Taking the cake: Best Buy’s non-equitable estoppel argument in Masters v. DirecTV
By Spencer Wilson, Brayton-Thornton Attorney
Do principles of fairness require duped consumers to arbitrate their claims against a corporation even when it is undisputed the parties never agreed to arbitrate? That is what Best Buy argued last week when the Ninth Circuit heard oral arguments in Masters v. DirecTV, a thorny case implicating mandatory arbitration that Public Justice’s Paul Bland and Leslie Bailey have been litigating for years. Paul argued on behalf of the consumers.
Public Justice represents a group of consumers who sued DirecTV and Best Buy for engaging in a complicated bait-and-switch scheme: the plaintiffs each thought they were purchasing a DirecTV receiver from Best Buy, but sometime after the consumers had purchased and installed their equipment, DirecTV allegedly mailed a document to the consumers — although most deny ever receiving the document — informing them that they had to begin making lease payments to DirecTV because they were actually just leasing the item they thought they had purchased. Sound unfair? Just wait.
Buried in this document was a reference to an arbitration clause saying that any disputes concerning the purported lease agreement must proceed individually in arbitration — not in court and not as a class. Could the consumers just return the equipment? Not without paying a stiff fine.
The Ninth Circuit must determine whether the case can proceed in court as a putative class or whether it will be forced into individual arbitration, effectively killing the plaintiffs’ claims. What’s more, it’s not just DirecTV arguing the case should proceed to arbitration; Best Buy is saying that it, too, wants to arbitrate the consumers’ claims on an individual basis, even though Best Buy admits it is a non-signatory to the DirecTV arbitration agreement. Best Buy’s argument? Equitable estoppel.
Equitable estoppel is a judicial doctrine founded in principles of fairness, good faith and justice. It has ancient roots traceable to the teachings of Aristotle and English common law. In the arbitration context, the doctrine has been applied to prevent parties from trying to claim a benefit or right from a contract containing an arbitration provision, while avoiding the contract’s arbitration requirements. As the saying goes, one cannot eat her cake and have it too. But the plaintiffs here have not even seen any cake.
To the contrary, the consumers are not trying to obtain any benefit or assert any claim based on the DirecTV lease agreement. In fact, there are no benefits for the consumers in the lease agreements and a major premise of the lawsuit is that the lease agreement is void.
Nevertheless, Best Buy contends that, because its alleged misdealings were performed in cahoots with DirecTV and because DirecTV purportedly had a lease agreement with the consumers containing an arbitration provision banning class actions, Best Buy should be able to benefit from that as well. I’m starting to figure out where the plaintiffs’ cake went.
Best Buy seems to hope that the Supreme Court’s recent infatuation with arbitration can somehow supersede ancient principles of equity and fairness. In resolving the issue, I hope the Ninth Circuit will recognize that it’s Best Buy’s arguments that really take the cake!