Supreme Court Overturns California Court’s Holding that Class Action Arbitration Waiver is Unenforceable

In the recent case of DirectTV, Inc. v. Imburgia, the Supreme Court issued a key decision interpreting the scope of arbitration agreements under the Federal Arbitration Act. In the lawsuit, the plaintiffs sought to enforce a class action arbitration waiver, which included a provision providing that the entire clause was not enforceable if the law in the signing party’s state dictated that class action waivers are not enforceable. When the defendants executed the contract, California law stated that class action waivers were not enforceable. The lower court ultimately ruled that the class action arbitration waiver was unconscionable and refused to enforce it.

In reaching this holding, the California courts relied on the language in the contract that said “the law of your state,” finding that this allowed the court a basis for avoiding preemption pursuant to the Federal Arbitration Act. The lower court determined that Sections 1751 and 1781 of the California Remedies Act required the provision to be deemed invalid, notwithstanding the application of the Federal Arbitration Act.

The Supreme Court of the United States rejected the lower court’s reasoning, finding that the Federal Arbitration Act requires state courts to apply its provisions when adjudicating claims about waiver disputes. In reaching this conclusion, the Supreme Court concluded that the lower court examined the contract language differently than it would have examined other agreements and that it did not give “due regard . . . to the federal policy favoring arbitration.” The high court also stated that the California Remedies Act was not the applicable law governing the dispute.

Consumers are unaware of the incredible number of purchases that involve arbitration agreements. In general, an arbitration agreement states that the parties agree to bind themselves to resolving any dispute about the product or injuries related thereto before an arbitrator and waive the ability to bring a case in a traditional court of law. Arbitration agreements can also dictate the rules that apply, the arbitrator to be used, and whether each side must pay its own expenses. Some arbitration agreements will even state that the losing party must compensate the other party for his or her arbitration costs.

Arbitration agreements are often presented in a take-it-or-leave-it fashion, and they are often buried in lengthy agreements that consumers rarely read in detail. Fortunately, a number of cases and laws have provided ground rules that companies must follow when including arbitration clauses in purchase contracts. In general, an arbitration clause will be deemed unenforceable when its provisions or effect shocks the conscience.

If you or someone you love has suffered injuries as the result of a defective product, you may be entitled to compensation. At Moll Law Group, our product liability lawyers know what it takes to overcome an arbitration provision or to ensure that it is being enforced fairly. We have represented victims throughout the United States, including in New York, California, and Texas. Our dedicated and compassionate team will guide you through every step of the process and pursue the settlement or the judgement that you deserve. Call us now at 312-462-1700 or contact us online to set up your free consultation.

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