On December 14, 2015, in DIRECTV, Inc. v. Imburgia, the US Supreme Court held that the FAA preempted the California Court of Appeal's interpretation of a class arbitration waiver (136 S.Ct. 463 (2015)).

DIRECTV entered into a service agreement with its customers that included an arbitration clause and a class arbitration waiver. The agreement additionally provided that if the "law of your state" made the waiver unenforceable, then the entire arbitration provision was unenforceable. Two customers sued DIRECTV in California state court for damages for early termination fees. DIRECTV requested that the case be sent to arbitration, but the trial court denied this request because California law at the time under Discover Bank v. Superior Court rendered class arbitration waivers, and therefore the instant arbitration clause, unenforceable (36 Cal. 4th 148 (2005)). However, while the action was pending, the Supreme Court held in AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), that the FAA preempted Discover Bank.

On appeal, the California Court of Appeal still found the class action waiver unenforceable despite Concepcion, reasoning that by including the terms "law of your state" in the arbitration agreement, the parties selected California law to govern the contract, even if it was invalid. The California Court of Appeal affirmed the trial court's denial of DIRECTV's motion to enforce the arbitration provision and the California Supreme Court denied review. On the same issue, the US Court of Appeals for the Ninth Circuit came to the opposite conclusion in Murphy v. DirecTV, Inc. 724 F.3d 1218 (9th Cir. 2013). As a result, the Supreme Court granted certiorari.

The Supreme Court reversed the California Court of Appeal's decision, focusing on whether the state decision was consistent with the FAA, not whether the court's decision was a correct statement of California law. The Court held that the California Court of Appeal's interpretation of the phrase "law of your state" did not give due regard to the federal policy favoring arbitration and was therefore preempted by the FAA. Through its analysis, it determined that the phrase "law of your state" should take the ordinary meaning of valid state law, rather than invalid state law such as that of Discover Bank. The Supreme Court noted that it would normally defer to a state court’s application of state contract law, but here the phrase "law of your state" unambiguously means "valid law of your state." The Supreme Court also noted that California law incorporates the California legislature's power to change the law retroactively under general contract principles. The Court therefore found that arbitration contracts were not on equal footing with other contracts under the California Court of Appeal's interpretation. Because the FAA preempts the Court of Appeal's interpretation, the California Court of Appeal must enforce the class action waiver contained in the arbitration agreement.