Masters v. DirecTV
The plaintiffs in this putative nationwide class action allege that DirecTV has violated California consumer protection laws by engaging in a “bait and switch” scheme in which it markets satellite television receivers for purchase, informing customers only after the sale is completed that they have merely “leased” the equipment and must pay additional long-term monthly fees or incur cancellation penalties. DirecTV’s consumer contract contains a class action ban and a choice-of-law clause providing that the law of each customer’s state of residence governs the contract’s enforceability. The district court held that DirecTV’s class action ban was unenforceable under California law with respect to all class members.
The Ninth Circuit affirmed. The court recognized that, if enforced, DirecTV’s choice-of-law clause — which provides that the law of each customer’s residence governs the enforceability of its contract terms — would permit the corporation to require individual arbitration in any state that enforces class action bans, despite the fact that its class action ban is unenforceable in California, the state in which the corporation is based. The court further held, as Public Justice urged, that enforcement of DirecTV’s choice-of-law clause would violate California’s fundamental public policy against exculpatory class action bans, and that because DirecTV is based in California, the alleged wrongful acts emanated from California, and the plaintiffs allege violations of only California law, California has a materially greater interest in applying its own laws to its corporate citizen than any other state has in preventing its residents from joining in this class action to hold DirecTV accountable.
The class action went forward in the district court, and extensive discovery demonstrated that DirecTV and Best Buy had intentionally duped their customers about the lease arrangement. The case was scheduled for trial. After the U.S. Supreme Court decided AT&T Mobility v. Concepcion, however, the DirecTV moved the district court to reconsider, and co-defendant Best Buy — which has no contractual relationship with the plaintiffs – sought to take advantage of DirecTV’s clause and force customers into individual arbitration.
The district court granted both motions. On July 30, 2013, the Ninth Circuit affirmed that Concepcion preempts California state law and requires enforcement of DirecTV’s arbitration clause despite the company’s strategic choice to incorporate state law into its contract. With respect to Best Buy, however, the court reversed, holding that there was no basis in the law of equitable estoppel, agency, or third-party beneficiaries that would justify permitting Best Buy to “piggy-back” onto DirecTV’s arbitration clause.
Public Justice’s Leslie Bailey and Paul Bland were lead counsel in the appeal, with assistance from Spencer Wilson and Amy Radon. Co-counsel are Robert Green of Green & Noblin, P.C., and Michael Reese of Reese Richman LLP in New York.
Read two of our recent blog posts on the case:
You can also read the decision issued by the U.S. Court of Appeals for the Ninth Circuit in Murphy v. DirecTV.