November 3, 2016
DirecTV Customers Can’t File Class Action Lawsuit, Says Supreme Court – Disputes To Be Settled Though Arbitration Only

DirecTV customers have been asked by the U.S. Supreme Court to read the fine print and abide by the clause that deals with dispute resolution. The court ruled that that the satellite TV provider can avoid a class action lawsuit in California over early termination fees. The court has effectively forced the bereaved DirecTV customers to go into private arbitration hearings instead.

In one of the biggest wins for corporations in the U.S. that are under the constant threat of an expensive class action lawsuit, the Supreme Court ruled that DirecTV customers can't unite and sue the company over early termination fees. Evidently, a federal law favoring dispute resolution by individual arbitration trumps a state law that once protected such class actions, reported USA Today.

The court has made DirecTV customers aware of their rather diminished rights when contesting charges and actions by their digital provider. In a 6-3 ruling, the justices made it clear that California customers cannot come together and file a class action lawsuit against satellite TV provider DirecTV. Instead, customers who are unhappy about any of the services offered or charges levied by the company have to settle their disputes in individual arbitration hearings.

Incidentally, the Supreme Court has already heard four cases that could have ballooned into full-fledged class action lawsuits. The DirecTV case was the least the least consequential as the company's customers were merely upset about the early termination fees forced on them. The customers maintained that the charges violated California law.

DirecTV Customers Can't File Class Action Lawsuit, Says Supreme Court
[Photo by Rachel Murray/Getty Images]

However, DirecTV had asked customers to sign a contract that clearly stated that in the case of disputes between the service provider and the customer, an arbitration hearing will be scheduled to settle the conflict. In other words, the customers have to settle their disputes individually. Businesses have been increasingly shielding themselves against potentially expensive lawsuits by including arbitration provisions in contracts.

Businesses have successfully curtailed their litigation costs in standard customer contracts. Consumer advocates, on the other hand, have argued that such sneaky clauses deprive customers of their ability to challenge corporate misconduct, reported the Miami Herald. Over the years, class action lawsuits have straightened many errant companies as consumers have banded together and fought power litigation teams retained by large corporations. However, the arbitration clause forces customers into private arbitration hearings, which can be quite protracted and expensive.

While consumer groups have strongly defended the right to unite to file class actions, whether in court or through collective arbitration, the justices noted that DirecTV was well within its rights to mandate that any dispute will be handled individually. The contract also prohibited customers from uniting for class action arbitration.

DirecTV Customers Can't File Class Action Lawsuit, Says Supreme Court
[Photo by Toby Canham/Getty Images]

The DirecTV case began way back in 2008, when Amy Imburgia and Kathy Greiner filed class action lawsuits claiming that DirecTV wrongly charged them cancellation fees.

At the core of the lawsuit was the sentence that said, "Contract disputes would be settled through arbitration unless 'the law of your state' prevents it."

Justice Stephen Breyer noted that California law is pre-empted by the Federal Arbitration Act. As such California's laws were superseded by federal laws that dealt with arbitration. He noted that "the law of your state" essentially means "valid state law."

"Just because the state law was valid at the time the contract was made did not matter if it became invalid later."

There were a few judges who didn't share the views of Breyer and were of the opinion that "parties to a contract can choose to be bound by a particular state law, even if it is superseded by federal law."

Justice Ruth Bader Ginsburg, one of the judges who dissented, lamented that majority opinion in the current DirecTV case and previous ruling in favor of arbitration clauses is steadily depriving customers of their right to seek redress for losses, especially for people "with little or no bargaining position."

[Photo by Mike Coppola/Getty Images]