Federal Arbitration Act

Arbitration clauses with class action waivers remain one of the most effective tools that consumer-facing companies can employ to fend off consumer class action litigation.  Yet many companies stumble both in getting their customers to agree to the arbitration clause and in drafting a clause that captures all claims that they might face.  As we continue to work, shop, and engage with the world from home, companies should perform a quick “health-check” of their arbitration clause, asking themselves at least the following questions:
Continue Reading An Arbitration Clause Health Check

The U.S. Supreme Court’s ruling in AT&T Mobility v. Concepcion, 563 U.S. 333 (2011) caused a shockwave in California’s class action bar when it held that the Federal Arbitration Act (“FAA”) preempted California’s former Discover Bank rule prohibiting arbitration clauses in consumer contracts from including a pre-dispute waiver of a plaintiff’s right to seek class action relief. After the decision in Concepcion, mandatory arbitration and corresponding class action waivers became the norm in consumer contracts. Many of the arbitration clauses in these consumer agreements, however, also included language prohibiting the plaintiff from obtaining relief for anyone other than the plaintiff. Courts interpreted this language as a pre-dispute waiver of a plaintiff’s right to seek “public injunctive relief” (i.e. injunctive relief that has the primary purpose and effect of prohibiting acts that threaten future injury to the general public) under California’s consumer protection statutes. Recent decisions by the California Supreme Court and the Ninth Circuit, however, confirm that a plaintiff cannot waive his or her right to seek public injunctive relief under California’s consumer statutes. Consumer-focused businesses that include arbitration clauses in their account agreements should reevaluate their arbitration clauses in light of California’s prohibition on the waiver of a plaintiff’s right to seek public injunctive relief.
Continue Reading Choose Your Forum Wisely: Save Your Arbitration Clause From California’s Prohibition on Pre-Dispute Waivers of a Plaintiff’s Right to Seek Public Injunctive Relief

On April 6, 2017, the California Supreme Court struck another blow in its contentious battle with the United States Supreme Court on the enforceability of consumer arbitration clauses subject to the Federal Arbitration Act (FAA).  In McGill v. Citibank, N.A., No. S224086, Slip Op. at 1 (Cal. Apr. 6, 2017), the Court held that an arbitration clause in Citibank’s credit card  agreement purporting to waive the plaintiff’s right to seek public injunctive relief under the Consumers Legal Remedies Act (CLRA), the Unfair Competition Law (UCL), or the False Advertising Law (FAL) in any forum was unenforceable as against California public policy.  The Court further held that, notwithstanding the U.S. Supreme Court’s decisions on the subject, including in AT&T Mobility v. Concepcion, 131 S. Ct. 1740, 1747 (2011), the FAA did not preempt California’s policy.  As discussed below, these holdings are troubling and likely inconsistent with federal law.
Continue Reading Dancing On Their Own: The California Supreme Court’s Decision in McGill v. Citibank, N.A. that Class Action Waivers Do Not Apply to Claims for Public Injunctive Relief under California’s Consumer Protection Laws