Page 36 - AVN December 2015

LEGALESE | | By Clyde DeWitt
”
Although the
Court already
has upheld
arbitration
Employers, Take Note
SCOTUS tackles huge arbitration issue
On Tuesday, October 6, 2015, the second day of the Supreme
squarely to the contrary, in favor of DirecTV’s position. That
Court’s 2015 term, the Court heard argument in a case that,
left the absurd result that whether an arbitration provision was
while not receiving much press, stands to dramatically impact
enforceable became a function of whether a California suit was
businesses, consumers, employers and employees. The ques-
brought in a state or federal court.
tion to be answered involves the extent to which the Federal
The nub of the dispute, albeit oversimplified, is that there
Arbitration Act trumps the rights under state law to class
was a provision in the DirecTV’s contract acknowledging that
actions and jury trials, among other things.
In the November 2012 issue of AVN, this column discussed
FAA would govern the contract; but another one that said that
the arbitration provision would not apply if it violated “the law
provisions that
foreclose class
actions, the
DirecTV case
has a different
twist
LEGAL NEWS
Clyde DeWitt is a Las Vegas and Los Angeles
attorney, whose practice has been focused on adult
entertainment since 1980. He can be reached at
ClydeDeWitt@earthlink.net. More information can
be found at ClydeDeWitt.com. This column is not a
substitute for personal legal advice. Rather, it is to alert
readers to legal issues warranting advice from your
personal attorney.
36 | AVN.com | 12.15
alternative dispute resolution, which includes arbitration. Fun-
damentally, arbitration is where the parties agree to hear a case
before an arbitrator, rather than a judge or jury. The arbitrator
acts like a judge—and, in fact, the bulk of arbitrators are retired
judges.
Arbitration is popular in contracts between businesses be-
cause both sides know that it will result in a less expensive and
more expedient resolution of disputes. Arbitration is also pop-
ular in contracts between a business, on the one hand and one
of its employees or consumers, on the other hand. Arbitration
has become pretty much standard because the contracts are
written by the businesses on a take-it-or-leave-it basis and in
a dispute with an employee or a customer, the business would
much rather be before a professional judge than a jury full of
employees and consumers.
Time was, courts resisted civilians acting in their stead.
Judicial sentiment was that elected/appointed judges should
resolve disputes, not private individuals. However, in 1925,
Congress changed that with the Federal Arbitration Act. 9
U.S.C. §§1, et seq. (“FAA”). Seizing on Congress’ constitution-
al power to regulate interstate commerce, which has expanded
profoundly since 1925, the FAA in essence says that where par-
ties to a dispute have agreed to arbitration, courts are required
to respect that. The FAA was upheld against the most powerful
constitutional challenge to it in 1984, when the Supreme Court
approved its application to state courts.**
The case argued on the second day of the Court’s 2015 term
pits DirecTV against a group of its former customers who
wanted to certify a class action and worm their way out of
arbitration.*** Although arbitration as opposed to a court trial
is a big deal, the really big deal is that the contract’s arbitration
agreement foreclosed class actions. Although the Court already
has upheld arbitration provisions that foreclose class actions),
the DirecTV case has a different twist.
As is commonplace, DirecTV had a standard contract with
all of its customers. Two of them separately filed suit, each
complaining that DirecTV’s cancellation policies violated a
series of California’s consumer-protection laws—and know that
California has more of those than anywhere. Answering the
suits, DirecTV moved to compel arbitration, which is the pro-
cedure for a defendant to bounce a case out of court
and into arbitration. DirecTV took the case
to the California Court of Appeal, which
rather remarkably affirmed. “Remark-
ably” because the United States
Court of Appeals for the Ninth
Circuit—the court that hears
federal appeals from federal
trial courts in Western states,
including California—had held
of [the consumer’s] state.”
California, the customers argued, had a provision in one of
its statutes that provided the basis of the action stating that its
provisions—including the right to class actions—could not be
waived.
DirecTV argued that the FAA is part and parcel of the laws
of every state because of provisions in the FAA, amongst
others, that the FAA governs all arbitration agreements and
substitutes itself for any state-law rule to the contrary. As an
analogy (one which did not arise in argument), if a contract
licensing a copyright commanded the application of the laws of
a particular state, the contract would necessarily be governed
by the federal Copyright Act of 1976, which expressly preempts
all state copyright laws.
Although the DirecTV case presents an obscure set of facts,
its result could render arbitration agreements unassailable, as
they should be. It is California’s last gasp.
Constitutional scholars have identified this Supreme Court
as a business-friendly one. During oral argument, Chief Justice
John Roberts punctuated that in what didn’t sound much like a
question:
“[T]he FAA was adopted because State courts were hostile
to arbitration, and Congress didn’t like that. Now, how were
they hostile to arbitration? They were hostile to arbitration by
adopting special rules of Contract interpretation that this fa-
vored arbitration. And in those instances, what the FAA says is
that that’s what they wanted to stop: special rules of Contract
interpretation, ordinarily a matter of State law, but not when
it’s hostile to the FAA. And what could be more hostile to the
FAA than to interpret a phrase that says nothing about the
FAA to dispense with our holdings about as they came about
our holdings about what the FAA has to say[?] And to do that
even though there’s a provision in the Contract that says this is
governed by the FAA.”
Finally, for any attorneys reading this piece, it is an admit-
tedly gross oversimplification of the convoluted facts before the
Court. The point is to allow the non-attorney readers to grasp
the significance of the DirecTV case.
* Southland Corp. v. Keating, 465 U.S. 1 (1984).
** DirecTV v. Imburgia, et al., No.
14-462; certiorari granted ___ U.S.
___, 135 S.Ct. 1547 (March 23,
2015).
*** (Oxford Health Plans LLC
v. Sutter, 133 S.Ct. 2064 (2013);
AT&T Mobility, LLC v. Concepcion,
131 S.Ct. 1740 (2011)