California Supreme Court Finds Arbitration Provision That Waives The Right To Pursue Public Injunctive Relief In Any Forum Is Unenforceable

In McGill v. Citibank, N.A. (Apr. 6, 2017, S224086) __ Cal.5th ___, the California Supreme Court tackled the validity of clauses in pre-dispute arbitration agreements which purport to waive an individual's right to seek public injunctive relief in any forum such as in court. In the employment context, claims for injunctive relief are frequently asserted by Plaintiffs hoping to capitalize on the four-year statute of limitations applicable under California's Unfair Competition Law (Cal. B&P Code § 17200, "UCL").

The injunctive relief available under the UCL and other consumer-protection laws such as the Consumers Legal Remedies Act (Civ. Code § 1750 et seq, "CLRA") and California false advertising law (id. § 17500 et seq.) is considered "public" rather than "private" where the relief sought primarily benefits the public rather than the plaintiff alone. For this reason, in the employment context, the Court's holding will primarily impact wage and hour class actions where a claim for injunctive relief under the UCL is asserted as a matter of course.

The underlying lawsuit concerned a "credit protector" plan to which Sharon McGill subscribed when she opened a credit card account with Citibank in 2001. The terms of the plan were modified in 2001 to include a binding arbitration clause in which McGill agreed to submit her claims to arbitration on an individual basis and waive any right to bring a class action.

McGill filed a class action in 2011 which asserted claims based on Citibank's marketing of the plan and the way that it handled her own claim under the plan; alleged claims under the UCL, the CLRA, and false advertising law; and requested injunctive relief under these statutes. Pursuant to the arbitration provision and class action waiver, Citibank petitioned to compel McGill to arbitrate her claims (including injunctive relief) on an individual basis. The Court found the arbitration provision to be invalid and unenforceable insofar as it purported to waive McGill's statutory right to seek public injunctive relief in...

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