In re Directv Early Cancellation Litig.. This Document Relates To: All Actions., Case No. ML 09-2093 AG (ANx)

• Citation: 738 F.Supp.2d 1062
• Decision Date: 07 September 2010
• Docket Number: Case No. ML 09-2093 AG (ANx)
• Parties: In Re: DIRECTV EARLY CANCELLATION LITIGATION. This document relates to: All Actions.
• Court: U.S. District Court — Central District of California

738 F.Supp.2d 1062

In Re: DIRECTV EARLY CANCELLATION LITIGATION. This document relates to: All Actions.

Case No. ML 09-2093 AG (ANx).

United States District Court, C.D. California.

Sept. 7, 2010.

Alfredo Torrijos, Brian S. Kabateck, Richard L. Kellner, Kabateck Brown Kellner, LLP, Los Angeles, CA, Anthony L. Vitullo, Fee Smith Sharp and Vitullo LLP, Barbara Dawson, Snell & Wilmer, Phoenix, AZ, Beth E. Terrell, Terrell Marshall and Daudt, Seattle, WA, Blake M. Harper, Lindsay J. Foster, Sarah P. Weber, Hulett Harper Stewart LLP, San Diego, CA, Brian Morris Knowles, Knowles Law Firm, Summerville, SC, Dan Getman, Getman and Sweeney, New Paltz, NY, Deanna D. Dailey, Sprenger & Lang, Minneapolis, MN, Deirdre C. McGlinchey, Monroe, LA,Douglas J. McNamara, Cohen Milstein Sellers & Toll, Douglas G. Thompson, Tracy D. Rezvani, Finkelstein Thompson LLP, Washington, DC, Eric Stoppenhagen, New York, NY, George K. Lang, Jamie E. Weiss, Jeffrey A. Leon, Michael J. Lotus, Paul M. Weiss, Freed & Weiss, Chicago, IL, J. Paul Gignac, Arias Ozzello and Gignac, Santa Barbara, CA, Jack E. Truitt, Covington, LA, James E. Cecchi, Carella Byrne Bain Gilfillan Cecchi Stewart and Olstein, Roseland, NJ, Jennifer E. Johnsen, Greenville, SC, Jonathan D. Selbin, Lieff Cabraser Heimann & Bernstein, New York, NY, Jonathan Shub, Seeger Weiss LLP, Philadelphia, PA, Joseph F. Rice, Motley Rice LLC, Mt. Pleasant, SC, Melissa D. Ingalls, Michael E. Baumann, Robyn Eileen Bladow, Shaun Paisley, Kevin M. Askew, Kirkland & Ellis LLP, Los Angeles, CA, Nimish R. Desai, Lieff Cabraser Heimann & Bernstein LLP, San Francisco, CA, Patrick L. Rocco, Shalov Stone Bonner and Rocco LLP, Morristown, NJ, Paul B. Mengedoth, Mengedoth Law Firm LLC, Scottsdale, AZ, Richard J. Burke, St. Louis, MO, Rosemary M. Rivas, Tracy Tien, Finkelstein Thompson LLP, San Francisco, CA, Scott E. Brady, Bohrer Law Firm, Baton Rouge, LA, William M. Sweetnam, Sweetnam LLC, Northbrook, IL, Andrew N. Friedman, Whitney R. Case, Cohen Milstein Sellers and Toll PLLC, Washington, DC, Carlos A. Gonzalez, Tracy L. Rhodes, Vaughan & Evans, Cartersville, GA, Christa L. Collins, St. Petersburg, FL, Joshua G. Konecky, Todd M. Schneider, Schneider Wallace Cottrell Brayton Konecky LLP, San Francisco, CA, Kevin Kleinpeter, Stephen Babcock, Babcock Law Firm, LLC, Baton Rouge, LA, Marc I. Machiz, Cohen Milstein Sellers & Toll PLLC, Philadelphia, PA, Michael E. Withey, Seattle, WA, Scott W. Weinstein, Morgan & Morgan, Ft. Myers, FL, William E. Applegate, IV, Yarborough Applegate LLP, Mt. Pleasant, SC, for DirecTV Inc. Early Cancellation Fee Marketing and Sales Practices Litigation.

ORDER GRANTING IN PART AND DENYING IN PART DIRECTV'S MOTION TO COMPEL ARBITRATION WITH CERTAIN PLAINTIFFS AND DISMISS PLAINTIFFS' CLAIMS

ANDREW J. GUILFORD, District Judge.

In this Multidistrict Litigation ("MDL") case concerning early cancellation fees, Defendant DirecTV filed a Motion to Dismiss Claims in Plaintiffs' Second Amended Consolidated Class Action Complaint and to Compel Arbitration with the Arizona, Florida, Illinois, Louisiana, New York, Pennsylvania, South Carolina, and Virginia Plaintiffs ("Motion"). After considering all papers and arguments submitted, the Motion is GRANTED in part and DENIED in part.

To resolve the Motion to Compel and the Motion to Dismiss, this case requires a review of the consumer protection laws of eight states.

BACKGROUND

The following facts are taken from Plaintiffs' Second Amended Consolidated Class Action Complaint ("SAC") and the Court accepts them to be true, as it must for motions to dismiss under Federal Rule of Procedure 12(b)(6).

DirecTV provides satellite television programming throughout the United States. (SAC ¶¶ 10, 37.) To allow its customers to access that service, DirecTV provides receivers and other equipment. (SAC ¶ 10.) DirecTV is incorporated and has its headquarters in California. (SAC ¶ 10.)

DirecTV has one of the lowest levels of customer "churn" in its competitive industry. (SAC ¶ 43.) "Churn" is "the turnoverin customer base that occurs when subscribers switch service providers." (SAC ¶ 43.) To reduce churn, DirecTV imposes an Early Cancellation Fee ("Cancellation Fee"). (SAC ¶ 44.) The Cancellation Fee can be as high as $480. (SAC ¶ 44.)

After customers sign up for the DirecTV service, and after the receivers and other equipment are installed, DirecTV provides the customers with their terms and conditions. (SAC ¶¶ 49-52.) Customers are not told about the Cancellation Fee when they order the service. (SAC ¶¶ 52-53.)

After a DirecTV customer has initiated service, DirecTV provides the customer with a standardized consumer contract ("Customer Agreement") that is sent to the customer with its first monthly bill. (SAC ¶ 60.) The Customer Agreement does not include the programming commitment and the Cancellation Fee. (SAC ¶ 62.) The Customer Agreement includes the following choice of law clause:

Applicable Law: The interpretation and enforcement of this Agreement shall be governed by the rules and regulations of the Federal Communications Commission, other applicable federal laws, and the laws of the state and local area where Service is provided to you. This agreement is subject to modification if required by such laws. Notwithstanding the foregoing, Section 9 shall be governed by the Federal Arbitration Act.

(SAC, Ex. 1, § 10(b) ("Choice of Law Clause").) The Customer Agreement also includes a section called "Resolving Disputes." (SAC, Ex. 1 § 9 ("Arbitration Clause").) In the Arbitration Clause, the Customer Agreement states that:

[n]either you nor we shall be entitled to join or consolidate claims in arbitration by or against other individuals or entities, or arbitrate any claim as a representative member of a class or in a private attorney general capacity. Accordingly, you and we agree that the JAMS Class Action Procedures do not apply to our arbitration. If, however, the law of your state would find this agreement to dispense with class arbitration unenforceable, then this entire [Arbitration Clause] is unenforceable.

(Arbitration Clause, § 9(d)(ii) ("Class Action Waiver").)

The Customer Agreement refers to a "separate programming commitment." (SAC ¶ 63.) That "separate programming commitment" comes to the customer after installation in a document called the "Equipment Lease Addendum." (SAC ¶ 63.) The Equipment Lease Addendum does not come to the customer with the Customer Agreement. (SAC ¶ 63.) Instead, the Equipment Lease Addendum is printed on the reverse side of a document titled "Installation/Service Satisfaction Checklist" ("Satisfaction Checklist"). (SAC ¶ 63, Ex. 2.) The Equipment Lease Addendum refers to the programming commitment and Cancellation Fee. (SAC ¶¶ 65-66, Ex. 2.)

DirecTV also imposes a commitment period on existing customers if they request a change in service, such as a different programming package or replacement equipment. (SAC ¶ 45.) If customers cancel during the new commitment period, they are assessed the Cancellation Fee. (SAC ¶ 45.) Customers are not told about the Cancellation Fee and commitment period before they change service or receive replacement equipment. (SAC ¶¶ 53, 63.) Often, these customers are not alerted to the existence of the Cancellation Fee until they attempt to cancel service. (SAC ¶ 54.) Other times, customers find out about the Cancellation Fee after they cancel the service and are billed or automatically charged for the service. (SAC ¶ 54.)

DirecTV imposes the Cancellation Fee regardless of the reason for early cancellation, such as moving to a new address, poor service, or the inability to establish service. (SAC ¶ 55.) The Cancellation Fee is also imposed if DirecTV cancels the service. (SAC ¶ 55.) For example, customers are charged the Cancellation Fee if DirecTV deems a customer a bad credit risk, or if a customer rejects a change in terms in the Customer Agreement. (SAC ¶ 55.)

DirecTV solicits customers to identify a bank account or credit card at the time of activation, and will not activate services unless either the information is provided or the customer gives a deposit. (SAC ¶ 57.) Without disclosing its intention to do so, DirecTV automatically withdraws the Cancellation Fee from cancelling customers' accounts. (SAC ¶ 57.) If the customer has not given DirecTV access to an account, DirecTV institutes collections efforts against the customer. (SAC ¶ 57.)

Based on these facts and others, Plaintiffs filed class action lawsuits. On October 9, 2009, the Joint Panel on Multidistrict Litigation ("JPML") transferred all the cases to this Court. On February 2, 2010, the Plaintiffs in the transferred cases sought leave to file a consolidated complaint, and this Court granted leave to do so. The Court also vacated motions to dismiss that were pending on that date, and granted several Plaintiffs' motion for reconsideration of this Court's previous order compelling arbitration. The Court did this because the Ninth Circuit had recently released its opinion in Masters v. DirecTV, Inc., Case Nos. 08-55825 and 08-55830, ---Fed.Appx. ----, 2009 WL 4885132 (9th Cir. Nov. 19, 2009).

Because this is an MDL case, the case involves many Plaintiffs from many States. The Court now turns to a brief description of each Plaintiff.

Plaintiffs Annette Kahaly ("Kahaly"), John Mulea ("Mulea"), and Maureen Van Meter ("Van Meter") (collectively, the "California Plaintiffs") are all residents of California, ordered and received DirecTV service in California, and originally filed their lawsuits in California. (SAC ¶¶ 11-13.)

Plaintiff Christine Slakans ("Slakans" or the "Arizona Plaintiff") is a citizen of Arizona who ordered and received DirecTV service in Arizona. (SAC ¶ 14.) Plaintiff Slakans originally filed her lawsuit in Arizona.

Plaintiffs Joseph Lombardi ("Lombardi"), Kathleen O'Brien ("O'Brien"), Sandra Johannes ("Johannes"), and Ira Boshnack ("Boshnack") (collectively, the "Florida Plaintiffs") are all citizens of Florida...