Supreme Court rejects class-action suit against DirecTV

The Supreme Court said on Monday that a class-action suit against satellite TV provider DirecTV over early-termination fees cannot go forward, because such complaints must be settled by private arbitration hearings.

The court ruled 6 to 3 that its previous decisions on the subject mean that California consumers may not rely on a state law that would have allowed consumers the right to band together to sue.

The action continues the court’s string of rulings that cut back on class-action suits and strengthens the power of companies to insist that consumer complaints must be settled by arbitration, which is generally seen as more advantageous for businesses.

Those rulings brought a sharp dissent from Justice Ruth Bader Ginsburg.

“These decisions have predictably resulted in the deprivation of consumers’ rights to seek redress for losses, and turning the coin, they have insulated powerful economic interests from liability for violations of consumer protection laws,” wrote Ginsburg, who was joined by Justice Sonia Sotomayor.

Justice Stephen Breyer was tasked by Chief Justice John Roberts Jr. with writing Monday’s decision, even though he dissented in the court’s 2011 decision in AT&T v. Concepcion that proved fatal to the California consumers. It said that the Federal Arbitration Act (FAA) preempts state rules that keep class-arbitration bans from being enforced.

“The fact that Concepcion was a closely divided case, resulting in a decision from which four justices dissented,” has no bearing on the obligation of lower courts to follow its holding, Breyer wrote. And that decision made California’s protection of class-arbitration invalid, Breyer wrote.

The case began in 2008 when Amy Imburgia and Kathy Greiner filed class-action lawsuits claiming that DirecTV wrongly charged outsize cancellation fees – some as high as $480.

The fine print in the customer agreement said that contract disputes would be settled through individual arbitration rather than class actions unless “the law of your state” prevents such arrangements. At the time, California’s law did just that.

But the court’s ruling in 2011 changed the legal background, Breyer said. Despite a California court’s decision that the lawsuit could go forward, Breyer said the Supreme Court’s Concepcion decision in effect made the California law invalid.

Business groups and conservative legal organizations said the decision was another lesson for state courts.

“The Supreme Court has once again reiterated its refusal to tolerate state-court hostility to arbitration,” said Cory Andrews of the Washington Legal Foundation. “As a result of today’s decision, arbitration will continue to thrive as an attractive and effective alternative to costly and time-consuming litigation.”

Consumer groups said the rulings provide more protection for businesses at the expense of consumers.

“This is another troubling day for American consumers who are ripped off by corporate greed and malfeasance, whether it’s a satellite TV system that doesn’t work, unlawful credit card fees, or a defective vehicle,” said Harvey Rosenfield, founder of Consumer Watchdog and one of the lawyers who represented consumers in the litigation. “The Supreme Court has taken away Americans’ only right to obtain justice: their day in court. The more the U.S. Supreme Court allows big corporations to evade accountability, the less confidence Americans have in the judicial branch and the rule of law.”

Ginsburg was only slightly less accusatory in her dissent.

“It has become routine, in a large part due to this court’s decisions, for powerful economic enterprises to write into their form contracts with consumers and employees no class-action arbitration clauses,” she wrote. The new decision “again expanded the scope of the FAA, further degrading the rights of consumers and further insulating already powerful economic entities from liability for unlawful acts.”

Justice Clarence Thomas dissented for different reasons. He said he does not think that the Federal Arbitration Act applied to proceedings in state courts.

Breyer was joined in the majority decision by Roberts and Justices Antonin Scalia, Anthony Kennedy, Samuel Alito Jr. and Elena Kagan. Kagan, too, had dissented in the Concepcion case.