On behalf of the American Bankers Association (ABA) and the Consumer Bankers Association (CBA), Ballard Spahr has submitted an amicus brief to the United States Supreme Court in Coinbase, Inc., et al. v. Kramer, et al., No. 24-1230. The amicus brief was filed in support of a petition for a writ of certiorari filed by Coinbase which asks the Court to clarify the scope of Federal Arbitration Act (FAA) preemption when California plaintiffs seek public injunctive relief under the "McGill rule" but only a fraction of the general public (typically customers of the defendant) would benefit from the issuance of any such relief.
In a 2017 decision, McGill v. Citibank, N.A., the California Supreme Court held on public policy grounds that claims for "public injunctive relief"—relief that has "the primary purpose and effect of prohibiting unlawful acts that threaten future injury to the general public"—cannot be waived by parties to private arbitration agreements and that the FAA does not preempt that rule.
In practice, however, California state courts have greatly expanded the rule to defeat the enforcement of arbitration clauses governed by the FAA even when an injunction is intended to benefit not the general public as a whole, but rather only a discrete segment of the general public, usually other customers of the defendant company. These courts have refused to find that the FAA preempts the McGill rule in any respect. This has resulted in hundreds of lawsuits against businesses that avoid arbitration by seeking "public injunctive relief" in their complaints.
By contrast, California federal courts hold that the state courts' expansive application of the McGill rule is preempted by the FAA because it forbids waiving claims for prospective injunctive relief against unlawful conduct even if the implementation of such an injunction would require evaluation of the individual claims of numerous non-parties and/or involve the sort of procedural complexity or formality that would be inconsistent with the FAA's objective of facilitating streamlined proceedings in arbitration. This sharp division between the California federal and state courts has led to confusion as well as flagrant gamesmanship and forum shopping.
In their amicus brief, the trade groups urge the Supreme Court to grant review to resolve this conflict and restore the overriding national policy favoring individual arbitration restore the overriding national policy favoring arbitration embodied in the FAA. In its landmark 2011 decision in AT&T Mobility LLC v. Concepcion, the Court approved the use of class action waivers in consumer arbitration agreements which require disputes to be resolved on an individual (non-class) basis. The Court reasoned that individual arbitration provides a fast, inexpensive, consumer-friendly and efficient means of resolving customer disputes precisely because it is not intended to adjudge claims of non-parties. It held that the FAA preempted California law which disapproved the use of class action waivers.
The trade groups argue that the California state courts' overly broad application of the McGill rule deprives consumers, businesses and the public of the many benefits of individual arbitration, emphasizing that the Consumer Financial Protection Bureau (CFPB) itself found that individual arbitration is a faster, more efficient and more cost-effective method of resolving consumer disputes than court litigation, particularly class action litigation. They further contend that the already overburdened and underfunded California state court system will become even more overburdened and underfunded if disputes that should be resolved in arbitration are instead shuttled to court due to an over-expansive interpretation of the McGill rule. Businesses will also be saddled with enormous additional litigation costs, and consumers will pay higher prices and/or suffer reduced services because the added litigation costs will be passed through to them in whole or in part. As taxpayers, they will also pay for the increased costs to the court systems required to handle the burgeoning increase in additional litigation. Moreover, the trade groups assert, holding that the FAA preempts the California state courts' uniform application of the McGill rule to deny arbitration will not impair consumer plaintiffs' individual claims. Their substantive rights will merely be resolved in arbitration instead of in court, and their claims will be resolved in a faster, cheaper and more convenient manner.
The Coinbase petition will be considered by the Court at its September 29, 2025 conference.
Ballard Spahr pioneered the use of class action waivers in consumer arbitration agreements and filed an amicus brief on behalf of the ABA, the CBA and other trade groups in Concepcion. It has written extensively on the issue of FAA preemption of the McGill rule.
In addition, it was in the forefront of successfully opposing the CFPB's efforts to override Concepcion and prohibit the use of class action waivers in consumer arbitration agreements.
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