United States: California Supreme Court Invalidates Contractual Waivers Of Public Injunctive Relief

Seyfarth Synopsis: No California contractual provision, including one in an arbitration agreement, can waive the statutory right to seek injunctive relief to protect the general public. McGill v. Citibank, N.A. (April 6, 2017).

The Facts

Sharon McGill had a Citibank credit card. The account had a "credit protector" plan, by which Citibank would defer certain amounts on the credit card account if a qualifying condition occurred, such as divorce, hospitalization, or unemployment.

In 2001, Citibank gave notice to McGill that their disputes would be subject to arbitration unless she opted out. She did not do so, either in 2001, or when Citibank gave renewed notices in 2005 and in 2007. In 2011, McGill filed a class action against Citibank based on how it handled her account following her loss of a job in 2008. By the time McGill sued, the arbitration agreement provided that disputes would be handled "on an individual (non-class, non-representative) basis, and the arbitrator may award relief only on an individual (non-class, non-representative) basis." By way of emphasis, the agreement stated: "Claims must be brought in the name of an individual person or entity and must proceed on an individual (non-class, non-representative) basis. The arbitrator will not award relief for or against anyone who is not a party."

McGill alleged claims under California's Unfair Competition Law ("UCL"), Consumer Legal Remedies Act ("CLRA"), and false advertising law. McGill sought an injunction prohibiting Citibank from continuing "illegal and deceptive practices" against the public.

Trial and Appellate Court Decisions

Citibank, invoking the arbitration agreement, petitioned to compel McGill to arbitrate her claim on an individual basis. The trial court ordered her to arbitrate all claims other than those for injunctive relief under the UCL, the CLRA, and the false advertising law. The trial court held that, under the Broughton-Cruz rule, agreements to arbitrate claims for public injunctive relief under these statutes are not enforceable.

On Citibank's appeal, the Court of Appeal reversed, directing the trial court to compel all claims to arbitration because the Federal Arbitration Act ("FAA") preempts the Broughton-Cruz rule. McGill then filed a petition for review, asserting (1) that the Court of Appeal erred in finding FAA preemption of the Broughton-Cruz rule, and (2) the arbitration provision is invalid and unenforceable because it waives her right to seek public injunctive relief in any forum.

The California Supreme Court Decision

The Supreme Court did not address the first issue (FAA preemption). And even as to the second issue, the Supreme Court did not reach the issue of whether there was an enforceable agreement to arbitrate, but rather decided that a contractual waiver of the right to seek a public injunction was unenforceable, regardless of whether that waiver appears in an arbitration agreement. The Supreme Court's decision on this narrow issue was unanimous.

The Supreme Court began by noting that the three statutes at issue (the UCL, the CLRA, the false advertising law) all authorize injunctions to protect the general public. These public injunctions—which benefit a plaintiff only incidentally, as a member of the general public—differ from private injunctive relief, which resolves the plaintiff's private dispute and benefits the public, if at all, only incidentally. The Broughton-Cruz rule holds that agreements to arbitrate claims for public injunctive relief under the statutes in question are not enforceable.

Although the Supreme Court had agreed to review whether this Broughton-Cruz rule is FAA-preempted, the Supreme Court concluded that the rule was not relevant here, because Citibank's arbitration agreement did not refer claims for public injunctions to arbitration, but rather banned such claims in any forum.

Viewed in this light, the case was not about what an enforceable arbitration agreement would look like, but rather whether any kind of agreement could effectively waive the right to seek a public injunction. The Supreme Court concluded: "the arbitration provision here at issue is invalid and unenforceable under state law insofar as it purports to waive McGill's statutory right to seek such relief." That result followed from Civil Code section 3513, which states that "a law established for a public reason cannot be contravened by a private agreement." The Supreme Court reasoned that the three statutes in question, in authorizing public injunctive relief, did so for a public reason.

The Supreme Court found this result consistent with the FAA. Although the FAA requires courts to treat arbitration agreements on a par with other contracts and to enforce them according to their terms, the FAA also permits arbitration agreements to be declared unenforceable "upon such grounds as exist at law or in equity for the revocation of any contract." In this case, Civil Code section 3513 would provide a ground to revoke any provision, whether it appears in an arbitration agreement or some other kind of agreement. Thus, the Supreme Court concluded, the FAA did not preempt a California anti-waiver rule protecting the right to pursue a public injunction.

Nor, the Supreme Court concluded, would an anti-waiver rule regarding public injunctions interfere with the fundamental attributes of arbitration (as the old Discover Bank anti-waiver rule had with respect to class actions).

The existence of an anti-waiver rule with respect to public injunctions did  not necessarily mean that the Citibank arbitration agreement was unenforceable. The Supreme Court expressly declined to decide that question and left it to be resolved on remand to the Court of Appeal.

What McGill Means for Employers

McGill is important for what it did not decide as well as for what it did decide. First, McGill does not invalidate agreements that would have the arbitrator decide whether to issue a public injunction. All that would stand in the way of such an arbitration agreement would be the Broughton-Cruz rule, the continuing viability of which is suspect. That rule is FAA-preempted, according to the (now depublished) Court of Appeal decision in McGill, and the Supreme Court's decision avoids endorsing that rule.

Second, McGill does not say that an arbitration agreement containing an invalid ban on public injunctive relief would necessarily be unenforceable. Courts often sever an unenforceable provision from an arbitration agreement and enforce the remainder of the agreement. Whether courts can thus save an arbitration agreement depends on the surrounding circumstances.

McGill does counsel that employers, whether in the form of an arbitration agreement or in some other sort of agreement, cannot require employees to waive their right to seek injunctions that would be primarily for the benefit of the public, and only incidentally of benefit for the employee.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.