SAN FRANCISCO – The California Court of Appeal issued a decision on May 9 remanding a class-action lawsuit filed against DirecTV to trial court for a ruling on whether the company waived its right to enforce an arbitration agreement that the U.S. Supreme Court recently upheld as enforceable in DirecTV Inc. v. Imburgia.
“If (the waiver) is decided in favor of consumers, the class will proceed in Los Angeles Superior Court, and consumers will get their constitutional right to a jury trial,” Linda Evans of Evans Law Firm Inc. told the Northern California Record.
Evans is class counsel representing Imburgia.
She said the next step in the litigation is for the trial court to make factual findings about the waiver.
In 2008, DirecTV customers filed a consumer class-action lawsuit in Los Angeles Superior Court based on allegedly unlawful early termination fees of up to $480. The plaintiffs alleged that DirecTV charged the early termination fee “to trap consumers, prevent competition and line its pockets,” according to a release from Evans.
Following a 2011 Supreme Court decision setting a low bar to the enforcement of arbitration agreements, DirecTV attempted to enforce an arbitration agreement that Evans claimed was hidden in the fine print of its contract to prevent the case from going forward as a class action. DirecTV sought to force every consumer to arbitrate against it on an individual basis, or to drop their claims and let DirecTV keep the profits.
On Dec. 14, the Supreme Court reversed a decision by the California Court of Appeal that DirecTV’s arbitration agreement was unenforceable as written; however, the Consumer Financial Protection Bureau (CFPB) ruled on May 4 that banks can no longer use forced arbitration clauses to ban consumers from joining together in class-action lawsuits. Evans said this new rule restored bank customers’ access to justice, the same access to justice that DirecTV’s customers are seeking.
According to the class-action complaint, DirecTV imposes a mandatory service term of 18 to 24 months, but few customers are aware of this condition before signing up. The complaint states that the company routinely extends this contractual obligation, often without notice, by another year or two if malfunctioning equipment needs to be replaced, or the customer decides to make a change to programming or other services.
In addition, the complaint states that customers who terminate service are charged an early cancellation fee of up to $480, regardless of the reason, plus a deactivation fee. The complaint alleges that customers are forced to pay these penalties even if their equipment could not be installed, if they moved and DirecTV service isn’t available in the new location, or if the equipment simply stopped working.
The complaint also states that DirecTV often charges these cancellation fees directly to their customers’ credit cards, or even takes the funds out of their checking accounts, without the knowledge or approval of the customer.
Evans said similar suits were filed in federal courts throughout the country, but those cases were dismissed in December 2013 after the 9th Circuit Court of Appeal ordered that plaintiffs in those cases had to comply with DirecTV’s arbitration clause. Evans said DirecTV acknowledged in California state court that its arbitration clause was not enforceable in California, and the state Superior Court certified the case as a class action in May 2011.
DirecTV then asked the court to dismiss the case and order consumers to resolve their complaints individually through a private arbitration. The Los Angeles Superior Court denied DirecTV's request, and the company appealed. The 2nd District California Court of Appeal rejected DirecTV's arguments in April 2014. The company then petitioned the U.S. Supreme Court.
“This is an important case for consumers, and they deserve to get their day in court,” Evans said.
Evans said the Supreme Court ruling in DirecTV v. Imburgia is the latest in a series of highly controversial decisions “in which the court has given corporations virtually carte blanche to require consumers to give up their right to their day in court to challenge corporate wrongdoing.”
“An arbitrator makes final decisions that are nearly impossible to challenge, even if they are obviously wrong and unfair,” Evans said. “Companies have the right to choose arbitrators that they think will unfairly favor the company. Companies have the right to refuse to hire an arbitrator if they think the arbitrator will be fair to consumers.”