Phillip Cohen v DirectTV
Lawsuit Claims DirectTV Engaged in Unlawful and Unfair Business Practices
In November, 2004, a class action was filed against DirectTV 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.
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.
