362 F. Supp. 3d 850
S.D. Cal.2019Background
- McGovern filed a putative class action and UCL claims against U.S. Bank challenging duplicate out-of-network ATM fees (OON Fees) and certain overdraft fees (OD Fees) tied to "APPSN" debit transactions.
- She alleged breach of contract and sought restitution, disgorgement, damages, and injunctive relief (including a public injunction).
- U.S. Bank moved to compel arbitration under McGovern's Deposit Account Agreement, which requires individualized arbitration and contains a broad waiver of class and "public injunctive" relief; it also designates that questions about the class-action waiver’s validity are for a court.
- McGovern amended her complaint to add an "Injunctive Relief Class" and repleaded UCL claims after the initial motion to compel.
- Central legal question: whether McGill v. Citibank (holding that contractual waivers of the right to seek public injunctive relief under California consumer statutes are unenforceable) voids the arbitration clause, or whether McGill is preempted by the Federal Arbitration Act (FAA).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether McGill renders the arbitration clause void because it waives the right to seek public injunctive relief | McGovern contends the FAC seeks public injunctive relief and thus McGill makes the waiver unenforceable (poison-pill nullification of the arbitration provision) | USB contends McGill does not apply because the FAC does not actually seek public injunctive relief | Court: McGovern does not seek "public" injunctive relief as defined in McGill; any injunction would be private/individual in purpose and effect |
| Whether McGill creates a generally applicable contract defense preserved by the FAA saving clause | McGovern relies on McGill and Cal. Civ. Code § 3513 to argue the waiver is void under a general contract-defense theory | USB argues McGill is targeted at arbitration waivers and therefore not a generally applicable ground to revoke any contract | Court: McGill is not a general contract defense applicable to any contract; it targets arbitration waivers and thus does not fall within the FAA saving clause |
| Whether McGill is preempted by the FAA | McGovern argues McGill is a state-law rule protecting public remedies and is not preempted | USB argues enforcing McGill would obstruct the FAA's objective to enforce arbitration agreements according to their terms, including individualized arbitration | Court: McGill is preempted because it conflicts with FAA objectives (it interferes with individualized bilateral arbitration and effectively disfavors arbitration) |
| Remedy when arbitration clause is enforceable | McGovern asked dismissal to enable immediate appeal; she also contested a stay | USB sought stay pending arbitration | Court: Motion to compel arbitration granted; case stayed pending arbitration under 9 U.S.C. § 3; parties must notify court after arbitration concludes |
Key Cases Cited
- AT & T Mobility LLC v. Concepcion, 563 U.S. 333 (preemption of state rules that unduly burden arbitration; enforce arbitration agreements according to their terms)
- Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (FAA enforces arbitration agreements in contracts involving commerce)
- Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213 (district courts must direct parties to arbitration where valid agreement exists)
- Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612 (individualized arbitration is a fundamental attribute; state rules cannot undermine FAA objectives)
- Italian Colors Restaurant v. American Express Co., 570 U.S. 228 (FAA does not permit courts to invalidate arbitration agreements because class arbitration is cost-prohibitive)
- Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (Article III standing requirements; Congress cannot bypass standing)
- McGill v. Citibank, N.A., 2 Cal.5th 945 (California Supreme Court: waivers of the right to seek public injunctive relief under UCL are unenforceable; discussed but held here to be preempted)