Paula Blair v. Rent-A-Center, Inc.
928 F.3d 819
9th Cir.2019Background
- Plaintiffs (including Blair) filed a putative California class action alleging Rent‑A‑Center’s rent‑to‑own pricing violated the Karnette Act, UCL, CLRA, and state usury law and sought public injunctive relief plus damages and restitution.
- Blair had a signed arbitration agreement only for a 2015 air‑conditioner transaction; that agreement demanded bilateral individual arbitration and barred class, representative, or attorney‑general style relief, with a severance clause for claims the law precludes from arbitration.
- The district court held the arbitration clause waived Blair’s right to seek public injunctive relief “in any forum,” so under McGill v. Citibank that waiver was unenforceable; it severed the non‑arbitrable Karnette Act/UCL/CLRA claims and compelled arbitration only of Blair’s usury claim.
- Rent‑A‑Center appealed, arguing the Federal Arbitration Act (FAA) preempts California’s McGill rule and that arbitration should cover liability for the consumer‑protection claims (with remedies litigated later).
- The Ninth Circuit affirmed: it concluded the McGill rule is a generally applicable contract defense not preempted by the FAA, interpreted the severance clause to remove the entire claims from arbitration, affirmed denial of a mandatory stay for non‑arbitrable claims, and dismissed appeals of discretionary relief for lack of jurisdiction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the FAA preempts California’s McGill rule (which invalidates contractual waivers of the right to seek public injunctive relief in any forum) | McGill protects public‑purpose statutes; waiver of public injunctive relief is invalid under Cal. Civ. Code § 3513 and thus enforceable as a state‑law defense to arbitration enforcement | FAA preempts McGill because McGill functionally bars arbitration (or materially interferes with arbitration’s objectives) | McGill is a generally applicable contract defense and does not interfere with arbitration’s bilateral, informal nature; FAA does not preempt McGill (affirmed). |
| Whether the arbitration agreement requires arbitration of liability for Karnette Act/UCL/CLRA claims and reserves remedy of public injunction for court | Blair: McGill renders the waiver unenforceable and the severance clause requires that the entire claim be severed to court | Rent‑A‑Center: the severance clause applies only to the remedy (public injunction); arbitrator should decide liability first | The severance clause severs the entire claim (cause of action) if McGill precludes enforcement; the Karnette Act/UCL/CLRA claims are non‑arbitrable here. |
| Whether the district court erred by denying a mandatory stay of non‑arbitrable claims pending arbitration of arbitrable claims | Plaintiffs: only arbitrable usury claim should be stayed; non‑arbitrable claims can proceed | Rent‑A‑Center: seeks stay of all claims pending arbitration outcome | Only claims referable to arbitration must be stayed under 9 U.S.C. § 3; the district court correctly denied a mandatory stay for non‑arbitrable claims (affirmed). |
| Whether this court has jurisdiction to review denial of discretionary stay and deferral on motion to strike class claims | Plaintiffs: discretionary stay and deferral are not orders appealable under FAA interlocutory provisions | Rent‑A‑Center: appealed those rulings | Appellate jurisdiction under 9 U.S.C. § 16(a) does not extend to denial of discretionary stay or non‑final deferral on motion to strike; those appeals dismissed for lack of jurisdiction. |
Key Cases Cited
- McGill v. Citibank, N.A., 393 P.3d 85 (Cal. 2017) (California rule invalidating contractual waiver of right to seek public injunctive relief in any forum)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (FAA preemption where state rule undermines arbitration’s fundamental attributes, e.g., class waiver rule)
- Sakkab v. Luxottica Retail N. Am., Inc., 803 F.3d 425 (9th Cir. 2015) (Iskanian/PAGA waiver rule is generally applicable and not preempted by FAA)
- Iskanian v. CLS Transp. L.A., LLC, 327 P.3d 129 (Cal. 2014) (bar on waiving PAGA representative claims)
- Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612 (2018) (state rules cannot single out arbitration by impairing its fundamental attributes)
- Ferguson v. Corinthian Colleges, Inc., 733 F.3d 928 (9th Cir. 2013) (Broughton‑Cruz rule preempted where it effectively prohibits arbitration of public injunctive claims)
- Kilgore v. KeyBank, Nat’l Ass’n, 718 F.3d 1052 (9th Cir. 2013) (de novo review of denial to compel arbitration)
- Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) (FAA’s liberal policy favoring arbitration)
- Mitsubishi Motors Corp. v. Soler Chrysler‑Plymouth, Inc., 473 U.S. 614 (1985) (arbitration appropriate for complex statutory claims)
- Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407 (2019) (FAA preemption analysis and arbitration attributes)