Opinion ID: 1035949
Heading Depth: 3
Heading Rank: 1

Heading: DirecTV

Text: “Applying Concepcion retroactively to the arbitration provision,” the district court held that “the class action waiver is not unconscionable, and therefore, the arbitration provision is enforceable.” We agree.4 Plaintiffs argue that Section 9 of DirecTV’s Customer Agreement, which requires binding arbitration, is unenforceable due to the jettison clause set forth in subsection 9(c). They maintain that as of April 24, 2007 and April 24, 2010, the effective dates of the Customer Agreements to which Plaintiffs are parties, “the law of [California] would [have found] this agreement to dispense with class arbitration procedures unenforceable,” rendering the “entire Section 9 unenforceable.” Before 2011, the Discover Bank rule had not yet been overruled by the Supreme Court, so Plaintiffs cling to the notion that the rule still governs the interpretation of their arbitration agreement today. This argument misapprehends the doctrine of preemption and the rationale of the Supreme Court’s ruling in Concepcion. Importantly, the FAA meant what the Court in Concepcion says it means—that the Customer Agreement’s 4 The district court found that Plaintiffs received the Customer Agreement containing the arbitration provision, and were bound by the contract, even if they did not read it. In their Reply Brief, Plaintiffs attempt to challenge this conclusion. However, Plaintiffs did not argue in their Opening Brief that they did not “assent to arbitration,” and therefore they have waived this argument. Smith v. Marsh, 194 F.3d 1045, 1052 (9th Cir. 1999). In any event, the district court’s finding that Plaintiffs received the Consumer Agreement and continued to accept DirecTV’s services is not clearly erroneous and its conclusion that these actions bound Plaintiffs to the terms of the contract is correct. 10 MURPHY V. DIRECTV, INC. class waiver is enforceable—even prior to 2011 when the Discover Bank rule was nominally in effect. That is because the Supreme Court’s “construction of a statute is an authoritative statement of what the statute meant before as well as after the decision of the case giving rise to that construction.” Rivers v. Roadway Express, Inc., 511 U.S. 298, 312–13 (1994); see also Morales-Izquierdo v. DHS, 600 F.3d 1076, 1090 (9th Cir. 2010) (“[W]hen a court interprets a statute, even an ambiguous one, and even when that interpretation conflicts with the court’s own prior interpretation, the new interpretation is treated as the statute’s one-and-only meaning.”). Thus, § 2 of the FAA has always preempted states from invalidating arbitration agreements that disallow class procedures. The parties’ agreement that state law would govern the enforceability of the arbitration requirement was not an agreement to rely on state law that “creates a scheme inconsistent with the FAA.” Concepcion, 131 S. Ct. at 1748. Section 2 of the FAA, which under Concepcion requires the enforcement of arbitration agreements that ban class procedures, is the law of California and of every other state. The Customer Agreement’s reference to state law “does not signify the inapplicability of federal law, for ‘a fundamental principle in our system of complex national polity’ mandates that ‘the Constitution, laws, and treaties of the United States are as much a part of the law of every State as its own local laws and Constitution.’” Fid. Fed. Sav. & Loan Ass’n v. de la Cuesta, 458 U.S. 141, 157 (1982) (quoting Hauenstein v. Lynham, 100 U.S. 483, 490 (1880)); see also Brown v. Investors Mortg. Co., 121 F.3d 472, 476 (9th Cir. 1997) (“The fact that the parties chose to apply the laws of Washington, rather than the laws of another state, does not mean the parties decided that federal law should not apply.”). MURPHY V. DIRECTV, INC. 11 It follows that, under the doctrine of preemption, the Discover Bank rule is not, and indeed never was, California law. Simply put, “state law is nullified to the extent that it actually conflicts with federal law.” De la Cuesta, 458 U.S. at 153 (emphasis added). Thus, Plaintiffs’ contention that the parties intended for state law to govern the enforceability of DirecTV’s arbitration clause, even if the state law in question contravened federal law, is nonsensical.5 A contract cannot be unenforceable under state law if federal law requires its enforcement, because federal law is “the supreme Law of the Land . . . , any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.” U.S. Const. art. VI, cl. 2. Section 9 of the Customer Agreement provides only that the arbitration agreement will be unenforceable if the “law of your state” disallows class waivers, which California law does not—and could not—under the FAA as interpreted in Concepcion. Plaintiffs cite no cases to the contrary. For instance, Plaintiffs rely heavily on American Airlines, Inc. v. Wolens, 513 U.S. 219 (1995), for the proposition that parties may enter a contract whose terms diverge from the requirements of federal law. In Wolens, the Supreme Court held that the federal Airline Deregulation Act, which displaces state laws regulating airline rates, routes, and services, see id. at 232, preempted claims brought under state consumer protection laws that served in effect as a “means to guide and police the 5 That the Customer Agreement may have been drafted and entered into with the Discover Bank rule in mind does not change the fact that “the law of your state” cannot include a rule that a federal statute, as interpreted by the Supreme Court, bars states from imposing. Under Concepcion, states simply lack the power to render class arbitration waivers unenforceable as unconscionably exculpatory. 12 MURPHY V. DIRECTV, INC. marketing practices of the airlines,” id. at 228. However, the Court held that the Act does not “shelter airlines from suits alleging no violation of state-imposed obligations, but seeking recovery solely for the airline’s alleged breach of its own, self-imposed undertakings.” Id. Plaintiffs read this language broadly, arguing that when a party to a contract promises to follow the substance of state law, it is bound to do so even if federal law would otherwise preempt it. But Wolens stands only for the proposition that contracting parties can enforce the substantive terms of a private agreement even if they exceed the requirements of federal law. Wolens does not hold that contract language referencing state law transforms otherwise preempted state contract-law doctrines into enforceable private obligations; in fact, it implies that the opposite is true. See id. at 233 (“This distinction between what the State dictates and what the airline itself undertakes confines courts, in breach-of-contract actions, to the parties’ bargain, with no enlargement or enhancement based on state laws or policies external to the agreement.”). Nor does Plaintiffs’ position find support in the Supreme Court’s decision in Volt Information Sciences, Inc. v. Board of Trustees of the Leland Stanford Junior University, 489 U.S. 468 (1989). While Volt does indicate that the terms of an arbitration agreement may be enforced even if they require procedures not contemplated by the FAA, the unique posture of Volt is a far cry from this case. In Volt, the California Court of Appeal had held that, by incorporating state law into an arbitration agreement, the parties agreed to be bound by a California rule authorizing courts to stay arbitration pending resolution of related litigation involving third parties. Id. at 471–72. The Court only reviewed the California Court of Appeal’s construction of the contract’s choice-of-law provision to the extent necessary to determine MURPHY V. DIRECTV, INC. 13 whether it was contrary to federal law, and concluded that it was not. See id. at 474–76. The Court held that, “assuming the choice-of-law clause meant what the Court of Appeal found it to mean,” i.e., that the arbitration agreement incorporated California procedural rules, id. at 476, the California rule at issue was not preempted by the FAA. Id. at 479. The Court in Volt emphasized “that the interpretation of private contracts is ordinarily a question of state law, which this Court does not sit to review.” Id. at 474. As Justice Brennan’s dissent noted, the Court declined to review the California Court of Appeal’s holding that the contract at issue “would be governed solely by the law of the State of California, to the exclusion of federal law.” Id. at 480 (Brennan, J., dissenting). Thus, the Volt majority had no occasion to consider whether the state court’s construction of the contract at issue was correct. Here, Plaintiffs’ contract interpretation arguments are squarely presented, and our reasons for rejecting them largely mirror the analysis of the Volt dissenters. See id. at 490 (“[T]he literal language of the contract–‘the law of the place’– gives no indication of any intention to apply only state law and exclude other law that would normally be applicable to something taking place at that location. By settled principles of federal supremacy, the law of any place in the United States includes federal law.”). But even the California Court of Appeal’s (nonprecedential) analysis in Volt is distinguishable because it proceeded from the premise that, “‘[i]n the face of such a choice of laws provision, California law applies unless preempted by the FAA.’” Bd. of Trustees of Leland Stanford Jr. Univ. v. Volt Info. Scis., Inc., 240 Cal. Rptr. 558, 560 (Cal. Ct. App. 1987) (depublished) (emphasis added) (quoting Garden Grove Cmty. Church v. Pittsburgh-Des Moines Steel Co., 191 Cal. 14 MURPHY V. DIRECTV, INC. Rptr. 15, 20 (Cal. Ct. App. 1983)), aff’d, 489 U.S. 468 (1989); see also Volt, 489 U.S. at 479 (noting that the California rule in question could be given effect “without doing violence to the policies behind the FAA”). Here, in contrast, the Supreme Court has expressly held that the rule Plaintiffs seek to apply is “an obstacle to the accomplishment of the FAA’s objectives.” Concepcion, 131 S. Ct. at 1748. Under Wolens and Volt, it is clear that if DirecTV had actually contracted with Plaintiffs to allow class arbitration, it would be required to do so irrespective of Concepcion. But DirecTV did exactly the opposite. The Customer Agreement provides that “Neither 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.” Under these circumstances, Plaintiffs’ argument that by referencing state law, DirecTV incorporated the Discover Bank rule by reference as a substantive contract term is especially dubious. The parties agreed not to arbitrate only if state law required the availability of class arbitration procedures to enforce the arbitration clause. Concepcion precludes such state laws. For this reason, many of the parties’ various contract interpretation arguments are largely irrelevant to our analysis. For example, Plaintiffs devote extensive briefing to their contention that the clause selecting state law in Section 9 is “far more specific” than the language selecting the FAA in Section 10. They likewise argue that the history of amendments to DirecTV’s Customer Agreement over time shows that Section 10’s reference to the FAA is inapplicable to the jettison clause in Section 9, and that ambiguities about whether state or federal law is controlling should be MURPHY V. DIRECTV, INC. 15 construed against DirecTV as the contract’s drafter. These arguments are unavailing because, under de la Cuesta and its progeny, there is no conflict between the reference to “the law of your state” in Section 9 of the Customer Agreement and the reference to the FAA in Section 10. Thus, we have no occasion to “choose” which provision of the contract controls the enforceability of the class arbitration ban. In answering the question “whether the rule of decision is supplied by the laws of State X or by federal law,” general “choice-of-law doctrines (and, accordingly, attempts by contracting parties to influence their application with choice-of-law clauses) have no applicability . . . because the relevant rule is supplied by the Constitution itself: a valid federal law preempts any state law purporting to regulate the same issue.” Roadway Package Sys., Inc. v. Kayser, 257 F.3d 287, 293–94 (3d. Cir. 2001), abrogated on other grounds by Hall St. Assocs. v. Mattel, Inc., 552 U.S. 576 (2008); see also Volt, 489 U.S. at 488 (Brennan, J., dissenting) (observing that it is “beyond dispute that the normal purpose of such choice-of-law clauses is to determine that the law of one State rather than that of another State will be applicable; they simply do not speak to any interaction between state and federal law”). For this reason, the reference to the FAA in Section 10 of the Customer Agreement is largely superfluous to our inquiry. The “law of your state” language of Section 9 already incorporates § 2 of the FAA. See de la Cuesta, 458 U.S. at 157 n.12 (“Paragraph 15 provides that the deed is to be governed by the ‘law of the jurisdiction’ in which the property is located; but the ‘law of the jurisdiction’ includes federal as well as state law.”). Thus, because the arbitration agreement is enforceable under Concepcion, the district court did not err in compelling Plaintiffs to arbitrate their claims against DirecTV. 16 MURPHY V. DIRECTV, INC.