Cable Connection v. DIRECTV

DIRECTV, Inc. (defendant) was a California broadcasting company for satellite television and contracted with companies to provide the necessary reception equipment to its customers. DIRECTV’s contracts included a mandatory arbitration clause providing that arbitrators did not have the authority to commit errors of law and that any award would be vacated or corrected by a court on those grounds. A dispute arose between DIRECTV and a group of retail dealers in Oklahoma, including Cable Connection, Inc. (dealers) (plaintiffs). The dealers filed a class-action lawsuit against DIRECTV for withholding commissions and improper charges. In response to a motion by DIRECTV, the Oklahoma state court compelled arbitration in California, as established in the terms of the DIRECTV contracts. The arbitration panel issued an award and found that even though the contract was silent on the issue of class arbitration, California state law allowed the dealers to pursue class action. DIRECTV petitioned a California state court to vacate the award, arguing that the panel exceeded its authority under the Federal Arbitration Act (FAA) by allowing class action and that the panel committed errors of law subject to judicial review. The trial court agreed and vacated the award. The dealers appealed to the appellate court, which reversed the decision. DIRECTV appealed to the California Supreme Court. The California Supreme Court found that arbitrators needed to decide whether the agreement allowed class arbitration and then addressed the agreement’s scope of judicial review.