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The U.S. Supreme Court has agreed to hear several cases of interest to risk managers in the 2015-2016 term that begins next week. In a case involving arbitration, the court will hear oral arguments in DirecTV Inc. v. Amy Imburgia et al. on Oct. 6
“The issue is whether the California Court of Appeal erred by holding, in direct conflict” with the 9th U.S. Circuit Court of Appeals, “that a reference to state law in an arbitration agreement governed by the Federal Arbitration Act requires the application of a state law pre-empted by the FAA,” the Washington-based National Association of Manufacturers said in a description of the case.
The case involves a class action brought under the California Consumers Legal Remedies Act in which the state appellate court refused to compel arbitration by applying state law. The agreement between DirecTV and customers prohibits arbitration on a classwide basis and says the entire arbitration section is void if state law nullifies such a prohibition.
The federal arbitration law requires both state and federal courts to interpret and enforce arbitration agreements according to their terms, and to resolve any doubts in favor of arbitration.
“If the class actions are allowed for disputes that would normally be settled by arbitration, that will potentially increase the costs substantially for dealing with these types of cases,” said Quentin Riegel, vice president and deputy general counsel of the Washington-based manufacturers' group.
“DirecTV is another case in the ongoing interest in the court in arbitration cases,” said Glenn Lammi, chief counsel of the legal studies division at the Washington Legal Foundation, which filed a brief supporting DirecTV. He said there's been a “concerted effort by state courts to ignore decisions” that uphold the pre-emptive power of the federal arbitration law.
DirecTV presents an “opportunity for the Supreme Court to state authoritatively that the Federal Arbitration Act has pre-emptive effective over state courts' desire to get rid of arbitration,” Mr. Lammi said.
In an amicus brief filed supporting Ms. Imburgia, Washington-based consumer group Public Citizen argued that the California court ruled correctly.
“The FAA does not pre-empt the field of arbitration regulation, and its application is not universal,” Public Citizen said in its brief. “States may have and enforce laws — even laws that resolve arbitration issues the opposite way from the FAA — regulating arbitrations that fall outside the FAA's scope.”
The high court also has accepted several cases involving aspects of class actions.
“I really see that the court is on the front lines of the class action wars,” said Robin S. Conrad, a partner in the Washington office of international law firm Dentons and a former executive vice president of the U.S. Chamber Litigation Center, the public policy law firm of the U.S. Chamber of Commerce. “These cases have been in the pipeline for a long time.”
Ms. Conrad said the class action situation is analogous to that after the Supreme Court ruled in its 2003 decision in State Farm Mutual Automobile Insurance Co. v. Curtis Campbell et al. that a punitive damage award 145 times the underlying compensatory damage award was excessive and unconstitutional.
“There was a slew of post-State Farm cases,” she said. “The plaintiffs bar tried to poke holes any way they could to get punitive damages. We're seeing the same thing on the class action front.”
In one class action case, Campbell-Ewald Co. v. Jose Gomez, the court will examine whether offering complete relief to a plaintiff renders the plaintiff's claim moot and, if offered before a class is certified, if it also renders the class claim moot. The case involves alleged violations of the Telephone Consumer Protection Act.
In another case, Spokeo Inc. v. Thomas Robins, Mr. Robins alleged that social media site Spokeo violated the Fair Credit Reporting Act by publishing inaccurate information about him and by failing to provide third parties with notices as required by the law.
Mr. Robins sought to file a class action seeking $1,000 per member, but since he didn't allege any real harm, a U.S. District Court in Los Angeles dismissed the claims. But the 9th Circuit reinstated the case and held that alleging violation of the credit law did in fact constitute an injury.
Mr. Riegel of the manufacturers' group said the outcome of the case will determine whether such a case can even be filed, and could eliminate some cases where an injury is not clearly shown.