El Segundo’s DirecTV got the go-ahead from the U.S. Supreme Court on Monday to resolve a dispute with customers through individual arbitration rather than in court.
The High Court ruled 6 to 3 in favor of DirecTV, finding that the company’s contracts – which include a clause that forbids customers from filing class-action lawsuits – are valid.
The court’s decision paves the way for other businesses in California to enforce arbitration agreements, increasingly popular tools companies use to resolve disputes outside courtrooms typically for far less money.
The dispute began in 2008 when a former DirecTV customer sued the satellite TV provider in Los Angeles Superior Court, alleging it had violated several California laws when it charged cancellation fees.
The Supreme Court didn’t rule on the merits of the dispute, but it was instead asked to decide where the complaint should be resolved – either in private arbitration or as part of a class-action lawsuit.
Businesses throughout the state had been watching this case closely, hoping the Supreme Court would protect their right to resolve disputes with customers and employees through arbitration. In general, businesses see arbitration as a cheaper and faster way to resolve disputes. Plus, it adds a layer of privacy.
“The ruling affirms the strong federal policy favoring arbitration agreements that efficiently allow consumers and businesses to resolve disputes without further burdening our overloaded courts,” said DirecTV spokesman Robert Mercer in a statement.
Consumer groups, on the other hand, often claim that arbitration provides an unfair advantage to businesses.
“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 Santa Monica’s 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.”
Check out the Business Journal’s past coverage of this case here.
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