McGill v. Citibank, N.A.
216 Cal. Rptr. 3d 627
| Cal. | 2017Background
- McGill opened a Citibank credit card in 2001 and purchased a paid "credit protector" plan; Citibank later amended the account agreement to add a mandatory arbitration clause (2001 Notice) and sent updated versions in 2005 and 2007.
- The arbitration provision mandated individual (non-class, non-representative) arbitration for all claims and stated arbitrators could award relief only for named parties; later versions included a severability clause that differed between notices.
- McGill sued in 2011 asserting UCL, CLRA, false advertising, and Insurance Code claims and sought public injunctive relief to stop Citibank’s alleged deceptive marketing and sale of the Plan.
- Citibank petitioned to compel individual arbitration; the trial court compelled arbitration except for claims seeking public injunctive relief (applying Broughton/Cruz); the Court of Appeal ordered all claims to arbitration relying on FAA preemption principles from Concepcion.
- McGill argued the arbitration clause went further: it waived the right to seek public injunctive relief in any forum; the California Supreme Court addressed that waiver question and reversed the Court of Appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a predispute arbitration clause that waives the right to seek public injunctive relief in any forum is enforceable under California law | McGill: such an across-the-board waiver is contrary to public policy because public injunctive relief serves the public and is unwaivable | Citibank: FAA preempts state law invalidation; FAA requires enforcing arbitration terms as written | Held: Waiver of statutorily authorized public injunctive relief is invalid under California law (Civ. Code § 3513); FAA does not preempt that rule |
| Whether private plaintiffs who meet Prop. 64 standing may seek public injunctive relief | McGill: a private plaintiff with injury in fact may seek public injunctions under UCL/false advertising/CLRA | Citibank: Prop. 64 and amendments restrict private plaintiffs from pursuing public injunctive relief or require class procedures | Held: Private plaintiffs with statutory standing may request public injunctive relief; Proposition 64 does not bar such relief nor convert it into a representative claim requiring Section 382 class procedure |
| Whether the FAA’s saving clause permits California’s rule invalidating public-injunction waivers in arbitration agreements | McGill: the California rule is a generally applicable contract defense and fits the FAA saving clause | Citibank: FAA requires enforcement regardless and generally applicable defenses cannot override FAA | Held: The saving clause allows application of generally applicable state contract defenses (e.g., Civ. Code § 3513); FAA does not force enforcement of waivers that eliminate substantive statutory remedies |
| Whether invalidating the waiver would impermissibly interfere with arbitration’s attributes (efficiency, speed) similar to Concepcion’s treatment of class-waiver rules | McGill: public injunctions are substantive remedies distinct from procedural class mechanisms and invalidation does not impair arbitration of agreed claims | Citibank: public injunctions are functionally like class relief and will frustrate arbitration’s objectives | Held: Distinction sustained — public injunctive relief is a substantive statutory remedy (not merely a procedural device); invalidating the waiver does not impinge on arbitration’s core attributes and piecemeal proceedings are permissible |
Key Cases Cited
- Broughton v. Cigna Healthplans, 21 Cal.4th 1066 (explains distinction between private and public injunctive relief under CLRA)
- Cruz v. PacifiCare Health Systems, 30 Cal.4th 303 (public injunctive relief under UCL and false advertising law primarily benefits the public)
- Concepcion v. AT&T Mobility LLC, 563 U.S. 333 (FAA preemption of certain state unconscionability/class-waiver rules; saved-clause limits)
- Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (FAA’s saving clause interpreted to make arbitration agreements no more enforceable than other contracts)
- Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, 473 U.S. 614 (arbitration does not eliminate substantive statutory rights; prospective waivers of statutory remedies may be condemned)
- Armendariz v. Foundation Health Psychcare Servs., 24 Cal.4th 83 (California law refusing enforcement of arbitration terms that limit statutorily imposed remedies)
- Preston v. Ferrer, 552 U.S. 346 (FAA preempts state law that assigns primary jurisdiction to judicial or administrative forums for arbitrable claims)
- Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213 (piecemeal litigation of arbitrable and nonarbitrable claims is consistent with FAA)