DirecTV Class Action Waiver Held UnconscionableMetropolitan News-Enterprise
Tuesday, September 19, 2006
Page 1
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
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