Revitch v. DIRECTV: A Wireless Contract Did Not Bind a Consumer to Arbitrate Robocall Claims Against a Later Acquired Affiliate

The bottom line: under California law, an arbitration clause that covers a company's "affiliates" does not automatically reach affiliates acquired long after signing, at least for claims unrelated to the contract.

Background

Jeremy Revitch alleged that DIRECTV placed multiple prerecorded calls to his cell phone advertising a $19.99 viewing package and a free flat screen television, even though he had no prior contact with DIRECTV. He filed a putative class action under 47 U.S.C. § 227(b)(3).

DIRECTV discovered that Revitch had signed a wireless services agreement with AT&T Mobility LLC in 2011. Its arbitration clause covered "all disputes and claims between" the parties, and it defined references to AT&T to include its "affiliates." AT&T, Inc. acquired DIRECTV in 2015, thereby becoming a sister company to AT&T Mobility. DIRECTV moved to compel arbitration and the district court denied the motion.

The decision

Judge O'Scannlain wrote for the panel, joined by Judge McKeown. Judge O'Scannlain also concurred separately, and Judge Bennett dissented.

Formation, not scope. The court framed the question as whether a valid agreement to arbitrate existed between Revitch and DIRECTV. Treating the issue as one of scope would trigger the presumption favoring arbitration and could bind consumers to entities they never agreed to arbitrate with.

Reasonable expectations at signing. California law interprets contracts to give effect to the parties' mutual intent at the time of contracting and to avoid absurd results. DIRECTV's reading would require Revitch to arbitrate any dispute with any entity AT&T, Inc. ever acquires, no matter how unrelated. The court said language such as "any affiliates, both present and future" might lead to a different result.

No preemption. DIRECTV argued that Lamps Plus, Inc. v. Varela requires ambiguities to be resolved in favor of arbitration. The court distinguished the contra proferentem default rule at issue in Lamps Plus from the absurd results canon, which helps discern intent. It held that the Federal Arbitration Act (FAA) does not preempt the canon.

The circuit split. The court acknowledged that the Fourth Circuit reached the opposite conclusion on an identical clause in Mey v. DIRECTV, LLC. It explained why hypotheticals, such as being hit by a DIRECTV van, are appropriate when the question is formation.

The concurrence

Judge O'Scannlain wrote that even under a scope analysis he would affirm, because the FAA covers only controversies "arising out of" the contract. DIRECTV's unsolicited satellite television ads had nothing to do with the formation or performance of a wireless services contract.

The dissent

Judge Bennett would have compelled arbitration. In his view, both parties accepted the existence of the clause, so the issue was scope. The plain meaning of "affiliates" has no time limit, the clause referred to forward-looking categories like "successors" and "assigns," and any ambiguity had to be resolved in favor of arbitration under Lamps Plus. He also argued that the majority applied the absurd results canon in a way that disfavors arbitration.

Practical takeaways

1. Companies which rely on sister companies' contracts with consumers to compel arbitration of TCPA claims face real risk in the Ninth Circuit.
2. Drafters seeking coverage of later acquired affiliates should say so expressly, recognizing that even explicit language may be challenged.
3. Defendants should be prepared to show that the TCPA dispute is connected to the contract with the clause.
4. Outcomes may differ by circuit, so forum matters.

Read the Ninth Circuit's opinion in Revitch v. DIRECTV.