Tuesday, September 19, 2006
DirecTV Class Action Waiver Held Unconscionable
By a MetNews Staff Writer
An arbitration clause in a cable television service agreement that barred classwide arbitration of claims was unconscionable, this district’s Court of Appeal ruled yesterday.
Div. Eight unanimously affirmed Los Angeles Superior Court Judge Peter D. Lichtman’s order denying DirecTV’s motion to compel arbitration in a class action lawsuit over its High Definition Television services.
Filed in November 2004 by DirecTV customer Phillip Cohen, the complaint alleged that DirecTV damaged its customers and engaged in unlawful, unfair or fraudulent business practices by switching some of its channels to a lower, sub-standard resolution in September 2004. Cohen had been a DirecTV customer since 1997 and received HDTV services starting in 2003.
Two months after enrolling for services, Cohen received along with his monthly bill an amended customer agreement containing an arbitration clause. In October 2004, after DirecTV allegedly degraded its signals, Cohen received an amendment to the arbitration clause that further prohibited the joinder or class litigation of claims in arbitration.
In response to Cohen’s complaint, DirecTV filed a motion to compel arbitration. Cohen argued the arbitration clause was unenforceable because DirecTV added the clause unilaterally, and the clause’s ban on joinder or class litigation of claims was unconscionable.
Denying the company’s motion to compel arbitration, Lichtman agreed with Cohen.
The appellate panel concurred with the trial judge that the clause was both unconscionable and, because it expressly prohibited the severance of the class action waiver from the remainder of the arbitration clause, was unenforceable in its entirety.
Applying principles the California Supreme Court announced in Discover Bank v. Superior Court (2005) 35 Cal.4th 148, the justices concluded the class action waiver in DirecTV arbitration clause was unconscionable, as it potentially exempted DirecTV from responsibility for its own fraud or willful injury to its customers.
Writing for the court, Justice Paul Boland explained that the arbitration clause amendment, sent in the form of a bill stuffer, was an adhesion contract. He also said that a class action was the only practicable means for consumers to take issue with DirecTV, since individual disputes involved only small damage amounts, arising out of the $10.99 monthly service fee for HDTV and the approximately $1,000 equipment fee.
Additionally, Boland pointed out, Cohen’s allegation—that DirecTV initially promised to provide “astonishing picture clarity” but later reduced its HDTV transmission quality to levels below the specified standards and bandwidth—amounted to a claim that the company carried out a scheme to cheat large numbers of customers out of their money. This contributed to the agreement’s unconscionability, Boland said, rejecting DirecTV’s contention that Cohen failed to allege hidden charges or undisclosed costs.
But Boland wrote:
“In every case, whether sooner or later, the scheme becomes apparent to the consumer, whether it is the appearance on an invoice of an improper charge or the appearance on the television of an inferior image. In either case, the customer is being deliberately cheated, because he is either paying for something he has not agreed to pay for . . . or paying for something he is not receiving (image clarity from DirecTV).”
The case is Cohen v. DirecTV, Inc., B184630.
Copyright 2006, Metropolitan News Company