CA Supreme Court Holds Arbitration Provisions Waiving Right To Seek Public Injunctive Relief 'In Any Forum' Are Unenforceable

Author:Mr Tyler Newby and Molly Melcher
Profession:Fenwick & West LLP

In a closely-watched case, the California Supreme Court recently held in McGill v. Citibank, N.A. that arbitration clauses that foreclose a plaintiff's right to pursue public injunctive relief in any forum are invalid and unenforceable. Many practitioners hoped the case would address whether California's Broughton-Cruz rule—under which agreements to arbitrate certain claims for public injunctive relief are not enforceable—remains viable. The Court decided the case on much more narrow grounds, however, focusing on the arbitration clause in that case, which not only required arbitration, but prohibited bringing any claim for public injunctive relief. In doing so, the California Supreme Court in its April 6 decision likely avoided any conflict with the U.S. Supreme Court's rule in AT&T Mobility v. Concepcion favoring the enforcement of arbitration provisions.

Case Background and Procedural History

In 2011, plaintiff Sharon McGill filed suit against Defendant Citibank, N.A. alleging Citibank violated California's Unfair Competition Law, Consumer Legal Remedies Act, False Advertising Law, and Insurance Code based on Citibank's marketing of its credit protector plan and the handling of a claim McGill made under it. Citibank moved to compel McGill's claims to arbitration on an individual basis. The trial court granted in part and denied in part Citibank's petition based on the California Supreme Court's holdings in Cruz v. PacifiCare Health Systems, Inc., 30 Cal. 4th 303 (2003), and Broughton v. Cigna Healthplans, 21 Cal. 4th 1066 (1999), which established that agreements to arbitrate claims for public injunctive relief under the CLRA, UCL, or FAL are not enforceable in California (the "Broughton-Cruz rule"). The trial court ordered McGill to arbitrate all claims other than those for injunctive relief under the CLRA, UCL, and FAL.

The Court of Appeal reversed and remanded for the trial court to order all of McGill's claims to arbitration on the basis that the United States Supreme Court decision in AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), preempts the Broughton-Cruz rule. McGill filed a petition for review with the Supreme Court asserting (1) the Court of Appeal erred in finding the Federal Arbitration Act preemption of the Broughton-Cruz rule; and (2) the arbitration provision is invalid and unenforceable because it waives her right to seek public injunctive relief in any forum.

California Supreme Court Analysis

As a threshold matter,...

To continue reading