In a 6-3 decision, the Supreme Court has upheld a provision in a DirecTV contract that allows it to avoid a class action suit over early termination fees and instead have the dispute arbitrated.
DirecTV's service contract includes a class action waiver saying that claims have to be resolved by binding arbitration.
After they were sued by two customers in a California state court over early termination fees they said violated state law, DirecTV pointed to the arbitration provision and asked the court to send it to arbitration. The court refused, pointing to a state law that made such waivers unenforceable, apparently paving the way for a class action lawsuit, and a Federal Appeals court agreed.
But the Supreme Court ruled that DirecTV's contract waiver was enforceable nonetheless given that it had since ruled in a separate case that the Federal Arbitration Act preempts state rules that render class-action bans unenforceable.
The Supreme Court's decision Monday (Dec. 14) buttresses the practice of companies putting in contractual protections from class actions suits.
The Supreme Court opinion was written by Justice Breyer, joined by Chief Justice Roberts and Justices Scalia, Kennedy, Alito and Kagan. Dissenting were Justices Thomas, Ginsburg and Sotomayor.
Writing for the dissenters, Justice Ginsburg said it had become common for powerful companies to include such no class-action arbitration clauses and said he would have "take[n] no further step to disarm consumers, leaving them without effective access to justice."
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