Just under the wire, SCOTUS released an arbitration opinion today, ensuring that 2015 would continue the string of years with cases interpreting the Federal Arbitration Act. In DIRECTV v. Imburgia, the Supreme Court found that California’s interpretation of an arbitration clause was preempted by the FAA. DIRECTV is a 6-3 decision, with Justice Kagan (who vociferously dissented in Italian Colors) joining the majority, and it appears to make it even harder for courts to apply state contract doctrines to find arbitration agreements unenforceable.

The issue in DIRECTV was primarily how to interpret the poison pill in the parties’ arbitration agreement, which stated that if the “law of your state” made the waiver of class arbitration unenforceable, then the entire arbitration agreement was unenforceable. The California Court of Appeal found the phrase’s meaning ambiguous, but relied on two doctrines of contract interpretation to conclude that it referred to California’s contract law, without consideration of any federal preemption. In other words, it meant California law before, or without respect to, Concepcion, which found California’s refusal to enforce class action waivers was preempted by the FAA. Therefore, the California court used the poison pill to blow up the arbitration agreement altogether. The California Supreme Court denied review, but SCOTUS took up the case. (And disposed of it quickly — the argument was just about two months ago.)

Read original article


Tags: