Recent decisions out of the Northern District of California and Ninth Circuit may reflect a new era of McGill jurisprudence. In McGill v. Citibank, N.A., 2 Cal. 5th 945 (2017), the California Supreme Court held on public policy grounds that an arbitration provision that barred the plaintiff from seeking public injunctive relief in any forum was unenforceable.
In Hodges v. Comcast, No. 18-cv-01829-HSG, 2019 U.S. Dist. LEXIS 120205, at *1 (N.D. Cal. July 18, 2019) putative class representative Brandon Hodges brought suit alleging that Comcast violated privacy laws by collecting data about subscribers' cable television viewing activity and personally identifiable demographic information. The action challenged Comcast's privacy and data-collection practices, seeking a variety of monetary and equitable remedies under federal and California statutory laws, including the Cable Communications Policy Act of 1984 ("Cable Act") and California Invasion of Privacy Act ("CIPA"). Comcast moved to compel arbitration pursuant to plaintiff's subscriber agreement. In denying the motion, District Judge Haywood S. Gilliam Jr. held that the arbitration provision was unenforceable because the complaint sought public injunctive relief under California's Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code §§ 17200, et seq. and under California's McGill rule, an arbitration provision that waives the right to seek public injunctive relief in all forums is unenforceable.
A panel from the Ninth Circuit reversed, holding that the arbitration agreement was enforceable because Hodges' complaint did not seek public injunctive relief and did not implicate the McGill rule. Writing for the majority in a split 2-1 decision, Circuit Judge Daniel P. Collins reasoned that public injunctive relief is limited to forward-looking injunctions that seek to prevent future violations of law for the benefit of the general public, as opposed to a particular class of persons. Under this standard, Hodges' complaint did not seek public injunctive relief. Hodges' desired injunctive relief– requiring Comcast to notify future customers about the demographic and video activity data it collects and to allow users to opt out– would affect only Comcast subscribers rather than the public at-large. Accordingly, the panel reversed and held that the McGill rule was not implicated and the arbitration agreement should have been enforced.
In the fall of 2021, the putative class representative petitioned for panel rehearing and rehearing en banc, asking the panel to reconsider whether its request to block targeted ads is tantamount to public injunctive relief. On December 23, 2021, the petitions for panel rehearing and for rehearing en banc were denied.
The Ninth Circuit's order declining to upset the panel's decision may signal a shift in the application of the McGill rule. At a minimum, this decision indicated that in the Ninth Circuit, a plaintiff must clearly seek forward-looking injunctive relief on behalf of the general public at-large for the McGill rule to apply. The admonition that "courts should stretch to invalidate contracts based on hypothetical issues that are not actually presented in the parties' dispute" echoed other decisions out of the Ninth Circuit rejecting speculative harms, which we have reported on here and here. Courts in the Ninth Circuit are already relying on the decision to compel arbitration where the injunctive relief sought is not truly for the benefit of the general public. However, it remains unclear how these developments will influence the California Supreme Court's approach or the application of McGill in other contexts. Until courts issue further guidance on McGill's applicability, we expect fierce litigation on these issues and will continue to monitor and report on further developments.
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