This article first appeared on the Securities Arbitration Alert (SAA) Blog, here.
DIRECTV is seeking a rehearing en banc on a split Ninth Circuit decision that had denied its Motion to compel arbitration.
We reported in SAA 2020-38 (Oct. 14) on Revitch v. DIRECTV, LLC, No. 18-16823 (9th Cir. Sep. 30, 2020), where a divided Court declined to disturb the District Court’s denial of DIRECTV’s Motion to compel arbitration of a putative Telephone Consumer Protection Act (“TCPA”) class action. The holding appeared to us to be one of first impression or at least very rare. What happened? When the lead Plaintiff signed up with AT&T Mobility cell phone service in 2011, he agreed to a predispute arbitration agreement (“PDAA”) that included “affiliates.” In 2015, the carrier became affiliated with satellite TV provider DIRECTV (DIRECTV was acquired by AT&T, Inc., which thus became the parent of DIRECTV and AT&T Mobility). A dispute eventually arose in 2018, with the consumer commencing a class action against DIRECTV for TCPA violations, and the latter seeking to compel arbitration. The District Court declined to compel arbitration and a split Ninth Circuit affirmed. We offer the review that follows drawn from our analysis in #38.
Majority: Look to Parties’ Intentions When Contract Was Formed
The majority applied California law requiring that a contract: “be interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting.” The result based on the facts here? “Had the wireless services agreement stated that ‘AT&T’ refers to ‘any affiliates, both present and future,’ we might arrive at a different conclusion. However, absent this or similar forward-looking language, we are convinced that the agreement does not cover entities that became affiliated with AT&T Mobility years after the contract was signed in an unrelated corporate acquisition.” To hold otherwise, the majority said, would produce an “absurd” result.
Mey Rejected; Lamp Plus Distinguished
Readers may recall that we reported in SAA 2020-32 (Aug. 26) on Mey v. DIRECTV LLC, No. 18-1534 (4th Cir. Aug. 7, 2020), a case involving essentially identical facts. There, the Fourth Circuit majority held that: “Mey formed an agreement to arbitrate with DIRECTV and that this dispute fits within the broad scope of that agreement, construed, as it must be, to favor arbitration.” The Revitch majority rejected the Fourth Circuit’s reasoning, while recognizing that it was opening a Circuit Court split. And what of Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407 (2019), “where the Court held that the FAA preempts California’s contra proferentem rule -- requiring ambiguities in a contract to be construed against the drafter -- when the rule is used ‘to impose class arbitration in the absence of the parties’ consent”? Said the majority: “DIRECTV fails to show that California’s absurd-results canon disfavors arbitration agreements compared to other contracts. The FAA’s savings clause was intended to ‘make arbitration agreements as enforceable as other contracts, but not more so.’ Accordingly, we are not persuaded that the FAA preempts California’s rule requiring that courts interpret contracts to avoid absurd results” (footnote and citation omitted).
Concurring & Dissenting Opinions
Judge O’Scannlain, who authored the majority Opinion, also wrote a separate concurring Opinion as well, “to expand upon the issue of contract scope, as distinguished from contract formation.” Said Judge O’Scannlain: “Even if we consider the question under the rubric of scope, I respectfully suggest that we would still affirm the denial of the motion to compel arbitration based on the express language of the Federal Arbitration Act … itself. The dispute between DIRECTV and Revitch in this case simply does not ‘aris[e] out of’ Revitch’s contract with AT&T Mobility.” Judge Bennett dissented, agreeing with the Fourth Circuit’s reasoning in Mey: “Nothing in the arbitration clause or in the dictionary definition of the word ‘affiliate’ confers any type of temporal scope to the term so that ‘affiliates’ should be read to refer only to present affiliate” (emphasis in original).
En Banc Review Sought
DIRECTV on October 28 filed a Petition for Rehearing En Banc. It’s core contention? “Rehearing is warranted because the divided panel’s decision refusing to enforce the plain and broadly written language of the arbitration agreement in this case departs from this bedrock principle in two significant respects -- and in the process creates an acknowledged ‘circuit split’ with a recent decision of the Fourth Circuit interpreting the same arbitration agreement in a virtually identical context. First, the panel majority inserted limitations into the arbitration agreement that lack support in the agreement’s text or structure .... Second, the panel majority concluded that it would be an ‘absurd result’ to enforce the broadly written arbitration provision according to its terms. But the panel majority’s application of the absurd-results canon squarely conflicts with the FAA and Supreme Court precedent” (internal citations omitted; emphasis in original.)
(ed: *If our theory is correct that this notoriously anti-arbitration Circuit has become less so, the Petition will be granted. **We’ll track this one for further updates.)