Regulating Against Forced Arbitration in Consumer Cases
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As Stacey writes just below this post, much is happening in the arbitration arena currently.
In December, the United States Supreme Court ruled that the 1925 Federal Arbitration Act pre-empts state law. Thus, when parties have executed agreements calling for arbitration rather than court resolutions, the arbiration clause will be upheld. The case was DirectTV, Inc. v. Imburgia, No. 14-462.
In the case, Imburgia’s contract stated that “[i]f … the law of your state would find this agreement to dispense with class arbitration procedures unenforceable, then this entire Section 9 [the arbitration section] is unenforceable.” www.supremecourt.gov/opinions/15pdf/14-462_2co3.pdf
The Supreme Court noted that when DIRECTV drafted the contract, the parties likely believed that the words “law of your state” included California law that then made class-arbitration waivers unenforceable. But the Court’s subsequent holding in AT&T Mobility LLC v. Conception found that the Federal Arbitration Act pre-empts state law on the issue. Thus, parties cannot contractually bind themselves to invalid state law. When they refer to “state law,”this means only valid state law.
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