Garcia v. Directv, Inc.

• Decision Date: 28 January 2004
• Docket Number: No. B158570.,B158570.
• Citation: 115 Cal.App.4th 297,9 Cal.Rptr.3d 190
• Court: California Court of Appeals
• Parties: Robert GARCIA et al., Plaintiffs and Respondents, v. DIRECTV, INC., et al., Defendants and Appellants.

9 Cal.Rptr.3d 190

115 Cal.App.4th 297

Robert GARCIA et al., Plaintiffs and Respondents, v. DIRECTV, INC., et al., Defendants and Appellants.

No. B158570.

Court of Appeal, Second District, Division 1.

January 28, 2004.

Quinn Emanuel Urquhart Oliver & Hedges, Dale H. Oliver, Michael Ernest Williams and Tiffany C. Graham, Los Angeles, for Defendants and Appellants.

Baron & Budd, Allen M. Stewart, Steve B. Jensen; McKool Smith, Lewis T. Leclair, Jill Adler; O'Neill, Lysaght & Sun, Brian C. Lysaght, Yolanda Orozco, Santa Monica, and Noah B. Salamon, for Plaintiffs and Respondents.

VOGEL (MIRIAM A.), J.

In the absence of a class action waiver, California law authorizes classwide arbitrations and vests jurisdiction in our trial courts to determine whether in a particular case that approach "offer[s] a better, more efficient, and fairer solution" than the alternatives. (Keating v. Superior Court (1982) 31 Cal.3d 584, 613, 183 Cal.Rptr. 360, 645 P.2d 1192, reversed on another ground in Southland Corp. v. Keating (1984) 465 U.S. 1, 104 S.Ct. 852, 79 L.Ed.2d 1; Lewis v. Prudential-Bache Securities, Inc. (1986) 179 Cal.App.3d 935, 225 Cal.Rptr. 69; Izzi v. Mesquite Country Club (1986) 186 Cal.App.3d 1309, 1319-1322, 231 Cal.Rptr. 315.) Until last year, we applied these rules to arbitrations governed by the Federal Arbitration Act (9 U.S.C. § 1 et seq.; Blue Cross of California v. Superior Court (1998) 67 Cal.App.4th 42, 60, 78 Cal.Rptr.2d 779; Sanders v. Kinko's, Inc. (2002) 99 Cal.App.4th 1106, 1113-1114, 121 Cal.Rptr.2d 766) — but no longer. The Supreme Court has spoken, and the foundational issue — whether a particular arbitration agreement prohibits class arbitrations — must (in FAA cases) henceforth be decided by the arbitrators, not the courts. (Green Tree Financial Corp. v. Bazzle (2003) 539 U.S. 444, 123 S.Ct. 2402, 156 L.Ed.2d 414.)

FACTS

DIRECTV, Inc. provides digital home satellite television services through a network of independent dealers, one of whom (Robert Garcia, later joined by others included in our references to Garcia) filed a "Class Action Demand for Arbitration" with the American Arbitration Association to resolve his claims against DIRECTV. Garcia and DIRECTV are bound by DIRECTV's standard Sales Agency Agreement, and that agreement includes an arbitration provision. Before the arbitration was heard, Garcia filed this class action lawsuit against DIRECTV (and its parent corporation), which in turn moved to compel arbitration. In April 2002, the trial court found that it (not the arbitrator) would determine the class action issues (including the threshold issue about whether classwide arbitration is prohibited by the terms of DIRECTV's agreement), found that classwide arbitration is not prohibited, and granted DIRECTV's motion to compel arbitration.

In previous proceedings before us, we relied on Blue Cross of California v. Superior Court, supra, 67 Cal.App.4th 42, 78 Cal.Rptr.2d 779, and affirmed the trial court's order. (Garcia v. DIRECTV, Inc. (Dec. 11, 2002, B158570), 2002 WL 31769224 [nonpub. opn.].) The California Supreme Court denied DIRECTV's petition for review, but the United States Supreme Court granted its petition for a writ of certiorari, vacated our judgment, held this case pending its resolution of Green Tree Financial Corp. v. Bazzle, supra, 539 U.S. 444, 123 S.Ct. 2402, and then remanded the cause to us for further consideration in light of Green Tree. We invited further briefing and set the matter for hearing.

DISCUSSION

A.

The plaintiffs in Green Tree (Lynn and Burt Bazzle) obtained a home improvement loan from Green Tree and agreed, in the loan documents, to resolve any disputes by arbitration under the FAA. Green Tree apparently failed to provide certain consumer notices, and the Bazzles thereafter sued Green Tree in state court, then asked the court to certify their claim as a class action. In response, Green Tree moved to compel arbitration. The trial court granted both motions, certified the class action, and compelled arbitration. The arbitration hearing was held, and the arbitrator awarded more than $10 million to the class. The trial court confirmed the award. The South Carolina Supreme Court affirmed, holding that the loan documents were silent in regard to class arbitration, and that they consequently authorized classwide arbitrations. (Green Tree Financial Corp. v. Bazzle, supra, 539 U.S. at pp. ___-___, 123 S.Ct. at pp. 2405-2406.)

In its petition to the United States Supreme Court, Green Tree posed the issue as whether, under the FAA, an arbitration clause silent as to class arbitration could be interpreted under state law to permit class arbitration. (Green Tree Financial Corp. v. Bazzle, supra, 539 U.S. at p. ___, 123 S.Ct. at p. 2404.) The Supreme Court granted certiorari (in the Bazzles' case and in another case that had followed a similar road to the high court), then held that the foundational question — that is, whether the agreement forbids class arbitration — had to be decided by the arbitrator, not the court, and that the South Carolina Supreme Court's judgment thus had to be vacated and the matter remanded to the arbitrator:

"The parties agreed to submit to the arbitrator `[a]ll disputes, claims, or controversies arising from or relating to this contract or the relationships which result from this contract.' ... And the dispute about what the arbitration contract in each case means (i.e., whether it forbids the use of class arbitration procedures) is a dispute `relating to this contract' and the resulting `relationships.' Hence the parties seem to have agreed that an arbitrator, not a judge, would answer the relevant question. [Citation.] And if there is doubt about that matter — about the `"scope of arbitrable issues"' — we should resolve that doubt `"in favor of arbitration."' [Citation.]

"In certain limited circumstances, courts assume that the parties intended courts, not arbitrators, to decide a particular arbitration-related matter (in the absence of `clea[r] and unmistakabl[e]' evidence to the contrary). [Citation.] These limited instances typically involve matters of a kind that `contracting parties would likely have expected a court' to decide. [Citation.] They include certain gateway matters, such as whether the parties have a valid arbitration agreement at all or whether a concededly binding arbitration clause applies to a certain type of controversy. [Citations.]

"The question here — whether the contracts forbid class arbitration — does not fall into this narrow exception. It concerns neither the validity of the arbitration clause nor its applicability to the underlying dispute between the parties. [T]he question is not whether the parties wanted a judge or an arbitrator to decide whether they agreed to arbitrate the matter. [Citation.] Rather the relevant question here is what kind of arbitration proceeding the parties agreed to. That question does not concern a state statute or judicial procedures [citation]. It concerns contract interpretation and arbitration procedures. Arbitrators are well situated to answer that question. Given these considerations, along with the arbitration contracts' sweeping language concerning the scope of the questions committed to arbitration, this matter of contract interpretation should be for the arbitrator, not the courts, to decide. [Citation.]" (Green Tree Financial Corp. v. Bazzle, supra, 539 U.S. at p. ___, 123 S.Ct. at p. 2407.)

B.

The arbitration agreement in Green Tree provided that:

"`ARBITRATION — All disputes, claims, or controversies arising from or relating to this contract or the relationships which result from this contract ... shall be resolved by binding arbitration by one arbitrator selected by us with consent of you. This arbitration contract is made pursuant to a transaction in interstate commerce, and shall be governed by the Federal Arbitration Act at 9 U.S.C. section 1.... THE PARTIES VOLUNTARILY AND KNOWINGLY WAIVE ANY RIGHT THEY HAVE TO A JURY TRIAL, EITHER PURSUANT TO ARBITRATION UNDER THIS CLAUSE OR PURSUANT TO COURT ACTION BY U.S. (AS PROVIDED HEREIN).... The parties agree and understand that the arbitrator shall have all powers provided by the law and the contract. These powers shall include all legal and equitable remedies, including, but not limited to, money damages, declaratory relief, and injunctive relief.'" (Green Tree Financial Corp. v. Bazzle, supra, 539 U.S. at p. ___, 123 S.Ct. at p. 2405, italics added by Supreme Court, capitalization in original.)

The arbitration provision in DIRECTV's agreement provides:

"18.12 ARBITRATION.

"(a) Any dispute or claim arising out of the interpretation, performance, or breach of this Agreement, including without limitation claims alleging fraud in the inducement, shall be resolved only by binding arbitration, at the request of either party, in accordance with the rules of the American Arbitration Association, modified as herein provided. The arbitrators shall be, to the fullest extent available, either retired judges or selected from a panel of persons trained and expert in the subject area of the asserted claims. If the claim seeks damages of less than $250,000, it shall be decided by one arbitrator. In all other cases, each party shall select one arbitrator, who shall jointly select the third arbitrator. If for any reason a third arbitrator is not selected within one month after the claim is first made, the third arbitrator shall be selected in accordance with the rules of the American Arbitration Association. The arbitrators shall apply California substantive law to the proceeding, except to the extent Federal substantive law would apply to any claim. The arbitration shall be conducted in Los Angeles, California. An award may be entered against a party who fails to appear at a duly noticed hearing. The arbitrators shall prepare in writing and provide to the parties an award including factual findings and the...