Posted by: yarbel | 15th Dec, 2015

First Do No Harm: The DIRECTV v. Imburgia Decision — Greg Klass

Post by Greg Klass

Yesterday the Supreme Court released its decision in DIRECTV v. Imburgia. DIRECTV won. If Amy Imburgia wants to sue DIRECTV under its 2007 contract, she will have to go to bilateral arbitration. Once again: no class action. I think this is the wrong outcome in this case, for reasons I articulated here, here and here, and for many of the reasons Justice Ginsburg gave in her dissent. That said, Breyer wrote a majority opinion that should make critics of the Court’s recent arbitration decisions happy.

If you read the opinion, you’ll see that it creates very little law. Breyer starts and ends his analysis by arguing that “law of your state,” as it appears in the contract, is unambiguous. This allows him to avoid the contra proferentem rule (interpret against the drafter). You might think this is the wrong result in this case. I do. But Breyer’s approach leaves contra proferentem intact. The important thing is that it remains a tool that can be applied future adhesive arbitration clauses.

The remainder of Breyer’s legal analysis is a thinly veiled finding that the California Court of Appeal’s reading of “law of your state” resulted from its deep-seated hostility to arbitration. Breyer does a close reading of the language in the California court’s opinion that would have made Jacques Derrida proud. The California court does not sufficiently explain its anomalous reading of “law of your state.” The court frames the issue with reference to the Federal Arbitration Act (FAA), rather than more general meanings of the phrase. The court keeps talking about “state law” and “California law” as if the FAA and Concepcion and the Supremacy clause didn’t even exist. The arguments and evidence here are all fairly weak. No, the California Court of Appeals did not explain its findings in the clearest possible terms—certainly not as well as the respondents did on appeal. But a state court’s interpretation of contract language is typically given the benefit of the doubt. But let’s not lose the forest for the trees. Although this is all bad news for this Amy Imburgia, it is good news for future Amy Imburgias. Breyer’s opinion does not state any categorical rules to govern future cases, except “don’t disfavor arbitration.” More than that, all the opinion says is that when a state court is messing around with preempted state law, it should be really, really clear that it understands that in the end federal law always wins.

The reason that this is good news is that things could have been much worse. DIRECTV argued on appeal that the FAA requires a presumption in favor of arbitration—which would compete with the contra proferentem rule. I do not believe that the Court has ever recognized such a presumption, which would be deeply problematic. Thankfully, Breyer’s opinion does not even mention the possibility. In the context of the current court, I take an opinion like this, which does no harm to the law of contracts in reaching the wrong result, to be a win.

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