Public Injunctive Relief Cannot Be Forfeited in Consumer Arbitration Agreements in Calif.

The California Supreme Court just weighed in again on consumer arbitration agreements, and although the court gave a tip of the hat to the strong public policy favoring arbitration, it readily found the consumer arbitration provision invalid in McGill v. Citibank, No. S224086, Slip Op. (Cal. April 6). In McGill, the court unanimously held that an arbitration clause in a credit card agreement is unenforceable to the extent it purports to waive the consumer’s statutory right to seek injunctive relief on behalf of other consumers in any forum, finding such a waiver to be contrary to California public policy. The court further held that, despite the U.S. Supreme Court’s decisions on the subject, including in AT&T Mobility v. Concepcion, 131 S. Ct. 1740, 1747 (2011), the Federal Arbitration Act (FAA) does not pre-empt California’s policy.

For companies that provide services and products to consumers pursuant to terms and conditions that include predispute agreements to arbitrate, the McGill opinion serves as an important reminder that some courts—including and especially in California—continue to scrutinize consumer arbitration agreements, and are reluctant to enforce those in which consumers are forfeiting rights deemed to be “substantive” under state law.

Procedural Background