Directv, Inc. v. Imburgia

DIRECTV , INC. v. IMBURGIA et al.

certiorari to the court of appeal of california,

second appellate district, division one No. 14–462. Argued October 6, 2015—Decided December 14, 2015 Petitioner DIRECTV , Inc., and its customers entered into a service agreement that included a binding arbitration provision with a class-arbitration waiver. It specified that the entire arbitration provision was unenforceable if the “law of your state” made class-arbitration waivers unenforceable. The agreement also declared that the arbitration clause was governed by the Federal Arbitration Act. At the time that respondents, California residents, entered into that agreement with DIRECTV , California law made class-arbitration waivers unenforceable, see Discover Bank v. Superior Court, 36 Cal. 4th 148, 113 P. 3d 1100. This Court subsequently held in AT&T Mobility LLC v. Concepcion, 563 U. S. 333, however, that California's Discover Bank rule was pre-empted by the Federal Arbitration Act, 9 U. S. C. § 2. When respondents sued petitioner, the trial court denied DIRECTV's request to order the matter to arbitration, and the California Court of Appeal affirmed. The court thought that California law would render class-arbitration waivers unenforceable, so it held the entire arbitration provision was unenforceable under the agreement. The fact that the Federal Arbitration Act pre-empted that California law did not change the result, the court said, because the parties were free to refer in the contract to California law as it would have been absent federal pre-emption. The court reasoned that the phrase “law of your state” was both a specific provision that should govern more general provisions and an ambiguous provision that should be construed against the drafter. Therefore, the court held, the parties had in fact included California law as it would have been without federal pre-emption. Held: Because the California Court of Appeal's interpretation is pre-empted by the Federal Arbitration Act, that court must enforce the arbitration agreement. Pp. 53–59. (a) No one denies that lower courts must follow Concepcion, but that elementary point of law does not resolve the case because the parties are free to choose the law governing an arbitration provision, including California law as it would have been if not pre-empted. The state court interpreted the contract to mean that the parties did so, and the interpretation of a contract is ordinarily a matter of state law to which this

Court defers, Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U. S. 468, 474. The issue here is not whether the court's decision is a correct statement of California law but whether it is consistent with the Federal Arbitration Act. Pp. 53–54.

(b) The California court's interpretation does not place arbitration contracts “on equal footing with all other contracts,” Buckeye Check Cashing, Inc. v. Cardegna, 546 U. S. 440, 443, because California courts would not interpret contracts other than arbitration contracts the same way. Several considerations lead to this conclusion. First, the phrase “law of your state” is not ambiguous and takes its ordinary meaning: valid state law. Second, California case law— that under “general contract principles,” references to California law incorporate the California Legislature's power to change the law retroactively, Doe v. Harris, 57 Cal. 4th 64, 69–70, 302 P. 3d 598, 601– 602—clarifies any doubt about how to interpret it. Third, because the court nowhere suggests that California courts would reach the same interpretation in any other context, its conclusion appears to refect the subject matter, rather than a general principle that would include state statutes invalidated by other federal law. Fourth, the language the court uses to frame the issue focuses only on arbitration. Fifth, the view that state law retains independent force after being authoritatively invalidated is one courts are unlikely to apply in other contexts. Sixth, none of the principles of contract interpretation relied on by the California court suggests that other California courts would reach the same interpretation elsewhere. The court applied the canon that contracts are construed against the drafter, but the lack of any similar case interpreting similar language to include invalid laws indicates that the antidrafter canon would not lead California courts to reach a similar conclusion in cases not involving arbitration. Pp. 54–58. 225 Cal. App. 4th 338, 170 Cal. Rptr. 3d 190, reversed and remanded. Breyer , J., delivered the opinion of the Court, in which Roberts, C. J., and Scalia, Kennedy , Alito , and Kagan, JJ., joined. Thomas, J., filed a dissenting opinion, post, p. 59. Ginsburg , J., filed a dissenting opinion, in which Sotomayor , J., joined, post, p. 59.

Christopher Landau argued the cause for petitioner. With him on the briefs were Melissa D. Ingalls, Robyn E. Bladow , and Shaun Paisley.

Justice Breyer delivered the opinion of the Court.

The Federal Arbitration Act states that a “written provision” in a contract providing for “settle[ment] by arbitration” of “a controversy . . . arising out of” that “contract . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U. S. C. § 2. We here consider a California court's refusal to enforce an arbitration provision in a contract. In our view, that decision does not rest “upon such grounds as exist . . . for the revocation of any contract,” and we consequently set that judgment aside.

DIRECTV , Inc., the petitioner, entered into a service agreement with its customers, including respondents Amy

In 2008, the two respondents brought this lawsuit against DIRECTV in a California state court. They seek damages for early termination fees that they believe violate California law. After various proceedings not here relevant, DIRECTV , pointing to the arbitration provision, asked the court to send the matter to arbitration. The state trial court denied that request, and DIRECTV appealed.

The California Court of Appeal thought that the critical legal question concerned the meaning of the contractual phrase “law of your state,” in this case the law of California. Does the law of California make the contract's class-arbitration waiver unenforceable? If so, as the contract provides, the entire arbitration provision is unenforceable. Or does California law permit the parties to agree to waive the right to proceed as a class in arbitration? If so, the arbitration provision is enforceable.

At one point, the law of California would have made the contract's class-arbitration waiver unenforceable. In 2005, the California Supreme Court held in Discover Bank v. Superior Court, 36 Cal. 4th 148, 162–163, 113 P. 3d 1100, 1110, that a “waiver” of class arbitration in a “consumer contract of adhesion” that “predictably involve[s] small amounts of damages” and meets certain other criteria not contested here is “unconscionable under California law and should not be enforced.” See Cohen v. DirecTV, Inc., 142 Cal. App. 4th

The California Court of Appeal subsequently held in this case that, despite this Court's holding in Concepcion, “the law of California would find the class action waiver unenforceable.” 225 Cal. App. 4th 338, 342, 170 Cal. Rptr. 3d 190, 194 (2014). The court noted that Discover Bank had held agreements to dispense with class-arbitration procedures unenforceable under circumstances such as these. 225 Cal. App. 4th, at 341, 170 Cal. Rptr. 3d, at 194. It conceded that this Court in Concepcion had held that the Federal Arbitration Act invalidated California's rule. 225 Cal. App. 4th, at 341, 170 Cal. Rptr. 3d, at 194. But it then concluded that this latter circumstance did not change the result—that the “class action waiver is unenforceable under California law.” Id., at 347, 170 Cal. Rptr. 3d, at 198.

In reaching that conclusion, the Court of Appeal referred to two sections of California's Consumers Legal Remedies Act, §§ 1751, 1781(a), rather than Discover Bank itself. See 225 Cal. App. 4th, at 344, 170 Cal. Rptr. 3d, at 195. Section

The court reasoned that just as the parties were free in their contract to refer to the laws of different States or different nations, so too were they free to refer to California law as it would have been without this Court's holding invali-dating the Discover Bank rule. The court thought that the parties in their contract had done just that. And it set forth two reasons for believing so.

First, § 10 of the contract, stating that the Federal Arbitration Act governs § 9 (the arbitration provision), is a general provision. But the provision voiding arbitration if the “law of your state” would find the class-arbitration waiver unenforceable is a specific provision. The court believed that the specific provision “ `is paramount to' ” and must govern the general. 225 Cal. App. 4th, at 344, 170 Cal. Rptr. 3d, at 195 (quoting Prouty v. Gores Technology Group, 121 Cal. App. 4th 1225, 1235, 18 Cal. Rptr. 3d 178, 185–186 (2004); brackets omitted).

Second, the court said that “ `a court should construe ambiguous language against the interest of the party that drafted it.' ” 255 Cal. App. 4th, at 345, 170 Cal. Rptr. 3d, at

The California Supreme Court denied discretionary review. App. to Pet. for Cert. 1a. DIRECTV then filed a petition for a writ of certiorari, noting that the Ninth Circuit had reached the opposite conclusion on precisely the same interpretive question decided by the California Court of Appeal. Murphy v. DirecTV, Inc., 724 F. 3d 1218, 1226–1228 (2013). We granted the petition.

No one denies that lower courts must follow this Court's holding in Concepcion. The fact that Concepcion was a closely divided case, resulting in a decision from which four Justices dissented, has no bearing on that undisputed obligation. Lower court judges are certainly free to note their disagreement with a decision of this Court. But the “Supremacy Clause forbids state courts to dissociate themselves from federal law because of disagreement with its content or a refusal to recognize the superior authority of its source.” Howlett v. Rose, 496 U. S. 356, 371 (1990); cf. Khan v. State Oil Co., 93 F. 3d 1358, 1363–1364 (CA7 1996), vacated, 522 U. S. 3 (1997). The Federal Arbitration Act is a law of the United States, and Concepcion is an authoritative interpretation of that Act. Consequently, the judges of every State must follow it. U. S. Const., Art. VI, cl. 2 (“[T]he Judges in every State shall be bound” by “the Laws of the United States”).

While all accept this elementary point of law, that point does not resolve the issue in this case. As the Court of Appeal noted, the Federal Arbitration Act allows parties to an arbitration contract considerable latitude to choose what law

Although we may doubt that the Court of Appeal has correctly interpreted California law, we recognize that California courts are the ultimate authority on that law. While recognizing this, we must decide whether the decision of the California court places arbitration contracts “on equal footing with all other contracts.” Buckeye Check Cashing, Inc. v. Cardegna, 546 U. S. 440, 443 (2006). And in doing so, we must examine whether the Court of Appeal's decision in fact rests upon “grounds as exist at law or in equity for the revocation of any contract.” 9 U. S. C. § 2. That is to say, we look not to grounds that the California court might have offered but rather to those it did in fact offer. Neither this approach nor our result “steps beyond Concepcion” or any other aspect of federal arbitration law. See post, at 67 (Ginsburg , J., dissenting) (hereinafter the dissent).

We recognize, as the dissent points out, post, at 62, that when DIRECTV drafted the contract, the parties likely believed that the words “law of your state” included California

First, we do not believe that the relevant contract language is ambiguous. The contract says that “[i]f . . . the law of your state would find this agreement to dispense with class arbitration procedures unenforceable, then this entire Section 9 [the arbitration section] is unenforceable.” App. 129. Absent any indication in the contract that this language is meant to refer to invalid state law, it presumably takes its ordinary meaning: valid state law. Indeed, neither the parties nor the dissent refer us to any contract case from California or from any other State that interprets similar language to refer to state laws authoritatively held to be invalid. While we recognize that the dissent believes this phrase to be “ambiguous,” post, at 65, 67, or “anomalous,” post, at 68, we cannot agree with that characterization.

Second, California case law itself clarifies any doubt about how to interpret the language. The California Supreme Court has held that under “general contract principles,” references to California law incorporate the California Legislature's power to change the law retroactively. Doe v. Harris, 57 Cal. 4th 64, 69–70, 302 P. 3d 598, 601–602 (2013) (holding that plea agreements, which are governed by general con-

Third, nothing in the Court of Appeal's reasoning suggests that a California court would reach the same interpretation of “law of your state” in any context other than arbitration. The Court of Appeal did not explain why parties might generally intend the words “law of your state” to encompass “invalid law of your state.” To the contrary, the contract refers to “state law” that makes the waiver of class arbitration “unenforceable,” while an invalid state law would not make a contractual provision unenforceable. Assuming—as we must—that the court's reasoning is a correct statement as to the meaning of “law of your state” in this arbitration provision, we can find nothing in that opinion (nor in any other California case) suggesting that California would generally interpret words such as “law of your state” to include state laws held invalid because they conflict with, say, federal labor statutes, federal pension statutes, federal antidiscrimi-nation laws, the Equal Protection Clause, or the like. Even given our assumption that the Court of Appeal's conclusion is correct, its conclusion appears to refect the subject matter at issue here (arbitration), rather than a general principle that would apply to contracts using similar language but in-volving state statutes invalidated by other federal law.

Fourth, the language used by the Court of Appeal focused only on arbitration. The court asked whether “law of your

Fifth, the Court of Appeal reasoned that invalid state arbitration law, namely, the Discover Bank rule, maintained legal force despite this Court's holding in Concepcion. The court stated that “[i]f we apply state law alone . . . to the class action waiver, then the waiver is unenforceable.” 225 Cal. App. 4th, at 344, 170 Cal. Rptr. 3d, at 195. And at the end of its opinion it reiterated that “[t]he class action waiver is unenforceable under California law, so the entire arbitration agreement is unenforceable.” Id., at 347, 170 Cal. Rptr. 3d, at 198. But those statements do not describe California law. See Concepcion, 563 U. S., at 344, 352; Sanchez, 61 Cal. 4th, at 923–924, 353 P. 3d, at 757. The view that state law retains independent force even after it has been authoritatively invalidated by this Court is one courts are unlikely to accept as a general matter and to apply in other contexts.

Sixth, there is no other principle invoked by the Court of Appeal that suggests that California courts would reach the same interpretation of the words “law of your state” in other contexts. The court said that the phrase “law of your state” constitutes “ `a specific exception' ” to the agreement's “ `general adoption of the [Federal Arbitration Act].' ” 225 Cal. App. 4th, at 344, 170 Cal. Rptr. 3d, at 195. But that tells us nothing about how to interpret the words “law of your state” elsewhere. It does not answer the relevant question: whether those words encompass laws that have been author-

The court added that it would interpret “ `ambiguous language against the interest of the party that drafted it,' ” namely, DIRECTV . 225 Cal. App. 4th, at 345, 170 Cal. Rptr. 3d, at 196 (quoting Mastrobuono , 514 U. S., at 62). The dissent adopts a similar argument. See post, at 65–67. But, as we have pointed out, supra, at 56, were the phrase “law of your state” ambiguous, surely some court would have construed that term to incorporate state laws invalidated by, for example, federal labor law, federal pension law, or federal civil rights law. Yet, we have found no such case. Moreover, the reach of the canon construing contract language against the drafter must have limits, no matter who the drafter was. The fact that we can find no similar case interpreting the words “law of your state” to include invalid state laws indicates, at the least, that the antidrafter canon would not lead California courts to reach a similar conclusion in similar cases that do not involve arbitration.

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Taking these considerations together, we reach a conclusion that, in our view, falls well within the confines of (and goes no further than) present well-established law. California's interpretation of the phrase “law of your state” does not place arbitration contracts “on equal footing with all other contracts,” Buckeye Check Cashing, Inc., 546 U. S., at 443. For that reason, it does not give “due regard . . . to the federal policy favoring arbitration.” Volt Information Sciences, 489 U. S., at 476. Thus, the Court of Appeal's interpretation is pre-empted by the Federal Arbitration Act. See Perry v. Thomas, 482 U. S. 483, 493, n. 9 (1987) (noting that the Federal Arbitration Act pre-empts decisions that take their “meaning precisely from the fact that a contract to arbi-

The judgment of the California Court of Appeal is reversed, and the case is remanded for further proceedings not inconsistent with this opinion.

It is so ordered.

Justice Thomas, dissenting.

I remain of the view that the Federal Arbitration Act (FAA), 9 U. S. C. § 1 et seq., does not apply to proceedings in state courts. See Allied-Bruce Terminix Cos. v. Dobson, 513 U. S. 265, 285–297 (1995) (dissenting opinion); see also Preston v. Ferrer, 552 U. S. 346, 363 (2008) (same); Buckeye Check Cashing, Inc. v. Cardegna, 546 U. S. 440, 449 (2006) (same); Green Tree Financial Corp . v. Bazzle, 539 U. S. 444, 460 (2003) (same); Doctor's Associates, Inc. v. Casarotto, 517 U. S. 681, 689 (1996) (same). Thus, the FAA does not require state courts to order arbitration. Accordingly, I would affirm the judgment of the California Court of Appeal.

Justice Ginsburg , with whom Justice Sotomayor joins, dissenting.

It has become routine, in a large part due to this Court's decisions, for powerful economic enterprises to write into their form contracts with consumers and employees no-class-action arbitration clauses. The form contract in this case contains a Delphic provision stating that “if the law of your state” does not permit agreements barring class arbitration, then the entire agreement to arbitrate becomes unenforceable, freeing the aggrieved customer to commence class-based litigation in court. This Court reads that provision in a manner most protective of the drafting enterprise. I would read it, as the California court did, to give the customer, not the drafter, the benefit of the doubt. Acknowl-edging the precedent so far set by the Court, I would take

This case began as a putative class action in state court claiming that DIRECTV , by imposing hefty early-termination fees, violated California consumer-protective legislation, including the Consumers Legal Remedies Act (CLRA), Cal. Civ. Code Ann. § 1750 et seq. (West 2015). App. 58. DIRECTV did not initially seek to stop the lawsuit and compel bilateral arbitration. See id., at 52–53. The reason for DIRECTV's failure to oppose the litigation is no mystery. The version of DIRECTV's service agreement applicable in this case (the 2007 version) requires consumers to arbitrate all disputes and to forgo class arbitration. Id., at 128–129. If the relevant provision stopped there, the Court's recent precedent, see American Express Co. v. Italian Colors Restaurant, 570 U. S. 228 (2013); AT&T Mobility LLC v. Concepcion, 563 U. S. 333 (2011), would control, and DIRECTV could have resisted the lawsuit. But DIRECTV's form contract continued: The entire arbitration clause is unenforceable “[i]f . . . the law of your state would find” unenforceable the agreement's class-arbitration prohibition. App. 129. At the time plaintiff-respondents Imburgia and Greiner commenced their court action, class-arbitration bars like the one in DIRECTV's agreement were per se unenforceable as unconscionable under the law of California. See Discover Bank v. Superior Court, 36 Cal. 4th 148, 162–163, 113 P. 3d 1100, 1110 (2005).

Nearly three years into the litigation, this Court held in Concepcion, 563 U. S., at 338–351, that the Federal Arbitration Act (FAA), 9 U. S. C. § 1 et seq., preempts state rules that render class-arbitration bans unenforceable. DIRECTV then moved to halt the long-pending lawsuit and compel bilateral arbitration. App. to Pet. for Cert. 4a. The California Superior Court denied DIRECTV's motion, No. BC398295 (Super. Ct. Los Angeles Cty., Jan. 26, 2012), App. to Pet. for Cert. 17a–20a, and the California Court of Appeal

In resolving this question, the California court emphasized that DIRECTV drafted the service agreement, giving its customers no say in the matter, and reserving to itself the right to modify the agreement unilaterally at any time. Id., at 345, 170 Cal. Rptr. 3d, at 196. See also Brief for Respondents 1–2. DIRECTV used the same take-it-or-leave-it contract everywhere it did business. Ibid. “[T]o protect the party who did not choose the language from an unintended or unfair result,” the California court applied “the common-law rule of contract interpretation that a court should construe ambiguous language against the interest of the party that drafted it.” 225 Cal. App. 4th, at 345, 170 Cal. Rptr. 3d, at 196 (quoting Mastrobuono v. Shearson Lehman Hut-ton, Inc., 514 U. S. 52, 62–63 (1995)). That rule was particularly appropriate in this case, the court reasoned, for, “as a practical matter, it seems unlikely that plaintiffs anticipated in 2007 that the Supreme Court would hold in 2011 that the FAA preempts” state-law protection against compelled class-arbitration waivers. 255 Cal. App. 4th, at 345, 170 Cal. Rptr. 3d, at 196 (internal quotation marks omitted).

The Court today holds that the California Court of Appeal interpreted the language in DIRECTV's service agreement so unreasonably as to suggest discrimination against arbitra-

Arbitration is a matter of “consent, not coercion.” Stolt- Nielsen S. A. v. AnimalFeeds Int'l Corp., 559 U. S. 662, 681 (2010) (internal quotation marks omitted). The FAA “requires courts to enforce privately negotiated agreements to arbitrate, like other contracts, in accordance with their terms.” Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U. S. 468, 478 (1989). “[T]he interpretation of private contracts is ordinarily a question of state law, which this Court does not sit to review.” Id., at 474. See also First Options of Chicago, Inc. v. Kaplan, 514 U. S. 938, 944 (1995) (when interpreting arbitration agreements, courts “should apply ordinary state-law principles that govern the formation of contracts”). Historically, this Court has respected state-court interpretations of arbitration agreements. See Mastrobuono , 514 U. S., at 60, n. 4; Volt Information Sciences, 489 U. S., at 484. Indeed, in the more than 25 years between Volt Information Sciences and this case, not once has this Court reversed a state-court decision on the ground that the state court misapplied state contract law when it determined the meaning of a term in a particular arbitration agreement. Today's decision is a dangerous first.

Beyond genuine debate, DIRECTV originally meant the “law of your state” clause to refer to its customer's home state law untouched by federal preemption. As DIRECTV explained in a state-court fling, the clause prevented enforcement of the arbitration agreement in those States, California among them, where the class-arbitration proscription was unenforceable as a matter of state law, while requiring bilateral arbitration in States that did not outlaw purported waivers of class proceedings. App. 52 (“The Customer Agreement between DIRECTV and its customers provides that the customer's home state laws will govern the relation-

According to DIRECTV , because the class-arbitration ban, post-Concepcion, is enforceable in all States, this case must now be resolved, if at all, in bilateral arbitration. The Court agrees. After Concepcion, the Court maintains, it no longer matters whether DIRECTV meant California's “home state laws” when it drafted the 2007 version of its service agreement. But Concepcion held only that a State cannot compel a party to engage in class arbitration when the controlling agreement unconditionally prohibits class procedures. See 563 U. S., at 351 (“Arbitration is a matter of contract, and the FAA requires courts to honor parties' expectations,” so parties may consent to class procedures even though such procedures “may not be required by state law.”). Just as a contract itself may provide for class arbitration, so the parties may choose to be bound by a particular state law, in this case, the CLRA, even if the FAA would otherwise displace that state law. Hall Street Associates, L. L. C. v. Mattel, Inc., 552 U. S. 576, 586 (2008) (“[T]he FAA lets parties tailor some, even many, features of arbitration by contract, includ-ing . . . procedure and choice of substantive law.”). 1 “In principle,” the Court acknowledges, parties “might choose to have portions of their contract governed by the law of Tibet, [or] the law of prerevolutionary Russia.” Ante, at 54; see Brief for Petitioner 20 (observing that the FAA would allow parties “to bind themselves by reference to the rules of a

Nothing in Concepcion or the FAA nullifies provisions of the CLRA. They hold sway when parties elect judicial resolution of their disputes, and should similarly control when parties choose that consumer-protective law to govern their arbitration agreements. See Volt Information Sciences, 489 U. S., at 475 (where parties had “incorporat[ed] . . . California rules of arbitration into their agreement,” they had no “FAA-guaranteed right to compel arbitration” on terms inconsistent with those California rules). 2 Thus, even after Concepcion, one could properly refer to the CLRA's class-waiver proscription as “California law.” To repeat, the dispositive question in this case is whether the parties intended the “law of your state” provision to mean state law as pre-empted by federal law, as the Court today reads the provision, or home state law as framed by the California Legislature, without considering the preemptive effect of federal law, as the California court read it.

The latter reading is the better one. DIRECTV had no occasion to refer to “the law of [its customer's] state” had it meant to incorporate state law as preempted by the FAA. That is, DIRECTV , like virtually every other company with a similar service agreement, could have employed a clause directly conditioning enforceability of the arbitration agreement on the exclusion of class arbitration. Indeed, DIRECTV

As earlier noted, see supra, at 61, and as the California court appreciated, courts generally construe ambiguous contractual terms against the drafter. See Mastrobuono , 514 U. S., at 63 (“Respondents drafted an ambiguous document, and they cannot now claim the benefit of the doubt.”). This “common-law rule of contract interpretation,” id., at 62, reflects the principle that a party should not be permitted to write an ambiguous term, lock another party into agreeing to that term, and then reap the benefit of the ambiguity once a dispute emerges. The rule has particular force where, as here, a court is interpreting a “standardized contrac[t]” that was not the product of bilateral bargaining. Restatement (Second) of Contracts § 206, Comment a (1979).

Allowing DIRECTV to reap the benefit of an ambiguity it could have avoided would ignore not just the hugely unequal bargaining power of the parties, but also their reasonable expectations at the time the contract was formed. See

DIRECTV primarily responds that the FAA requires construction of all terms in arbitration agreements in favor of arbitrability. True, this Court has found in the FAA a “federal policy favoring arbitration.” Ante, at 58 (quoting Volt Information Sciences, 489 U. S., at 476). But the Court has also cautioned that an arbitration-favoring presumption applies “only where it reflects, and derives its legitimacy from, a judicial conclusion that arbitration of a particular dispute is what the parties intended because their express agreement to arbitrate was validly formed[, is] legally enforceable[,] and [is] best construed to encompass the dispute.” Granite Rock Co. v. Teamsters, 561 U. S. 287, 303 (2010).

Today's decision steps beyond Concepcion and Italian Colors. There, as here, the Court misread the FAA to deprive consumers of effective relief against powerful economic entities that write no-class-action arbitration clauses into their form contracts. In Concepcion, 563 U. S., at 336, customers brought a class action claiming that AT&T Mobility had improperly charged $30.22 in sales tax while advertising cellular telephones as free. AT&T Mobility's form consumer contract contained a mandatory arbitration clause and a class-arbitration proscription. Because consumers lacked input into the contractual terms, and because few rational consumers would go through the hassle of pursuing a $30.22 claim in bilateral arbitration, the California courts deemed the arbitration agreement unenforceable as unconscionable. See id., at 365 (Breyer , J., dissenting) (“ `[T]he maximum gain to a customer for the hassle of arbitrating a $30.22 dispute is still just $30.22.' ” (quoting Laster v. AT&T Mobility LLC , 584 F. 3d 849, 856 (CA9 2009))); Carnegie v. Household Int'l, Inc., 376 F. 3d 656, 661 (CA7 2004) (“The realistic alternative to a class action is not 17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30.”), cert. denied, 543 U. S. 1051 (2005). Nonetheless, the Court held that the FAA mandated enforcement of the entire arbitration agreement, including the class-arbitration ban. Concepcion, 563 U. S., at 343. Two years later, in Italian Colors, 570 U. S., at 235, the Court reaffirmed that class-arbitration prohibitions are enforceable even where claim-

These decisions have predictably resulted in the deprivation of consumers' rights to seek redress for losses, and, turning the coin, they have insulated powerful economic interests from liability for violations of consumer-protection laws. See N. Y . Times, Nov. 1, 2015, p. A1, col. 5 (“By insert-

The Court has suggested that these anticonsumer outcomes fow inexorably from the text and purpose of the FAA. But Congress passed the FAA in 1925 as a response to the reluctance of some judges to enforce commercial arbitration agreements between merchants with relatively equal bargaining power. Moses, Arbitration Law: Who's in Charge? 40 Seton Hall L. Rev. 147, 170–171 (2010). See also id., at 170 (contract disputes between merchants have been a proper subject of arbitration since the 1600's). The FAA's purpose was to “make the contracting party live up to his agreement.” H. R. Rep. No. 68–96, p. 1 (1924). See also Moses, supra, at 147 (Congress sought to “provide federal courts with procedural law that would permit the enforcement of arbitration agreements between merchants in diversity cases.”). Congress in 1925 could not have anticipated that the Court would apply the FAA to render consumer adhesion contracts invulnerable to attack by parties who never meaningfully agreed to arbitration in the first place. See Resnik, Diffusing Disputes 2860 (“The merchants and lawyers who forged the public law of arbitration in the United States sought federal legislation to enforce consensual agreements.” (emphasis added)).

Nor does the text of the FAA compel this result. Section 2, on which the Court relied in Concepcion, Italian Colors, and this case, prescribes simply that arbitration provisions are to be treated the same as other contractual terms: “A written provision in . . . a contract evidencing a transaction involving commerce to settle by arbitration a controversy . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U. S. C. § 2. As Justice O'Connor observed when the Court was just beginning to transform the FAA into what it has become, “the Court has abandoned all pretense of ascertaining congressional intent with respect to the Federal Arbitration Act, building instead, case by case,

The Court's ever-larger expansion of the FAA's scope contrasts sharply with how other countries treat mandatory arbitration clauses in consumer contracts of adhesion. A 1993 European Union Directive forbids binding consumers to unfair contractual terms, defined as those “not . . . individually negotiated” that “caus[e] a significant imbalance in the parties' rights and obligations . . . to the detriment of the consumer.” Coun. Directive 93/13, Art. 3, 1993 O. J. (L. 95) 31. A subsequent EU Recommendation interpreted this Directive to bar enforcement of one-party-dictated mandatory consumer arbitration agreements. Comm'n Recommendation 98/257, 1998 O. J. (L. 115) 34 (“The consumer's recourse to the out-of-court procedure may not be the result of a commitment prior to the materialisation of the dispute, where such commitment has the effect of depriving the consumer of his right to bring an action before the courts for the settlement of the dispute.”). As a result of this Directive and Recommendation, disputes between providers and consumers in the EU are arbitrated only when the parties mutually agree to arbitration on a “post-dispute basis.” Sternlight, Is the U. S. Out on a Limb? Comparing the U. S. Approach to Mandatory Consumer and Employment Arbitration to That of the Rest of the World, 56 U. Miami L. Rev. 831, 847–848 (2002) (emphasis deleted); see id., at 852 (enforcement of mandatory arbitration clauses in consumer contracts of adhesion “is quite rare, if not nonexistent,” outside the United States).

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The California Court of Appeal appropriately applied traditional tools of state contract law to interpret DIRECTV's