Lead Opinion
Opinion
In this case we consider whether a claim brought under the Consumers Legal Remedies Acts, Civil Code section 1750 et seq. (CLRA or the Act), may be subject to arbitration. The Court of Appeal concluded that such a claim would not be arbitrable, principally because the CLRA authorizes permanent injunctive relief to enjoin deceptive business practices, and such a remedy is beyond the scope of an arbitrator to grant or properly enforce. We conclude that the Court of Appeal is partially correct that the injunctive relief portion of a CLRA claim is inarbitrable, although for reasons somewhat different from those found by the Court of Appeal. But we also conclude that an action for damages under the CLRA is fully arbitrable and should be severed from an injunctive relief action when, as here, a plaintiff requests both types of relief.
I. Statement of Facts and Procedural Background
Plaintiffs are a minor, Adrian Broughton, Jr., through his guardian ad litem, Keya Johnson (his mother), and Ms. Johnson on her own behalf. Adrian and his mother were covered by Medi-Cal, which had negotiated a contract with Cigna Healthplans of California (Cigna) for health care coverage. The first cause of action in the complaint against Cigna and others, not parties to the appeal, seeks damages for medical malpractice, based on severe injuries claimed to have been suffered by Adrian at birth. The second cause of action alleges violation of the CLRA, based on allegations that Cigna deceptively and misleadingly advertised
Cigna answered the complaint and filed a combined motion to compel arbitration and verified petition for an order requiring plaintiffs to arbitrate the controversy. Cigna relied on the mandatory arbitration provision in its combined evidence of coverage and disclosure form.
Plaintiffs opposed the motion. They argued that there was no evidence of an agreement to arbitrate between them and Cigna, the case did not come within the statutes governing arbitration of medical malpractice claims, Cigna waived the right to arbitrate by litigating motions before the trial court, and the second cause of action under the CLRA was not subject to arbitration. In support of the last argument, plaintiffs cited Civil Code section 1751,
The trial court severed the causes of action and granted the motion to compel arbitration of the medical malpractice cause of action, but denied the motion as to the cause of action under the CLRA. Cigna filed a timely notice of appeal from the order denying its motion to compel arbitration of the second cause of action for violation of the CLRA.
The Court of Appeal affirmed the trial court’s judgment. It pointed to the CLRA antiwaiver provision and to the fact that the statute authorizes the granting of permanent injunctions against deceptive business practices. The court reasoned, as explained at greater length below, that arbitrators may not issue permanent injunctions, and therefore arbitration' is not an adequate forum for the resolution of CLRA claims. We granted review to decide whether CLRA claims are arbitrable, and we also requested the parties to address the question whether a conclusion that an agreement to arbitrate CLRA claims is unenforceable would run afoul of the Federal Arbitration Act (9 U.S.C. § 1 et seq. (FAA)).
II. Discussion
We begin our discussion by recapitulating the federal statutory mandate and strong public policy in favor of enforcing arbitration agreements. Section 2 of the FAA provides: “A written provision in . . .a contract evidencing a transaction involving [interstate] commerce to settle by arbitration the controversy thereafter arising out of such contract or transaction, . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” (9 U.S.C. § 2.) The FAA, and section 2 in particular, “was intended to ‘revers[e] centuries of judicial hostility to arbitration agreements,’ [citation] by ‘placing] arbitration agreements “upon the same footing as other contracts.” ’ ” (Shearson/American Express, Inc. v. McMahon (1987)
Over the past 15 years, the United States Supreme Court has on numerous occasions invalidated laws and judicial decisions that disfavored arbitration. The seminal case of Southland Corp. v. Keating (1984)
In Perry v. Thomas (1987)
Since Southland and Perry, the court has repeatedly made clear that arbitration may resolve statutory claims as well as those purely contractual if the parties so intend, and that in doing so, the parties do not forego substantive rights, but merely agree to resolve them in a different forum. (Mitsubishi Motors v. Soler Chrysler-Plymouth (1985)
Notwithstanding all of the above, the United States Supreme Court has acknowledged that “not ... all controversies implicating statutory rights are suitable for arbitration.” (Mitsubishi Motors, supra,
In Mitsubishi Motors, supra,
In McMahon, supra,
The Mitsubishi Motors and McMahon courts’ rejection of what may be termed the “public interest” argument in
Is there an inherent conflict between arbitration and the CLRA? In order to answer that question, we first look to the nature and purpose of that statute. The CLRA was enacted in an attempt to alleviate social and economic problems stemming from deceptive business practices, which were identified in the 1969 Report of the National Advisory Commission on Civil Disorders (i.e., the Kemer Commission). (See Reed, Legislating for the Consumer: An Insider’s Analysis of the Consumers Legal Remedies Act (1971) 2 Pacific LJ. 1, 5-7.) Section 1760 contains an express statement of legislative intent: “This title shall be liberally construed and applied to promote its underlying purposes, which are to protect consumers against unfair and deceptive business practices and to provide efficient and economical procedures to secure such protection.”
Specifically, the CLRA identifies as actionable certain deceptive business practices. (§ 1770.) The practices include, for example, “[rjepresenting that goods are original or new if they have deteriorated unreasonably or are altered, reconditioned, reclaimed, used, or secondhand” (§ 1770, subd. (a)(6)) or “[advertising goods or services with intent not to sell them as advertised” (§ 1770, subd. (a)(9)). It permits a consumer who has been damaged by these deceptive practices to bring an action for actual damages, including a class action suit, as well as for “an order enjoining a method, act, or practice,” and punitive damages. (§ 1780, subd. (a).) The court is also mandated to award the prevailing plaintiff court costs and attorneys fees, and reasonable attorneys fees to the prevailing defendant upon a finding that a plaintiff’s prosecution was not in good faith. (§ 1780, subd. (d).) The statute further provides that its remedies are “not exclusive” but rather “in addition to any other procedures or remedies ... in any other law.” (§ 1752.) And as mentioned, the Act also expressly provides that its protections may not be waived by the consumer. (§ 1751.)
In deciding whether CLRA claims are arbitrable, we first dispose of plaintiffs’ contention that section 2 of the FAA does not apply to their agreement with Cigna because the terms of that agreement purport to incorporate the rules of the California Arbitration Act (Code Civ. Proc., § 1280 et seq.), citing Volt Info. Sciences v. Leland Stanford Jr. U. (1989)
Even assuming arguendo that California’s statute embodies a less strict standard for enforcing arbitration agreements than does the FAA, section 2 of the FAA applies regardless of which law the arbitration agreement incorporates. As the court recently stated in Doctors Associates, Inc. v. Casarotto, supra,
Plaintiffs’ main arguments that CLRA claims are not suitable for arbitration revolve around the Act’s injunctive relief provision. As noted, they sought injunctive relief as well as damages in their CLRA claim. Following the Court of Appeal, they argue that they cannot “vindicate [their CLRA claim] in the arbitral forum” because of an arbitrator’s supposed lack of authority to grant permanent injunctive relief.
Plaintiffs contend that arbitrators may not issue permanent injunctions principally because an arbitrator has no authority to vacate or modify an injunction. They correctly point out that a superior court has the power “to modify or vacate its [injunctive] decree when the ends of justice will be thereby served,” notwithstanding the rule regarding finality of judgments. (Sontag Chain Stores Co. v. Superior Court (1941)
Plaintiffs cite Marsch v. Williams (1994)
Cigna disagrees, citing Swan Magnetics, Inc. v. Superior Court (1997)
We need not decide the broad question framed by the Court of Appeal and by plaintiffs as to whether an arbitrator may ever issue a permanent injunction. We conclude on narrower grounds that the injunction plaintiffs seek in the present case is indeed beyond the arbitrator’s power to grant. The CLRA plaintiff in this case is functioning as a private attorney general, enjoining future deceptive practices on behalf of the general public. We hold that under such circumstances arbitration is not a suitable forum, and the Legislature did not intend this type of injunctive relief to be arbitrated.
Our path to that conclusion begins by recalling that the purpose of arbitration is to voluntarily resolve private disputes in an expeditious and efficient manner. (See Moncharsh, supra, 3 Cal.4th at pp. 10-11; Dean Witter Reynolds Inc. v. Byrd (1985)
On the other hand, the evident purpose of the injunctive relief provision of the CLRA is not to resolve a private dispute but to remedy a public wrong. Whatever the individual motive of the party requesting injunctive relief, the benefits of granting injunctive relief by and large do not accrue to that party, but to the general public in danger of being victimized by the same deceptive practices as the plaintiff suffered. In this important respect, the injunctive relief at issue in this case differs from the antitrust treble damages remedy considered in Mitsubishi Motors, supra, 473 U.S. at pages 635-636 [105 S.Ct. at pages 3358-3359], in which any public benefit was merely incidental to private compensation.
In addition to the fact that the injunction is for the public benefit, we are cognizant of the evident institutional shortcomings of private arbitration in the field of such public injunctions. Even those courts that have generally affirmed the ability of arbitrators to issue injunctions acknowledge that the modification or vacation of such injunctions involves the cumbersome process of initiating a new arbitration proceeding. (See Swan Magnetics, Inc. v. Superior Court, supra, 56 Cal.App.4th at pp. 1511-1512.) While these procedures may be acceptable when all that is at stake is a private dispute by parties who voluntarily embarked on arbitration aware of the trade-offs to be made, in the case of a public injunction, the situation is far more problematic. The continuing jurisdiction of the superior court over public injunctions, and its ongoing capacity to reassess the balance between the public interest and private rights as changing circumstances dictate, are important to ensuring the efficacy of such injunctions. In some cases, the continuing supervision of an injunction is a matter of considerable complexity. (See, e.g., Board of Ed. of Oklahoma City v. Dowell (1991)
Furthermore, we recently held that an arbitration award does not have collateral estoppel effect in favor of nonparties to an arbitration unless the arbitral parties so agree. (Vandenberg v. Superior Court (1999)
Moreover, it hardly requires elaboration that superior court judges are accountable to the public in ways arbitrators are not. Superior court judges are constitutional
In short, there are two factors taken in combination that make for an “inherent conflict” between arbitration and the underlying purpose of the CLRA’s injunctive relief remedy. First, that relief is for the benefit of the general public rather than the party bringing the action. (Mitsubishi Motors, supra, 473 U.S. at pp. 635-636 [105 S.Ct. at pp. 3358-3359]; McMahon, supra, 482 U.S. at pp. 241-242 [107 S.Ct. at pp. 2345-2346].) Second, the judicial forum has significant institutional advantages over arbitration in administering a public injunctive remedy, which as a consequence will likely lead to the diminution or frustration of the public benefit if the remedy is entrusted to arbitrators. Given this inherent conflict, we will presume, absent indications to the contrary, that the Legislature did not intend that the injunctive relief claims be arbitrated. (See Gilmer, supra,
Nor do we believe that this interpretation of the CLRA contravenes the FAA. As discussed, the United States Supreme Court recognizes an “inherent conflict” exception to the arbitrability of federal statutory claims. (Gilmer, supra,
In other terms, our holding does not represent a “ ‘suspicion of arbitration as a method of weakening the protections afforded in the substantive law to would-be complainants’ . . . ‘out of step with our current strong endorsement of the federal statutes favoring this method of resolving disputes’ ” (Gilmer, supra,
Nor does anything in the legislative history of the FAA suggest that Congress contemplated “public injunction” arbitration to be within the universe of arbitration agreements it was attempting to enforce. Indeed, the primary focus of the drafters of the FAA appears to have been on the utility of arbitration in resolving ordinary commercial disputes. (See Schwartz, Enforcing Small Print to Protect Big Business: Employee and Consumer Rights Claims in an Age of Compelled Arbitration, (1997) Wis. L.Rev. 33, 75-78; Cohen & Dayton, The New Federal Arbitration Law (1926) 12 Va. L.Rev. 265, 285.) Although the court has interpreted the FAA to extend to noncommercial statutory claims, it is doubtful Congress would have envisioned the extension of the FAA to enforce arbitral jurisdiction over a public injunction.
Our bolding that a CLRA injunctive relief action is not subject to arbitration does not necessarily lead to the conclusion that a CLRA action for damages is likewise inarbitrable. On the contrary, as Mitsubishi Motors, McMahon, Gilmer and other cases cited above make clear, statutory damages claims are fully arbitrable. Such an action is primarily for the benefit of a party to the arbitration, even if the action incidentally vindicates important public interests. (Mitsubishi Motors, supra, 473 U.S. at pp. 635-636 [
Thus, although the CLRA might be interpreted to mean that the damages remedy under the Act is to be resolved solely in a judicial forum (see Keating, supra,
Moreover, although as noted, the CLRA does not address the question of arbitrability directly, the provisions of the statute itself imply that a distinction between an arbitrable request for damages and an inarbitrable request for injunctive relief is warranted. In Gilmer, the court suggested that a statute such as the ADEA that promotes “ ‘informal methods of conciliation, conference, and persuasion,’ ” is consistent with arbitration. (Gilmer, supra,
Plaintiffs contend that neither damages nor injunctive relief under the CLRA is subject to arbitration. They argue that insofar as the FAA would prevent states from delegating to state courts exclusively the task of enforcing a particular statute, it is in violation of the Tenth Amendment of the United States Constitution, citing Printz v. United States (1997)
Plaintiffs also claim that arbitration of any CLRA claim would waive an important statutory right to judicial review, citing in particular our decision in Moncharsh, supra,
Plaintiffs’ claim is premature. As the United States Supreme Court has stated: “[Ajlthough judicial scrutiny of arbitration awards necessarily is limited, such review is sufficient to ensure that arbitrators comply with the requirements of the statute” at issue. (McMahon, supra,
Plaintiffs also argue that arbitration costs and attorneys fees mandated for a prevailing plaintiff in a CLRA claim (see § 1780, subd. (d)) would not be available under arbitration, and for that reason arbitration of the claim would foreclose important remedies provided under the Act. In support of their contention they cite Code of Civil Procedure section 1284.2, which declares that “each party to the arbitration shall pay his pro rata share of the expenses and fees of the neutral arbitrator” and bear his own attorneys fees unless “the arbitration agreement otherwise provides.”
We agree with plaintiffs that the availability of costs and attorneys fees to prevailing plaintiffs is integral to making the CLRA an effective piece of consumer legislation, increasing the financial feasibility of bringing suits under the statute. (See Enrolled Bill Rep. on Assem. Bill No. 3756 (1987-1988 Reg. Sess.) p. 3.) When we construe potentially conflicting statutes, our duty is to harmonize them if reasonably possible. (County of San Bernardino v. City of San Bernardino (1997)
Finally, plaintiffs claim that the FAA applies only to interstate commerce, and interstate commerce was not at issue here. If the FAA does not apply, then California law might arguably have a less stringent standard for enforcing agreements to arbitrate unwaivable statutory claims. (See Keating, supra,
United States Supreme Court case law makes clear that when a suit contains both arbitrable and inarbitrable claims, the arbitrable claims should be severed from those that are inarbitrable and sent to arbitration. (Dean Witter Reynolds Inc. v. Byrd, supra,
III. Disposition
For all of the foregoing, we affirm the judgment of the Court of Appeal in part and reverse in part, and remand the cause for proceedings consistent with this opinion.
George, C. J., Baxter, J., and Werdegar, J., concurred.
Notes
A11 statutory references are to the Civil Code unless otherwise indicated.
In limiting the issues on which we granted review, we have not considered an issue plaintiffs raised below: whether the government can, on behalf of Medi-Cal recipients, agree to arbitration and waive the recipients’ right to a jury trial as a condition of receiving Medi-Cal benefits. Nor do we address plaintiffs’ contention that the arbitration agreement at issue in this case applied only to medical malpractice claims and not CLRA claims. These issues may be raised as appropriate in subsequent proceedings.
Of course, parties may conceivably enter into an arbitration agreement that provides a different standard of enforceability than that found in section 2 of the FAA. There is no indication in the present case that the parties have done so.
Plaintiffs also claim the FAA preemption issue was raised for the first time in the petition for review and not in the courts below, and is therefore not properly before this court. But as Cigna points out, the issue was not raised by the trial court’s ruling, which merely held that the agreement between Broughton and Cigna did not encompass the arbitration of CLRA claims. The Court of Appeal, on the other hand, held that the CLRA itself precludes arbitration, which directly raises the issue of FAA preemption, although neither the Court of Appeal nor the parties addressed that issue. This court is empowered to decide issues necessary for the proper resolution of the case before it, whether or not raised in the courts below. (See Cal. Rules of Court, rule 29.2(a); Cedars-Sinai Medical Center v. Superior Court (1998)
It is true, of course, that many injunctions will have effects beyond the parties themselves. For example, an injunction in the copyright field will prevent certain parties from selling products to third parties. (See, e.g., Saturday Evening Post Co. v. Rumbleseat Press, Inc. (7th Cir. 1987)
In the present case, however, plaintiffs asked for an injunction against Cigna’s “deceptive methods, acts, and practices,” an injunction that will obviously not benefit them directly, since they have already been injured, allegedly, by such practices and are aware of them. Moreover, even if a CLRA plaintiff stands to benefit from an injunction against a deceptive business practice, it appears likely that the benefit would be incidental to the general public benefit of enjoining such a practice. Unlike an antitrust treble damages award, for example, where the plaintiff is the primary beneficiary of such an award and the public only indirectly benefited by its deterrent value, in the case of a CLRA injunction the public is generally benefited directly by the elimination of deceptive practices, and the plaintiff benefited, if at all, only by virtue of being a member of the public. Thus, we disagree with the concurring and dissenting opinion that the public benefit of a CLRA injunction is “only incidental (or, at best, complementary) to providing the CLRA plaintiff with a complete remedy.” (Cone, and dis. opn., post, at p. 1100.) We do not decide the hypothetical case of the CLRA plaintiff whose injunctive relief claim stands to benefit him or her uniquely without public benefit.
As the concurring and dissenting opinion points out, a CLRA claim, like the antitrust claim at issue in Mitsubishi Motors, “remains at all times under the control of the individual litigant” and “no citizen is under an obligation to bring” such an action, nor does the CLRA plaintiff require “executive or judicial approval” before settling a CLRA claim. (Mitsubishi Motors, supra,
The concurring and dissenting opinion argues that Code of Civil Procedure section 1281.2 mandates the enforcement of arbitration agreements subject only to the statutory exceptions listed therein. We disagree. Rather, we agree with the United States Supreme Court, as cited above, that a legislative body may express its intention to make a statutory right inarbitrable not only explicitly, but also implicitly in those rare circumstances in which the fulfillment of the statutory purpose inherently conflicts with arbitration.
Our holding does not imply that the government itself may not be a party to an arbitration agreement. Public sector arbitration is common, for example, in the field of labor relations. (See, e.g., Fire Fighters Union v. City of Vallejo (1974)
Because we conclude that the FAA does not compel private arbitration of public injunctions, we need not consider plaintiffs’ related argument that the Tenth Amendment precludes interpreting the FAA to prohibit legislatures from delegating enforcement of public injunctions exclusively to the courts.
Plaintiffs cite Alexander v. Gardner-Denver Co. (1974)
The Gilmer court articulated the reasons why these three cases differ from the line of cases quoted above affirming the arbitrability of statutory claims. “First, [these three] cases did not involve the issue of the enforceability of an agreement to arbitrate statutory claims. Rather, they involved the quite different issue whether arbitration of contract-based claims precluded subsequent judicial resolution of statutory claims. Since the employees there had not agreed to arbitrate their statutory claims, and the labor arbitrators were not authorized to resolve such claims, the arbitration in those cases understandably was held not to preclude subsequent statutory actions. Second, because the arbitration in those cases occurred in the context of a collective-bargaining agreement, the claimants there were represented by their unions in the arbitration proceedings. An important concern therefore was the tension between collective representation and individual statutory rights .... Finally, those cases were not decided under the FAA, which, as discussed above, reflects a ‘liberal federal policy favoring arbitration agreements.’ ” (Gilmer, supra,
Concurrence Opinion
I concur in the majority’s holding that an agreement to arbitrate a claim under the Consumers Legal Remedies Act (CLRA or Act) (Civ. Code, §§ 1750-1784)
However, I dissent from the majority’s holding that an agreement to arbitrate a CLRA claim is unenforceable to the extent the consumer seeks “[a]n order enjoining the [unlawful] methods, acts, or practices.” (§ 1780, subd. (a)(2).) As a matter of federal law, the FAA and the supremacy clause of the federal Constitution prohibit us from enforcing the CLRA as the majority interprets it. As a matter of statutory construction, nothing requires us to adopt the majority’s constitutionally suspect interpretation. The public policy of this state, which the Legislature has expressly declared through the arbitration statutes, requires that we enforce arbitration agreements according to their terms. The majority’s conclusion frustrates this public policy. Moreover, I find nothing in the CLRA indicating, either explicitly or implicitly, that the Legislature intended to override this statutorily declared public policy and prohibit arbitration of CLRA injunction requests. On the contrary, both the structure and language of the CLRA suggest the Legislature viewed arbitration of injunction requests as consistent with the CLRA’s goals.
Of course, at first glance, the majority’s interpretation may seem appealing, because the facts alleged in this case are tragic and plaintiffs do not want to arbitrate. However, the majority’s holding extends beyond this setting; it prevents full enforcement of an arbitration agreement even between parties who desire and expressly agree to arbitrate all aspects of a CLRA claim in order to avoid costly and often slow court proceedings. As I will explain, I conclude that an agreement to arbitrate a CLRA claim is enforceable in its entirety.
I. Under the Majority’s Construction, the CLRA Conflicts With the FAA and Is Unconstitutional in Part.
In enacting the FAA, Congress “intended to ‘revers[e] centuries of judicial hostility to arbitration agreements,’ [citation], by ‘placing] [them] “upon the same footing as other contracts.” ’ ” (Shearson/American Express Inc. v. McMahon (1987)
The United States Supreme Court has demonstrated the primacy and scope of this duty by repeatedly invalidating, under the supremacy clause of the federal Constitution, state statutes that attempt to limit the enforceability of arbitration agreements. For example, in Perry v. Thomas (1987)
In my view, the majority’s conclusion that the CLRA prohibits enforcement of an agreement to arbitrate a CLRA injunction request runs afoul of these high court decisions. Under the majority’s interpretation, the Legislature, through the CLRA, has “singl[ed] out arbitration provisions for suspect status,” which Congress, through the FAA, has specifically prohibited. (Doctor’s Associates, Inc. v. Casarotto (1996)
Rejecting this conclusion, the majority maintains the FAA permits the Legislature to prohibit enforcement of an agreement to arbitrate a CLRA injunction request. Although acknowledging that the high court “has stated generally” that only Congress has this prohibitory power and has recognized an “inherent conflict” exception to the FAA only in determining whether Congress intended to preclude arbitration, the majority nevertheless asserts that the court “has never directly decided whether a [state] legislature may restrict a private arbitration agreement when it inherently conflicts with a public statutory purpose that transcends private interests.” (Maj. opn., ante, at p. 1083.) “[I]t would be perverse,” the majority reasons, “to extend the policy [of enforcing arbitration agreements] so far as to preclude states from passing legislation the purposes of which make it incompatible with arbitration, or to compel states to permit the vitiation through arbitration of the substantive rights afforded by such legislation.” (Ibid.)
I conclude that binding federal authority forecloses the majority’s attempt to base an FAA exception for state laws limiting enforcement of arbitration agreements on the “inherent conflict” analysis applicable to congressional action. As I have shown above, the high court’s pronouncements regarding the preemptive effect of the FAA on such state laws have been broad and emphatic. They do not appear to permit any exception. But we need not speculate on that question, because in Southland the high court declared: “We discern only two limitations on the enforceability of arbitration provisions governed by the [FAA]: they must be part of a written maritime contract or a contract ‘evidencing a transaction involving commerce’ and such clauses may be revoked upon ‘grounds as exist at law or in equity for the revocation of any contract.’ We see nothing in the [FAA] indicating that the broad principle of enforceability is subject to any additional limitations under state law.” (Southland, supra, 465 U.S. at pp. 10-11 [104 S.Ct. at p. 858], italics added, fn. omitted; see also Perry, supra, 482 U.S. at pp. 489-490 [107 S.Ct. at pp. 2525-2526] [quoting Southland].) Absent one of these two exceptions, we must enforce an agreement to arbitrate “unless Congress itself has evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue.” (Mitsubishi, supra,
Indeed, Southland belies the majority’s assertion that the high court “has never directly decided whether a legislature may restrict a private arbitration agreement when it inherently conflicts with a public statutory purpose that transcends private interests.” (Maj. opn., ante, at p. 1083.) In Keating v. Superior Court (1982)
Justice Stevens dissented from this part of the majority opinion in South-land, invoking the FAA exception to arbitrability “based on ‘such grounds as exist at law or in equity for the revocation of any contract.’ ” (Southland, supra,
The Southland majority disagreed with Justice Stevens, explaining: “If we accepted this analysis, states could wholly eviscerate congressional intent to place arbitration agreements ‘upon the same footing as other contracts’ [citation] simply by passing statutes such as the Franchise Investment Law. We have rejected this analysis because it is in conflict with the [FAA] and would permit states to override the declared policy requiring enforcement of arbitration agreements.” (Southland, supra,
Southland is significant for another reason; the high court there refused to do precisely what the majority now does, i.e., apply legal principles for determining whether Congress established an FAA exception to validate state laws limiting enforcement of arbitration agreements. In Wilko v. Swan (1953)
Finally, I note that federal appellate courts applying the “inherent conflict” analysis even in its proper context—to congressional conduct—have rejected the “public injunction” exception the majority now creates. In Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith (D.Mass. 1998)
II. CLRA Injunction Requests Are Arbitrable Under California Law.
In adopting a constitutionally suspect construction of the CLRA, the majority violates a cardinal rule of statutory interpretation. “If a statute is susceptible of two constructions, one of which will render it constitutional and the other unconstitutional in whole or in part, or raise serious and doubtful constitutional questions, the court will adopt the construction which, without doing violence to the reasonable meaning of the language used, will render it valid in its entirety, or free from doubt as to its constitutionality, even though the other construction is equally reasonable. [Citations.] The basis of this rule is the presumption that the Legislature intended, not to violate the Constitution, but to enact a valid statute within the scope of its constitutional powers.” (Miller v. Municipal Court (1943) 22 Cal.2d 818, 828 [
A. Public Policy Expressly Favors Enforcement of Arbitration Agreements.
The majority correctly observes that California’s public policy strongly favors enforcement of arbitration agreements. (Maj. opn., ante, at p. 1074.) Through enactment of “a comprehensive statutory scheme regulating private arbitration . . . , the Legislature has expressed a ‘strong public policy in favor of arbitration as a speedy and
Perhaps the clearest and most unequivocal expression of this public policy favoring arbitration appears in Code of Civil Procedure section 1281. It declares that “[a] written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.” This section establishes the “fundamental policy” of California’s arbitration scheme: “that arbitration agreements will be enforced in accordance with their terms.” (Vandenberg, supra,
Of course, the Legislature is free to establish additional exceptions to this statutory command. (Cf. Shearson, supra,
B. The CLRA. Does Not Establish an Exception to the Statutory Duty to Enforce Arbitration Agreements.
In concluding that the Legislature has established an exception to the courts’ statutory duty to enforce arbitration agreements, the majority does not maintain that the language of the CLRA expressly creates an exception. On the contrary, the majority declares that “the CLRA does not address the question of arbitrability directly . . . .” (Maj. opn., ante, at p. 1084.) Nor does the majority assert that the CLRA’s legislative history reveals a legislative intent to create an exception. Notably, the majority does not even consider this traditional indicator of legislative intent. Rather, adopting one aspect of the analysis federal courts apply in determining arbitrability under the FAA, the majority begins by asking whether “there [is]
Initially, the majority does not explain what basis exists in California law for adopting the federal “inherent conflict” analysis, which essentially recognizes implied exceptions to the express statutory requirement that we enforce arbitration agreements. The majority cites no case where we have taken a similar approach in applying California’s arbitration statutes.
In any event, even applying the “inherent conflict” analysis, because I reject the majority’s two underlying premises, I also reject its conclusion that an agreement to arbitrate a CLRA injunction request is unenforceable. The majority’s first premise is that a CLRA injunction does “not
The provisions of the CLRA indicate the Legislature does not share the majority’s view. Under section 1780, only a damaged consumer has standing to file a CLRA claim seeking an order enjoining unlawful practices (or any other form of authorized relief). Moreover, the CLRA gives the damaged consumer complete control over the litigation. Thus, a CLRA plaintiff may decide not to request an injunction, or may abandon a request at any time, or may settle or dismiss the CLRA claim without obtaining injunctive relief. Of course, these litigation decisions would impact any public benefit of injunctive relief far more than would arbitration. The Legislature would not have given the CLRA plaintiff such unfettered control,- and would not have so strictly limited standing to seek injunctive relief, had it viewed a CLRA injunction as only a public remedy that does not resolve a private dispute or benefit the individual CLRA plaintiff. Thus, the provisions of the CLRA belie the majority’s conclusion that because CLRA plaintiffs act merely as private attorneys general insofar as they request injunctions, they may not agree to arbitrate that request. If they may decline to make the request or abandon it, then surely they can arbitrate it.
Notably, applying the federal “inherent conflict” analysis the majority now adopts, the United States Supreme Court has twice relied on similar considerations in rejecting claims that the public nature of a particular remedy precluded enforcement of an arbitration agreement. In Mitsubishi, the high court considered the argument that antitrust claims under the Sherman Act are not arbitrable because of “ ‘the pervasive public interest in enforcement of the antitrust laws.’ ” (Mitsubishi, supra,
Another CLRA provision reinforces this conclusion. Section 1752 declares that the CLRA’s provisions and remedies “are not exclusive,” are “in addition to any other procedures or remedies for any violation or conduct provided for in any other law,” and do not “limit any other statutory or any common law rights of the Attorney General or any other person to bring class actions.” This section further suggests
The CLRA’s legislative history supports this conclusion. Summaries and analyses of the CLRA emphasized its remedial purpose for the victimized consumer and said little about public protection. For example, the Legislative Counsel’s Digest for the bill enacting the CLRA stated that the Act “provides specific legal remedies for consumers who suffer damage as a result of’ an unlawful method, act, or practice. (Legis. Counsel’s Dig., Assem. Bill No. 292, 2 Stats. 1970 (Reg. Sess.) Summary Dig., p. 223; see also Quelimane Co. v. Stewart Title Guaranty Co. (1998)
Finally, besides the Legislature’s evident intent, for two additional reasons I disagree with the majority that a CLRA injunction is only a public remedy that does not resolve private disputes or benefit the CLRA plaintiff. First, nothing prevents a CLRA plaintiff from requesting an injunction that merely prohibits a defendant from committing additional unlawful acts against that plaintiff, and only against that plaintiff. This type of limited order would not appear to be a public remedy at all. Second, given the list of practices the CLRA prohibits (see § 1770), a victimized consumer who continues to transact business with a CLRA defendant, either by choice or necessity, will often benefit from an order enjoining the defendant from committing the unlawful practice again. Under these circumstances, the public benefit of a CLRA injunction is only incidental (ór, at best, complementary) to providing the CLRA plaintiff with a complete remedy. The first premise underlying the majority’s conclusion is, therefore, unsound.
The majority’s second premise fares no better. The majority asserts that private arbitration is inferior to the judicial forum “in administering a public injunctive remedy” and will diminish or frustrate the public benefit of a CLRA injunction. (Maj. opn., ante, at p. 1082.) Specifically, the majority asserts that private arbitration has certain “institutional shortcomings” that are especially problematic when dealing with “public injunctions.” (Id. at p. 1081.)
I need not question the majority’s list of purported institutional shortcomings to reject its conclusion. Initially, as I have already explained, the Legislature designed the CLRA, including its injunctive remedy, primarily to benefit the individual consumer, not to protect the public. Thus, the purported institutional shortcomings of arbitration are no more relevant here than in any other context.
In addition, despite its protestations to the contrary (maj. opn., ante, at pp. 1083-1084), the majority’s reliance on the purported institutional shortcomings of arbitration merely resurrects the judicial hostility toward arbitration that we long ago abandoned
More importantly, given the statutory duty the Legislature imposed on us to enforce arbitration agreements according to- their terms (Code Civ. Proc., §§ 1281, 1281.2), it is not our judicial prerogative to decide that “arbitration is not a suitable forum” (maj. opn., ante, at p. 1080) or that “judges, rather than arbitrators, are the most appropriate overseers of injunctive remedies explicitly designed for public protection.” (Id. at p. 1082.) As Justice Mosk recently wrote for a unanimous court, the desirability of arbitration “implicates an issue of public policy—an issue that the Legislature has already resolved” through Code of Civil Procedure section 1281.2. (Mercury Ins. Group v. Superior Court (1998)
In short, neither of the premises central to the majority’s analysis is valid. Thus, they are insufficient to support the majority’s inference that because an inherent conflict exists between arbitration and the purpose of a CLRA injunction, the Legislature must have intended to exclude CLRA claims from the express statutory rule requiring full enforcement of arbitration agreements.
Moreover, other CLRA provisions suggest that arbitration of CLRA injunction requests does not conflict with, and indeed
In addition, as the majority correctly explains, sections 1782 and 1784 of the CLRA promote informal methods of dispute resolution by establishing a notice and opportunity to cure mechanism that conditions a damaged consumer’s ability to file an action for and recover damages. (Maj. opn., ante, at pp. 1084-1085.) To quote the high court, that a statute directs resort to “ ‘informal methods of conciliation, conference, and persuasion’ [citation] . . . suggests that out-of-court dispute resolution, such as arbitration, is consistent with the statutory scheme” at issue. (Gilmer, supra,
The majority draws this same inference from sections 1782 and 1784, but, citing section 1782, subdivision (d), refuses to apply it to an injunction request. (Maj. opn., ante, at pp. 1084-1085.) Section 1782, subdivision (d), permits a damaged consumer to file an action for injunctive relief without first invoking the CLRA’s informal “cure” mechanism. According to the majority, the separate treatment this section affords an injunction request is consistent with the conclusion that such a request is not arbitrable. (Maj. opn., ante, at pp. 1084-1085.)
I find that section 1782, subdivision (d), is more consistent with the opposite conclusion. Its exclusion of injunction requests from the CLRA’s “cure” mechanism suggests, in my view, a legislative desire for speedy determination of such requests and a speedy end to the unlawful practices being committed. Supporting this inference is section 1760, which declares that one of the CLRA’s purposes is “to provide efficient and economical procedures to secure [consumer] protection.” As I have already explained, our public policy encourages arbitration precisely because it avoids the delays of the judicial forum and offers a relatively speedy and economical method for resolving disputes. (Moncharsh, supra,
Finally, I also disagree with the majority’s assertion that section 1780, subdivision (c), suggests the Legislature intended to prohibit arbitration of CLRA injunction requests. (Maj. opn., ante, at p. 1082.) Section 1780, subdivision
In summary, nothing in the language, structure, or legislative history of the CLRA establishes, or even suggests, that an inherent conflict exists between the Act’s goals and arbitration of a CLRA injunction request. On the contrary, those sources all suggest that arbitration of a CLRA injunction request is consistent with the Act’s goals. Thus, the statutory command to enforce arbitration agreements according to their terms fully applies to an agreement to arbitrate a CLRA claim, including a request for an injunction. I therefore cannot join the majority’s holding that an agreement to arbitrate a CLRA injunction request is unenforceable. I would hold that an agreement to arbitrate a CLRA claim is enforceable in its entirety.
Brown, L, concurred.
Unless otherwise indicated, all further statutory references are to the Civil Code.
Keating, supra,
The CLRA contains a nonwaiver provision (§ 1751) that is similar to the nonwaiver provision we construed in Keating, supra,
To support its assertion that we should “presume” a legislative intent to prohibit arbitration, the majority cites Gilmer. (Maj. opn., ante, at p. 1082.) However, Gilmer says nothing about making such a presumption. It simply states that, in applying federal law, any congressional intent to prohibit arbitration “will be discoverable in the text of the [statute at issue], its legislative history, or an ‘inherent conflict’ between arbitration and the [statute’s] underlying purposes.” (Gilmer, supra,
Similarly, in the CLRA, the Legislature has already expressed its view regarding the majority’s concern that “only the parties to [a CLRA] injunction” initially issued in arbitration “would be able to enforce it. . . .” (Maj. opn., ante, at p. 1081.) As I have already explained, the Legislature gave the CLRA plaintiff sole control over the claim, including the decision to make and pursue an injunction request. Thus, even if the majority is correct that only parties would be able to enforce an arbitral CLRA injunction—an issue that has not been decided and is not before us—this result would be completely consistent with the Legislature’s intent.. Moreover, where a CLRA claim proceeds as a class action under section 1781, all class members would be able to enforce the injunction. Thus, the population of damaged consumers with enforcement power is not necessarily as small as the majority suggests. In any event, the scenario the majority imagines would probably arise rarely, if ever; the CLRA defendant would have to continue to commit the identical practice, despite losing a lawsuit, perhaps paying both damages and punitive damages, and being ordered to stop, and all of the CLRA plaintiffs would have to decline to enforce the injunction they went to substantial effort to obtain. We should not base a general rule prohibiting arbitration of CLRA injunction requests on this seemingly remote possibility.
Dissenting Opinion
In this case, defendant Cigna Healthplans of California sought arbitration of plaintiffs’ claims against it, including a statutory claim under the Consumers Legal Remedies Act (CLRA; Civ. Code, § 1750 et seq.). Defendant, however, failed to produce any competent evidence to meet its burden of establishing the existence of an agreement to arbitrate plaintiffs’ claims. Accordingly, the trial court should have denied defendant’s petition for arbitration.
Because defendant failed to prove the existence of an arbitration agreement, it is impossible to know the scope of the alleged arbitration agreement and whether it was intended to include plaintiffs’ CLRA claim. The majority nonetheless decides the arbitrability of CLRA claims, concluding that such claims are arbitrable to the extent they seek damages but not to the extent they seek injunctive relief. I do not join the majority’s advisory opinion on the question. Instead, I would await a case in which the question is clearly presented on the record.
The majority also appears to suggest that parties to an arbitration agreement may not use a choice of law provision to restrict the scope of arbitrable claims. I disagree. Rather than let the majority’s suggestion go unquestioned and potentially mislead courts in the future, I explain the basis of my disagreement below.
I
Plaintiffs are a mother and son who are Medi-Cal members. Defendant Cigna Healthplans of California (Cigna) offers HMO-type medical insurance plans to Medi-Cal members, for which Medi-Cal pays the cost. It appears that plaintiff mother joined Cigna’s plan in 1991. Her son was injured during birth in December 1993. Plaintiffs brought this action against Cigna, the hospital, and the son’s doctors, alleging medical malpractice and seeking damages. Plaintiffs also allege that Cigna violated the CLRA by making false and misleading statements concerning the quality of medical care Cigna provides to Medi-Cal members; they seek damages and injunctive relief for this alleged CLRA violation. Cigna petitioned for arbitration, claiming there was an arbitration provision in the contract between it and the State of California governing the Medi-Cal health plan to which plaintiffs belonged.
Cigna never produced a copy of the alleged arbitration agreement, however.
In the trial court, Cigna later submitted with its reply in support of arbitration, but again without any foundational or authenticating testimony, two versions of a summary of benefits for Medi-Cal patients that were included in documents produced by plaintiffs. The summaries themselves are undated, but other documents and certain notations suggest that one was given to plaintiff mother in January 1994 and the other in December 1994. The January 1994 summary makes no mention of arbitration. The December 1994 summary states that arbitration applies only to “any controversy . . . arising from a medical practice claim,” apparently thereby excluding from arbitration CLRA claims that, like plaintiffs’, are based on false advertising. It also states that the arbitration shall be “governed by the provisions of the California Code of Civil procedure [szc].” Cigna never produced the underlying agreements between it and the State of California that these documents purported to summarize.
The trial court ordered arbitration of plaintiffs’ malpractice claim but not their CLRA claim. The Court of Appeal affirmed, holding that the CLRA claim was not arbitrable because an arbitrator lacks authority to grant and enforce injunctive relief intended to benefit the general public. The majority agrees that plaintiffs’ CLRA claim is not arbitrable to the extent it seeks injunctive relief but concludes that it is arbitrable to the extent it seeks damages.
II
Arbitration is a creature of contract. “[Ajrbitration is simply a matter of contract between the parties; it is a way to resolve those disputes—but only those disputes—that the parties have agreed to submit to arbitration.” (First Options of Chicago, Inc. v. Kaplan (1995)
Accordingly, the question of whether the parties have agreed to arbitrate, the scope of the claims they have agreed to arbitrate, the methods by which the arbitration is to be conducted, and the remedies available to the arbitrator all depend upon the terms of the agreement between the parties. Without knowing the content of the agreement between the parties, it is impossible to answer the question of whether the parties have agreed to arbitrate a particular claim.
Here, the record before us contains no substantial evidence of any arbitration agreement between the parties. Cigna, while insisting on its alleged right to arbitrate plaintiffs’ claims, never produced any competent evidence of the alleged arbitration agreement. It failed to produce its alleged agreement with the State of California establishing its medical plan for Medi-Cal members. Some of the various
Cigna’s evidentiary failure alone should have doomed its petition for arbitration. A court may not order arbitration where, as here, there is no substantial evidence of the existence of a valid written agreement to arbitrate. (Code Civ. Proc., § 1281.2; Rosenthal v. Great Western Fin. Securities Corp. (1996)
The majority does not dispute the absence of any arbitration agreement between the parties. It nonetheless decides the abstract and hypothetical question of whether, if two parties agree to arbitrate CLRA claims and the agreement is subject to the United States Arbitration Act (USAA; 9 U.S.C. § 1 et seq.), the USAA allows California to forbid arbitration of CLRA claims. In doing so, the majority renders an advisory opinion. Although its decision that claims for injunctive relief under the CLRA are nonarbitrable may be correct, I would decide the question only in a case where it is present on the record before us.
Ill
In the course of its decision, the majority appears to suggest that parties to an arbitration agreement may not use a choice of law provision to restrict the scope of arbitrable claims. I disagree.
Arbitration is a matter of contract. Accordingly, the only claims that may be arbitrated are those the parties have identified in their arbitration agreement. In turn, there are many methods by which the parties can identify the claims they have agreed to arbitrate. For example, they may specify the arbitrable claims directly as those arising out of a particular transaction or event, those arising within a particular time period, or those based on a particular legal theory. Or the parties may identify the arbitrable claims indirectly by choosing a body of private arbitration rules that specifies the scope of arbitrable claims. In doing so, they incorporate by reference the claims limitations determined by those rules. The parties may also indirectly specify the scope of arbitrable claims by including a choice of law provision that selects a body of law limiting the arbitrability of certain claims. Such a choice of law provision, if the parties so intend, incorporates by reference whatever limits on the scope of arbitrability are established by the chosen body of law. (See generally, Mastrobuono v. Shearson Lehman Hutton, Inc. (1995)
Thus, in this case, if an arbitration agreement does exist between the parties, determining whether plaintiffs’ CLRA claims are arbitrable would involve the following inquiry: Does the parties’ arbitration agreement include CLRA claims within the scope of an express specification of the claims subject to arbitration? Have the parties incorporated by reference in their agreement an arbitration rule authorizing or limiting arbitration of CLRA claims? Have the parties incorporated by reference a body of law restricting arbitration of CLRA claims and, if so, did the parties thereby intend to exclude CLRA claims from arbitration?
Only after it is determined that the parties have in some manner authorized arbitration of CLRA claims and have not chosen
The majority appears to take a somewhat different view of the use of a choice of law provision to shape the contours of an arbitration agreement. The majority opinion may be read to suggest that section 2 of the USAA, which provides as a matter of federal law that arbitration agreements are generally enforceable according to their terms notwithstanding any contrary provision of state law, forbids the parties from using a choice of law provision to limit the scope of an arbitration agreement. (Maj. opn., ante, at pp. 1077-1078.) The two United States Supreme Court decisions the majority cites, Doctor’s Associates, Inc. v. Casarotto (1996)
These two cases stand only for the proposition that the USAA preempts state law from restricting the scope of arbitrable claims contrary to the intent of the parties as manifested in the arbitration agreement. Both those cases acknowledge that the purpose of the USAA is only to “ ‘ensur[e] that private agreements to arbitrate are enforced according to their terms.’ ” (Doctor’s Associates, Inc. v. Casarotto, supra,
Accordingly, when a procedural or substantive limitation on arbitration is voluntarily adopted by the parties through a choice of law provision, and is not imposed unwillingly on them by a state, judicial enforcement of the parties’ freely chosen limitation is fully consistent with the USAA. In that situation, a court is merely enforcing the arbitration agreement “according to [its] terms.” (Volt Info. Sciences v. Leland Stanford Jr. U., supra,
Because the record contains no arbitration agreement between the parties, I would reverse the judgment of the Court of Appeal and instruct it to vacate the trial court’s partial order of arbitration and to remand for further proceedings.