This morning, the California Supreme Court handed down its long-awaited opinion, McGill v. Citibank, N.A., ___ Cal.5th ___ (Apr. 6, 2017).
[I]t is now clear that the Broughton-Cruz rule is not at issue in this case. As detailed above, late in the Court of Appeal proceedings, McGill asserted that the arbitration provision purports to preclude her from seeking public injunctive relief in any forum. She repeats that assertion in this court .... At oral argument before us, Citibank agreed with McGill’s reading of the arbitration provision.
Slip op. at 7 (emphasis in original).
Accordingly, the opinion addressed whether such a contractual provision—one purporting to completely eliminate the right to seek public injunctive relief under the UCL, FAL, and CLRA—was void, under ordinary contract-law principles, as contrary to public policy. The Court held that it was. Id. at 14.
The opinion then addressed whether the FAA, construed in Concepcion, preempted this principle of California contract law. It held that Concepcion did not. Slip op. at 14-22.
Here's the part that's really interesting. The opinion addresses, at length, whether Prop. 64 eliminated the ability of private plaintiffs to seek broad-ranging public injunctive relief. Not only did the Court say "no" to that (id. at 10-14), it also held that class certification is not required of a UCL or FAL claim seeking such relief! Id. at 13-14.
Truthfully, I did not expect the Court to reach or decide it in McGill, but I think the Court's conclusion is absolutely the correct one. Attempting to apply class certification principles to forward-reaching injunctive relief claims just doesn't make any sense, procedurally:
[W]e have held that the phrase “compl[y] with Section 382 of the Code of Civil Procedure” (Bus. & Prof. Code, §§ 17203, 17535) “imposes a requirement that the action be brought as a class action.” (Arias v. Superior Court (2009) 46 Cal.4th 969, 978.) This requirement has never been imposed with regard to requests to enjoin future wrongful business practices that will injure the public, and we find nothing in the ballot materials for Proposition 64 suggesting an intent to link or restrict such relief to the class action context. Indeed, imposing this requirement would largely eliminate the ability of a private plaintiff to pursue such relief, because class certification requires “the existence of both an ascertainable class and a well-defined community of interest among the class members” (Washington Mutual Bank v. Superior Court (2001) 24 Cal.4th 906, 913), and “ ‘the general public’ . . . fails to meet” this requirement (Czap v. Credit Bureau of Santa Clara Valley (1970) 7 Cal.App.3d 1, 6).
Slip op. at 13 (emphasis added). The opinion holds that the class certification requisite added by Prop. 64 applies only to claims by private plaintiffs "seek[ing] disgorgement and/or restitution on behalf of persons other than or in addition to the plaintiff.'" Id. at 13-14 (quoting Kraus v. Trinity Management Services, Inc., 23 Cal.4th 116, 126 n.10 (2000))(emphasis in original).
The opinion also strongly suggests that a defendant's "voluntary cessation of wrongful conduct" does not automatically preclude forward-reaching injunctive relief. Id. at 10. Notably, the opinion favorably cites Robinson v. U-Haul of California, 4 Cal.App.4th 304 (2016) (discussed in this blog post), in which the Court of Appeal rejected an argument that no injunction may issue under the UCL if the defendant voluntarily stops engaging in wrongful acts.
For those interested in a general overview of the McGill opinion, this is the Court's introductory paragraph:
In previous decisions, this court has said that the statutory remedies available for a violation of the Consumers Legal Remedies Act (CLRA; Civ. Code, § 1750 et seq.), the unfair competition law (UCL; Bus. & Prof. Code, § 17200 et seq.), and the false advertising law (id., § 17500 et seq.) include public injunctive relief, i.e., injunctive relief that has the primary purpose and effect of prohibiting unlawful acts that threaten future injury to the general public. (Cruz v. PacifiCare Health Systems, Inc. (2003) 30 Cal.4th 303, 315-316 (Cruz); Broughton v. Cigna Healthplans (1999) 21 Cal.4th 1066, 1077 (Broughton).) The question we address in this case is the validity of a provision in a predispute arbitration agreement that waives the right to seek this statutory remedy in any forum. We hold that such a provision is contrary to California public policy and is thus unenforceable under California law. We further hold that the Federal Arbitration Act (FAA; 9 U.S.C. § 1 et seq.) does not preempt this rule of California law or require enforcement of the waiver provision. We therefore reverse the judgment of the Court of Appeal.
Slip op. at 1.