McGill v. Citibank
This case in the Supreme Court of California concerned the validity of California’s so-called “Broughton-Cruz” rule that claims for injunctive relief that would benefit the general public are not subject to arbitration. The case involved claims by a consumer that Citibank’s marketing of “credit protector” services to its credit cardholders violated California consumer protection laws. The plaintiff sought an injunction to protect the general public against Citibank’s marketing practices. That form of injunctive relief is specifically authorized by California law. Citibank, however, sought to compel arbitration of all of the claims, including the one for public injunctive relief, under the terms of an arbitration agreement that specifically bars the arbitrator from granting injunctive relief to benefit anyone other than the individual parties to the arbitration. The trial court refused to compel arbitration of the claims for public injunctive relief based on the Broughton-Cruz rule, but a panel of the California Court of Appeal reversed, holding that the Broughton-Cruz rule is preempted by the Federal Arbitration Act. The California Supreme Court granted review to consider that issue. Public Citizen filed an amicus brief arguing that the Broughton-Cruz rule is not preempted to the extent it applies to an arbitration agreement that specifically denies the arbitrator the power to issue public injunctive relief, and that the court should not consider more broadly whether the application of the Broughton-Cruz rule would be preempted in other circumstances.
On April 6, 2017, the California Supreme Court issued its opinion. The court’s approach largely agreed with Public Citizen’s position that the court need not address whether claims for public injunctive relief are ever arbitrable, because in this case, the arbitration agreement did not actually require arbitration of such claims, but effectively prohibited assertion of claims for public injunctive relief altogether. The court held that California law does not permit enforcement of any agreement that waives a claim for public injunctive relief, and that the FAA does not require enforcement of such an agreement merely because it is included in an arbitration agreement. The court also strongly reaffirmed that public injunctive relief is available under California’s Consumers Legal Remedies Act and Unfair Competition Law.