DirecTV Must Face Class Action Lawsuit over Early Termination Fees

A panel of judges on the California Court of Appeals refused to send a class action lawsuit accusing DirecTV of failing to disclose early termination fees into arbitration, finding that the class action waiver in the company’s arbitration agreement with customers was not enforceable under California law.

The DirecTV class action lawsuit, filed by plaintiffs Amy Imburgia and Kathy Greiner, alleges that DirecTV improperly assessed early termination fees (ETFs) because they did not disclose that customers were subject to a fee if they decided to cancel their service before the end of the contract.

DirecTV sought to compel arbitration based on the U.S. Supreme Court’s decision in AT&T Mobility v. Concepcion, which allowed companies to add an arbitration clause to customer agreements that prohibit them from filing a class action lawsuit to resolve a grievance. The company also relied on a recent ruling in its favor by the Ninth Circuit (Murphy v. DirecTV Inc.), which found a similar arbitration agreement was enforceable under Concepcion because the Supreme Court’s ruling preempted any state law.

The California Court of Appeals disagreed, sometimes pointedly. The judges focused on the section of the agreement that noted that “if the law of your state would find this agreement to dispense with class arbitration procedures unenforceable, then this entire [arbitration section] is unenforceable.” The state’s Consumer Legal Remedies Act bans the classwide arbitration DirecTV had sought.

Further, the panel argued that there is “no authority for the [Ninth Circuit] court’s position” that “contract interpretation is irrelevant because the parties are powerless to opt out of the FAA by contract.” Rather, if “parties have agreed to abide by state rules of arbitration, enforcing those rules according to the terms of the agreement is fully consistent with the goals of the FAA.”

Returning to the clause in question, the court agreed that the DirecTV class action lawsuit attorneys for the plaintiffs were right in arguing that two common law provisions should govern: one, that “a court should construe ambiguous language against the interests of the party that drafted it” and two, that a “specific provision controls over a general one[.]” The latter issue dictated the judges’ decision to ignore a U.S. District Court judge who thought that the waiver would render the general provision of classwide arbitration meaningless.

The DirecTV early termination fee class action lawsuits that the court referred to in its decision are In re: DIRECTV Early Cancellation Fee Marketing and Sales Practice Litigation in U.S. District Court for the Central District of California and Murphy v. DIRECTV Inc. in the U.S. Court of Appeals for the Ninth Circuit.

The plaintiffs are represented by class action lawsuit attorneys Paul D. Stevens, Mayo L. Makarczyk and Shireen Mohsenzadegan of Milstein Adelman LLP.

The DirecTV ETF Class Action Lawsuit is Amy Imburgia, et al. v. DirectTV Inc., Case No. B239361, California Court of Appeal, Second Appellate District.