "predictably involve[s] small amounts of damages" and meets certain other criteria not contested here is "unconscionable under California law and should not be enforced." See Cohen v. DirecTV, Inc., 142 Cal.App.4th 1442, 1446–1447, 48 Cal.Rptr.3d 813, 815–816 (2006) (holding a class-action waiver similar to the one at issue here unenforceable pursuant to Discover Bank ); see also Consumers Legal Remedies Act, Cal. Civ.Code Ann. §§ 1751, 1781(a) (West 2009) (invalidating class-action waivers for claims brought under that statute). But in 2011, this Court held that California's Discover Bank rule " ‘stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress' " embodied in the Federal Arbitration Act. AT & T Mobility LLC v. Concepcion, 563 U.S. 333, 352, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011) (quoting Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 85 L.Ed. 581 (1941) ); see Sanchez v. Valencia Holding Co., LLC, 61 Cal.4th 899, 923–924, 190 Cal.Rptr.3d 812, 353 P.3d 741, 757 (2015) (holding that Concepcion applies to the Consumers Legal Remedies Act to the extent that it would have the same effect as Discover Bank ). The Federal Arbitration Act therefore pre-empts and invalidates that rule. 563 U.S., at 352, 131 S.Ct. 1740 ; see U.S. Const., Art. VI, cl. 2.

The California Court of Appeal subsequently held in this case that, despite this Court's holding in Concepcion, "the law of California would find the class action waiver unenforceable." 225 Cal.App.4th 338, 342, 170 Cal.Rptr.3d 190, 194 (2014). The court noted that Discover Bank had held agreements to dispense with class-arbitration procedures unenforceable under circumstances such as these. 225 Cal.App.4th, at 341, 170 Cal.Rptr.3d, at 194. It conceded that this Court in Concepcion had held that the Federal Arbitration Act invalidated California's rule. 225 Cal.App.4th, at 341, 170 Cal.Rptr.3d, at 194. But it then concluded that this latter circumstance did not change the result—that the "class action waiver is unenforceable under California law." Id., at 347, 170 Cal.Rptr.3d, at 198.

In reaching that conclusion, the Court of Appeal referred to two sections of California's Consumers Legal Remedies Act, §§ 1751, 1781(a), rather than Discover Bank itself. See 225 Cal.App.4th, at 344, 170 Cal.Rptr.3d, at 195.

Section 1751 renders invalid any waiver of the right under § 1781(a) to bring a class action for violations of that Act. The Court of Appeal thought that applying "state law alone" (that is, those two sections) would render unenforceable the class-arbitration waiver in § 9 of the contract. Id., at 344, 170 Cal.Rptr.3d, at 195. But it nonetheless recognized that if it applied federal law "then the class action waiver is enforceable and any state law to the contrary is preempted." Ibid. As far as those sections apply to class-arbitration waivers, they embody the Discover Bank rule. The California Supreme Court has recognized as much, see Sanchez, supra, at 923–924, 190 Cal.Rptr.3d 812, 353 P.3d, at 757, and no party argues to the contrary. See Supp. Brief for Respondents 2 ("The ruling in Sanchez tracks respondents' position precisely"). We shall consequently refer to the here-relevant rule as the Discover Bank rule.

The court reasoned that just as the parties were free in their contract to refer to the laws of different States or different nations, so too were they free to refer to California law as it would have been without this Court's holding invalidating the Discover Bank rule. The court thought that the parties in their contract had done just that. And it set forth two reasons for believing so.

First, § 10 of the contract, stating that the Federal Arbitration Act governs § 9 (the arbitration provision), is a general provision. But the provision voiding arbitration if the "law of your state" would find the class-arbitration waiver unenforceable is a specific provision. The court believed that the specific provision " ‘is paramount to’ " and must govern the general. 225 Cal.App.4th, at 344, 170 Cal.Rptr.3d, at 195 (quoting Prouty v. Gores Technology Group, 121 Cal.App.4th 1225, 1235, 18 Cal.Rptr.3d 178, 185–186 (2004) ; brackets omitted).

Second, the court said that " ‘a court should construe ambiguous language against the interest of the party that drafted it.’ "

225 Cal.App.4th, at 345, 170 Cal.Rptr.3d, at 196 (quoting Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 62, 115 S.Ct. 1212, 131 L.Ed.2d 76 (1995) ). DIRECTV had drafted the language; to void the arbitration provision was against its interest. Hence the arbitration provision was void. The Court of Appeal consequently affirmed the trial court's denial of DIRECTV's motion to enforce the arbitration provision.

The California Supreme Court denied discretionary review. App. to Pet. for Cert. 1a. DIRECTV then filed a petition for a writ of certiorari, noting that the Ninth Circuit had reached the opposite conclusion on precisely the same interpretive question decided by the California Court of Appeal. Murphy v. DirecTV, Inc., 724 F.3d 1218, 1226–1228 (2013). We granted the petition.

II

No one denies that lower courts must follow this Court's holding in Concepcion. The fact that Concepcion was a closely divided case, resulting in a decision from which four Justices dissented, has no bearing on that undisputed obligation. Lower court judges are certainly free to note their disagreement with a decision of this Court. But the "Supremacy Clause forbids state courts to dissociate themselves from federal law because of disagreement with its content or a refusal to recognize the superior authority of its source." Howlett v. Rose, 496 U.S. 356, 371, 110 S.Ct. 2430, 110 L.Ed.2d 332 (1990) ; cf. Khan v. State Oil Co., 93 F.3d 1358, 1363–1364 (C.A.7 1996), vacated, 522 U.S. 3, 118 S.Ct. 275, 139 L.Ed.2d 199 (1997). The Federal Arbitration Act is a law of the United States, and Concepcion is an authoritative interpretation of that Act. Consequently, the judges of every State must follow it. U.S. Const., Art. VI, cl. 2 ("[T]he Judges in every State shall be bound" by "the Laws of the United States").

While all accept this elementary point of law, that point does not resolve the issue in this case. As the Court of Appeal noted, the Federal Arbitration Act allows parties to an arbitration contract considerable latitude to choose what law governs some or all of its provisions, including the law governing enforceability of a class-arbitration waiver. 225 Cal.App.4th, at 342–343, 170 Cal.Rptr.3d, at 194. In principle, they...