In DIRECTV, Inc. v. Imburgia, 2015 WL 8546242, at *1-2 (U.S.Cal.,2015), the Supreme Court of the United States once again affirmed its preference for arbitration, and killed the “poison-pill” argument that had gathered fancy amongst the plaintiff’s bar.
Petitioner DIRECTV, Inc., and its customers entered into a service agreement that included a binding arbitration provision with a class-arbitration waiver. It specified that the entire arbitration provision was unenforceable if the “law of your state” made class-arbitration waivers unenforceable. The agreement also declared that the arbitration clause was governed by the Federal Arbitration Act. At the time that respondents, California residents, entered into that agreement with DIRECTV, California law made class-arbitration waivers unenforceable, see Discover Bank v. Superior Court, 36 Cal.4th 148, 30 Cal.Rptr.3d 76, 113 P.3d 1100. This Court subsequently held in AT & T Mobility LLC v. Concepcion, 563 U.S. 333, 131 S.Ct. 1740, 179 L.Ed.2d 742, however, that California’s Discover Bank rule was pre-empted by the Federal Arbitration Act, 9 U.S.C. § 2. When respondents sued petitioner, the trial court denied DIRECTV’s request to order the matter to arbitration, and the California Court of Appeal affirmed. The court thought that California law would render class-arbitration waivers unenforceable, so it held the entire arbitration provision was unenforceable under the agreement. The fact that the Federal Arbitration Act pre-empted that California law did not change the result, the court said, because the parties were free to refer in the contract to California law as it would have been absent federal pre-emption. The court reasoned that the phrase “law of your state” was both a specific provision that should govern more general provisions and an ambiguous provision that should be construed against the drafter. Therefore, the court held, the parties had in fact included California law as it would have been without federal pre-emption. Held : Because the California Court of Appeal’s interpretation is pre-empted by the Federal Arbitration Act, that court must enforce the arbitration agreement. (a) No one denies that lower courts must follow Concepcion, but that elementary point of law does not resolve the case because the parties are free to choose the law governing an arbitration provision, including California law as it would have been if not pre-empted. The state court interpreted the contract to mean that the parties did so, and the interpretation of a contract is ordinarily a matter of state law to which this Court defers, Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 474, 109 S.Ct. 1248, 103 L.Ed.2d 488. The issue here is not whether the court’s decision is a correct statement of California law but whether it is consistent with the Federal Arbitration Act. (b) The California court’s interpretation does not place arbitration contracts “on equal footing with all other contracts,” Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443, 126 S.Ct. 1204, 163 L.Ed.2d 1038, because California courts would not interpret contracts other than arbitration contracts the same way. Several considerations lead to this conclusion. First, the phrase “law of your state” is not ambiguous and takes its ordinary meaning: valid state law. Second, California case law—that under “general contract principles,” references to California law incorporate the California Legislature’s power to change the law retroactively, Doe v. Harris, 57 Cal.4th 64, 69–70, 158 Cal.Rptr.3d 290, 302 P.3d 598, 601–602—clarifies any doubt about how to interpret it. Third, because the court nowhere suggests that California courts would reach the same interpretation in any other context, its conclusion appears to reflect the subject matter, rather than a general principle that would include state statutes invalidated by other federal law. Fourth, the language the court uses to frame the issue focuses only on arbitration. Fifth, the view that state law retains independent force after being authoritatively invalidated is one courts are unlikely to apply in other contexts. Sixth, none of the principles of contract interpretation relied on by the California court suggests that other California courts would reach the same interpretation elsewhere. The court applied the canon that contracts are construed against the drafter, but the lack of any similar case interpreting similar language to include invalid laws indicates that the antidrafter canon would not lead California courts to reach a similar conclusion in cases not involving arbitration. 225 Cal.App. 4th 338, 170 Cal.Rptr.3d 190, reversed and remanded.