In a much-anticipated decision, the California Supreme Court held that an arbitration agreement's waiver of the right to seek, in any forum, public injunctive relief—that is, an order enjoining a practice challenged under the state's Unfair Competition Law, Consumers Legal Remedies Act, or False Advertising Law—is void as against public policy. McGill v. Citibank, N.A., No. S224086 (Cal. Apr. 6, 2017).

The decision notes but does not expressly address the rule the court articulated in its Broughton-Cruz line of cases: "Agreements to arbitrate claims for public injunctive relief" under those consumer statutes "are not enforceable in California." However, those cases were decided before the US Supreme Court's decision in AT&T Mobility v. Concepcion, which sharply limited the ability of state courts to use state laws to void certain arbitration clauses. The California Supreme Court skirted the issue of Concepcion's impact on the Broughton-Cruz rule because the defendant, Citibank, conceded that the arbitration agreement at issue precluded the plaintiff from seeking public injunctive relief in any forum, not just in arbitration. The court found California Civil Code section 3513, which prohibits contractual waiver of "a law established for a public reason," precluded enforcement of the public-injunctive-relief waiver before it.

The court rejected Citibank's argument that the Federal Arbitration Act (FAA) would preempt such a rule. It observed that Section 3513 is generally applicable to all contracts and does not single out arbitration agreements. Accordingly, the court concluded that enforcing it would be consistent with Section 2 of the FAA, which permits courts to declare arbitration agreements unenforceable "upon such grounds as exist at law or in equity for the revocation of any contract." The court further distinguished the US Supreme Court's recent Italian Colors decision. It reasoned that the global waiver of public injunctive relief before it applied to a substantive statutory right, in contrast to the classwide arbitration waiver the US Supreme Court found enforceable in Italian Colors (which was deemed procedural).

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