DIRECTV, Inc., moved to dismiss or stay this class action litigation and to compel arbitration. The superior court denied the motion. DIRECTV argues that the motion should have been granted under the United States Supreme Court's decision in AT&T Mobility LLC v. Concepcion (2011) 563 U.S. ___ [179 L.Ed.2d 742, 131 S.Ct. 1740] (Concepcion). We conclude that under the terms of the parties' arbitration agreement, the motion was correctly denied. We therefore affirm.
On September 17, 2008, Amy Imburgia filed a class action complaint against DIRECTV, alleging claims for unjust enrichment, declaratory relief, false advertising, and violation of the Consumers Legal Remedies Act (CLRA) (Civ. Code, § 1750 et seq.), the unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.), and Civil Code section 1671, subdivision (d). Imburgia's claims were based on allegations that DIRECTV has improperly charged early termination fees to its customers. Kathy Greiner filed a similar class action complaint one day after Imburgia, and Imburgia and Greiner (hereafter plaintiffs) jointly filed a first amended complaint on March 16, 2009. Plaintiffs' lawsuit proceeded at the same time as a multidistrict
Plaintiffs subsequently moved for class certification. On April 20, 2011, the superior court granted the motion in part and denied it in part, certifying a class as to one of plaintiffs' theories but denying certification as to others.
On April 27, 2011, the United States Supreme Court decided Concepcion, which held that the Federal Arbitration Act (FAA) (9 U.S.C. § 1 et seq.) preempts the rule of Discover Bank v. Superior Court (2005) 36 Cal.4th 148 [30 Cal.Rptr.3d 76, 113 P.3d 1100] (Discover Bank). Discover Bank held that under certain circumstances, class action waivers in consumer contracts are unconscionable and hence unenforceable. (Id. at pp. 162-163.)
On May 17, 2011, less than one month after the court decided Concepcion, DIRECTV moved to stay or dismiss plaintiffs' action, decertify the class, and compel arbitration of plaintiffs' claims. DIRECTV explained that it had not moved to compel arbitration earlier because, in an unrelated case several years before plaintiffs filed this litigation, the Court of Appeal had held that the arbitration provision in DIRECTV's customer agreement was unenforceable under Discover Bank. (See Cohen v. DIRECTV, Inc. (2006) 142 Cal.App.4th 1442, 1455 [48 Cal.Rptr.3d 813].) Until Concepcion held that the FAA preempts the rule of Discover Bank, DIRECTV consequently believed that a motion to compel arbitration would be futile.
The relevant arbitration provision is contained in section 9 of DIRECTV's 2007 customer agreement. Section 9 provides that "any legal or equitable claim relating to this Agreement, any addendum, or your Service" will first be addressed through an informal process and then, if the claim is not resolved informally, "any Claim either of us asserts will be resolved only by binding arbitration" under JAMS rules. Under the heading "Special Rules," section 9 of the agreement provides as follows: "Neither you nor we shall be entitled to join or consolidate claims in arbitration by or against other individuals or entities, or arbitrate any claim as a representative member of a class or in a private attorney general capacity. Accordingly, you and we agree that the JAMS Class Action Procedures do not apply to our arbitration. If, however, the law of your state would find this agreement to dispense with class arbitration procedures unenforceable, then this entire Section 9 is unenforceable."
Section 10 of the 2007 customer agreement contains provisions addressing several miscellaneous matters, including the following provision concerning "Applicable Law": "The interpretation and enforcement of this Agreement
Plaintiffs opposed the motion to compel arbitration on numerous grounds. The superior court denied the motion, and DIRECTV timely appealed.
"On appeal from the denial of a motion to compel arbitration, `we review the arbitration agreement de novo to determine whether it is legally enforceable, applying general principles of California contract law. [Citations.]' (Kleveland v. Chicago Title Ins. Co. (2006) 141 Cal.App.4th 761, 764 [46 Cal.Rptr.3d 314].)" (Baker v. Osborne Development Corp. (2008) 159 Cal.App.4th 884, 892 [71 Cal.Rptr.3d 854].) We review the superior court's ruling, not its reasoning, and we consequently may affirm on the basis of any valid legal theory, regardless of whether the superior court relied on it. (See, e.g., Perlin v. Fountain View Management, Inc. (2008) 163 Cal.App.4th 657, 663-664 [77 Cal.Rptr.3d 743].)
Under the foregoing principles, if section 9 of DIRECTV's 2007 customer agreement had said that the enforceability of the class action waiver "shall be determined under the law of your state to the extent that it is not preempted by the FAA," then that provision would have been enforceable. Likewise, if section 9 had said that the enforceability of the class action waiver "shall be determined under the law of your state without considering the preemptive effect, if any, of the FAA," then that provision would have been enforceable as well. No party argues to the contrary.
Section 9 of the 2007 customer agreement is not, however, as explicit as either of those hypothetical examples. The question before us, then, is how to interpret section 9's choice of law concerning enforceability of the class action waiver. Where section 9 requires us to consider whether "the law of
DIRECTV's sole response to that argument is that "the contract interpretation principle [p]laintiffs invoke applies only where `the provisions in question are truly inconsistent,'" but "there is no inconsistency" here because "both federal and state law have a role." We are not persuaded. If we apply state law alone (for example, the antiwaiver provision of the CLRA) to the class action waiver, then the waiver is unenforceable. If we apply federal law, then the class action waiver is enforceable and any state law to the contrary is preempted. That is a sufficient inconsistency to make plaintiffs' principle of contract interpretation applicable. Indeed, the entire preemption analysis of Concepcion is based on a conflict or inconsistency between the Discover Bank rule and the FAA. (See Concepcion, supra, 563 U.S. at p. ___ [131 S.Ct. at p. 1751] ["class arbitration, to the extent it is manufactured by Discover Bank ... is inconsistent with the FAA"]; id. at pp. ___, ___ [131 S.Ct. at pp. 1749, 1750] ["the FAA was designed to promote arbitration," and "California's Discover Bank rule ... interferes with arbitration"]; id. at p. ___ [131 S.Ct. at p. 1753] ["... California's Discover Bank rule is preempted by the FAA" because it "`stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress'"].)
Finally, DIRECTV cites three cases as having "rejected" plaintiffs' argument. Two of the cases are readily distinguishable because, unlike the instant case, neither of them involves an arbitration agreement that specifically provides that the enforceability of the class action waiver is to be decided under state law. (See Litman v. Cellco Partnership (3d Cir. 2011) 655 F.3d 225, 231, fn. 8 [the agreement provided that state law applied "`[e]xcept to the extent we've agreed otherwise in the provision[] on ... arbitration,'" the arbitration provision stated that it was governed by the FAA, and the class action waiver stated that "`if for some reason the prohibition on class arbitrations ... is deemed unenforceable, then the agreement to arbitrate will not apply'"]; Meyer v. T-Mobile USA, Inc. (N.D.Cal. 2011) 836 F.Supp.2d 994, 1001 [the agreement's only choice of law provision stated: "`This Agreement is governed by the Federal Arbitration Act, applicable federal law, and the laws of the state in which your billing address in our records is located.'"].)
The third case, however, is a decision in the federal multidistrict litigation that parallels the instant state court actions. In an "indicative ruling" under rule 62.1 of the Federal Rules of Civil Procedure (28 U.S.C.), the federal district court stated that the reference to "the law of your state" in section 9 of the
After briefing in this appeal was completed, the United States Court of Appeals for the Ninth Circuit decided a similar case concerning the enforceability of the arbitration provision and class action waiver in DIRECTV's customer agreement under Concepcion. (See Murphy v. DIRECTV, Inc. (9th Cir. 2013) 724 F.3d 1218 (Murphy).) The court held that "the arbitration agreement is enforceable under Concepcion ...," which preempts any state law to the contrary. (Id. at p. 1228.) The court reasoned that "the parties' various contract interpretation arguments" — which included both the argument that the specific reference to state law controlled over the general reference to the FAA and the argument that ambiguities should be construed against the drafter — "are largely irrelevant to our analysis," because under the supremacy clause of the United States Constitution, and the related doctrine of federal preemption, federal law is the law of every state. (724 F.3d at p. 1228; see id. at p. 1226 ["Section 2 of the FAA, which under Concepcion requires the enforcement of arbitration agreements that ban class procedures, is the law of California and of every other state."]; see generally id. at pp. 1225-1228.)
We find the analysis in Murphy unpersuasive. On the one hand, insofar as the court's reasoning is a matter of contract interpretation, it means that when the parties used the phrase "the law of your state," they meant "federal law plus (nonfederal) state law." Murphy provides no basis for concluding that the parties intended to use the phrase "the law of your state" in such a way, and we are aware of none. On the contrary, a reasonable reader of the customer agreement would naturally interpret the phrase "the law of your state" as referring to (nonfederal) state law, and any ambiguity should be construed against the drafter.
The order is affirmed. Respondents shall recover their costs of appeal.
Chaney, J., and Miller, J.,