The Customer Might Not Always Be Right

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One of the most unnecessary, yet unavoidable bills the average household has is for television. The relationship between consumer and TV provider is a highly dynamic love-hate relationship. We feel obligated to stay up to date on the news to see what is going on in the world, and we enjoy watching our comedy, sports, and reality shows when we can. Of course, it is nice to have additional perks like high definition, recording capability, and the ability to record and rewind what we watch. What we do not appreciate is being cheated out of fair service and suffering hidden fees.

It is a feeling millions of DIRECTV subscribers can identify with after using said services. California customers decided several years ago that enough was enough; they united to sue the company for their part in causing these fees to go into effect. However, it does not appear the case will rule in their favor. In December 2015, the Supreme Court ultimately stated that DIRECTV, a satellite TV company, could avoid a class action lawsuit in the State of California. The lawsuit concerned early termination fees, and the ruling would force customers into private arbitration hearings. While the Supreme Court had to deliberate and decide if unhappy customers of the company had the chance to come together in a class action, they negated it. The majority believe it better to rebuke and reverse the California appeals court that permitted class action and will send them to arbitration instead. Most of the time, the Supreme Court is often against class actions and partial to arbitration where parties in dispute can resolve their problem before private bodies.

The Court decided, in a 6-3 opinion, that it was a sound and reasonable rule because the satellite provider’s contracts mentioned a statement that protects them from consumers joining to sue them. Regardless of that fact, California state law would still permit any class action related to it to go forward. This change is the latest in a multitude of high court rulings that are for companies that have the ability to limit their litigation expenses by adding mandatory arbitration in every general customer contract. It is a smart move that only benefits the companies. Consumer advocates, however, are not pleased and say agreements like these rob customers of any meaningful power to fight corporate misconduct. Stephen Breyer, an Associate Justice of the Supreme Court, wrote for the court and stated that California’s law preempts the Federal Arbitration Act. It allows businesses to require any customer dispute to be settled one-on-one in arbitration. Earlier in 2014, the California state appeals court ruled against DIRECTV. The state’s highest court mentioned that the state law forbade any agreements that waived customer’s rights to bring a class action.

The case originally started back in 2008 when Kathy Greiner and Amy Imburgia both filed class action lawsuits against the satellite company, stating they wrongfully charged them termination fees of up to $480. These fees would often be paid directly from the customer’s credit card or bank account on file without obtained permission. Greiner stated that her dissatisfaction started with a minor issue with the company’s receiver not operating, causing her to order another one. It wasn’t too long after the replacement arrived until it also starting giving her troubles that DIRECTV would not resolve. She was a customer with them for six years and ultimately decided it would be best for her to leave the company and return the equipment when she was slapped in the face with the disputed fees. Imburgia had a different scenario and mentioned they failed to tell her that the company imposed an 18-24 month term of service. She was unaware of any cancellation before that time meant huge expenses for her. Not only that but DIRECTV also automatically extends the “contractual obligation” another 12-24 months. Both Greiner and Imburgia argue the company’s policies resulting in fees were never disclosed.

The satellite company also said the ruling that took place April of last year by the California Court of Appeal won a similar issue. It was held by the 9th US Circuit Court of Appeals based in San Francisco. The primary complication was language in the customer agreement that stated all contract disputes would get settled via arbitration unless the “law of your state” prohibits it. Justice Breyer stated the high court ruled in another case (AT&T Mobility vs. Concepcion), during 2011, and said California’s law was invalid since it clashed with the federal arbitration law. Breyer also said the “language” in the contract that referred to state law meant “valid state law.” Even if the state law was indeed valid at the time the contract was created; it didn’t matter if it became invalid sometime down the road.

Clarence Thomas, an Associate Justice of the Supreme Court, disagreed with the statement. He argued that he didn’t believe that the federal arbitration law should apply to proceedings in state courts. Ruth Bader Ginsburg, yet another Associate Justice of the Supreme Court, along with Associate Justice, Sonia Sotomayer, voiced another disagreement. They mentioned that parties to a contract had the ability to decide if they wanted to be bound by a certain state law, regardless if the federal law supersedes it. Justice Ginsburg said that the majority option, as well as prior rulings in favor for arbitration clauses “predictably, meant it would deprive customers of their rights to get justice for any loss.” As a result, Ginsburg stated that large businesses could impose contracts and ban class lawsuits altogether on those with little to no bargaining position.

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