The California Supreme Court recently issued an opinion in McGill v. CitiBank, N.A. (Apr. 6, 2017, S224086) __ Cal.5th ___, analyzing whether an arbitration provision is valid and enforceable insofar as it purports to waive the right to seek public injunctive relief in any forum. (Slip opn., p. 8.) The court held that a provision in a predispute arbitration agreement that waives the right to seek public injunctive relief, which is available under the Consumers Legal Remedies Act, the unfair competition law, and the false advertising law, "is contrary to California public policy and is thus unenforceable under California law." (Id. at p. 1.) The court also held that the Federal Arbitration Act "does not preempt this rule of California law or require enforcement of the waiver provision." (Ibid.)
The court explained that because the parties elected to exclude public injunctive relief from arbitration, "the Broughton-Cruz rule—which applies only when parties have agreed to arbitrate requests for such relief—is not at issue, and we need not consider the rule's vitality in light of the high court's post-CruzFAA decisions." (Slip opn., p. 7, original italics.) Rather, in this case, the arbitration provision purported to preclude the plaintiff from seeking public injunctive relief in any forum.
The court first concluded that public injunctive relief remains a remedy available to private plaintiffs under the UCL and the false advertising law, as well as under the CLRA, despite post-Cruz amendments to the UCL and false advertising law. (Slip opn., pp. 10-11, 14.) The court then concluded that the arbitration provision was invalid and unenforceable under state law insofar as it purported to waive the plaintiff's statutory right to seek such relief in any forum. (Id. at p. 14.)
Finally, the court held "that the FAA does not require enforcement of a provision in a predispute arbitration agreement that, in violation of generally applicable California contract law, waives the right to seek in any forum public injunctive relief under the UCL, the CLRA, or the false advertising law." (Slip opn., p. 17, original italics.) According to the court, "a provision in any contract — even a contract that has no arbitration provision — that purports to waive, in all fora, the statutory right to seek public injunctive relief under the UCL, the CLRA, or the false advertising law is invalid and unenforceable under California law." (Id. at pp. 15-16, original italics.) The court also explained that "because the waiver at issue here is a waiver of the right to pursue statutory remedies — rather than of a procedural path to vindicating the statutory claim — it is, contrary to [the defendant's] assertion, distinguishable from a waiver of class procedures." (Id. at p. 20, original italics.)
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
