In DiCarlo v. MoneyLion, Inc., No. 20-55058, 2021 U.S. App. LEXIS 4817 (9th Cir. Feb. 19, 2021), the Court of Appeals for the 9th Circuit ordered a case to arbitration, finding that the arbitration clause did not violate the McGill rule.
California’s legal requirement that contracts allow public injunctive relief is known as the McGill rule. See McGill v. Citibank, N.A., 2 Cal. 5th 945, 216 Cal. Rptr. 3d 627, 393 P.3d 85 (Cal. 2017). Public injunctive relief is “relief that by and large benefits the general public . . . and that benefits the plaintiff, if at all, only incidentally and/or as a member of the general public.” Id. at 89 (cleaned up). Consider the relief sought here. Among other things, DiCarlo seeks to enjoin MoneyLion from “[f]alsely advertising to the general public within the State of California that the [credit-builder] Loan contains ‘no hidden fees.'” ER 149. But what good will that do her in the future? She already knows that these claims are (allegedly) untrue. That’s why she sued. DiCarlo seeks the injunction to aid those who do not already know what she has learned. McGill, 393 P.3d at 89-90. That is public injunctive relief. HN4 In McGill, the California Supreme Court held that no one can contractually waive all rights to seek public injunctive relief. Id. at 94; see Blair v. Rent-A-Ctr., Inc., 928 F.3d 819, 830-31 (9th Cir. 2019) (holding that the FAA does not preempt the McGill rule). The UCL, FAL, and CLRA all authorize public injunctive relief. Cal. Bus. & Prof. Code §§ 17203, 17535; Cal. Civ. Code § 1780(a)(2); Cruz v. PacifiCare Health Sys., Inc., 30 Cal. 4th 303, 133 Cal. Rptr. 2d 58, 66 P.3d 1157, 1162, 1164 (Cal. 2003). Thus, any contract that bars public injunctive relief in both court and arbitration is invalid. McGill, 393 P.3d at 94; see Ferguson v. Corinthian Colls., Inc., 733 F.3d 928, 934-35 (9th Cir. 2013). By permitting either party to compel arbitration unilaterally, the Agreement effectively cuts off the availability of public injunctive relief in court. So the relief must remain possible in arbitration proceedings, or else the arbitration provision violates California law and triggers the poison-pill clause. MoneyLion insists that DiCarlo can get public injunctive relief in arbitration. The Agreement, after all, “authorize[s]” the arbitrator to “award all [injunctive] remedies available in an individual lawsuit under [California] law.” ER 202-03. And, says MoneyLion, public injunctive relief is available in an individual lawsuit. DiCarlo disagrees. She says that she can secure public injunctive relief only by acting as a private attorney general, which the Agreement explicitly prohibits. ER 202. Whoever is right wins. Thus, the question presented: Is public injunctive relief under the relevant statutes available in an “individual lawsuit” without a plaintiff “act[ing] as a private attorney general”? ER 202-03 (capitals omitted).
The Court of Appeals said that a public injunctive relief claim can be sought by an ‘individual’ and, thus, could be sought in arbitration. Thus, there was no violation of the McGill rule.
With that background, we can return to the question at hand: Must DiCarlo act as a private attorney general to seek public injunctive relief? The evolution of the UCL and FAL, along with the California Supreme Court’s treatment of them, convinces us that the answer is no. HN11 Public injunctive relief is available under California law in individual lawsuits—not just in private-attorney-general suits. It follows that DiCarlo may secure that relief in arbitration under the Agreement. Both the UCL and FAL formerly gave standing to “any person acting for the interests” of “the general public.” Cal. Bus. & Prof. Code §§ 17204, 17535 (2004). That fit squarely within the concept of the standing-to-sue private attorney general. See Nike, Inc. v. Kasky, 539 U.S. 654, 661, 123 S. Ct. 2554, 156 L. Ed. 2d 580 (2003) (Stevens, J., concurring); Californians for Disability Rts., 138 P.3d at 213 (referring to “uninjured persons” suing under the UCL as “private attorneys general”). That all changed when Californians passed Proposition 64. They decided “that only the California Attorney General and local public officials [should] prosecute actions on behalf of the general public.” Prop. 64, § 1(f), 2004 Cal. Stat. A-337; see In re Tobacco II Cases, 46 Cal. 4th 298, 93 Cal. Rptr. 3d 559, 207 P.3d 20, 41-42 (Cal. 2009) (Baxter, J., concurring and dissenting). HN12 After Proposition 64, individuals must suffer their own injuries to sue. Prop. 64, §§ 3, 5, 2004 Cal. Stat. A-338 to -340; Californians for Disability Rts., 138 P.3d at 210. What’s more, they can no longer bring a UCL or FAL claim “for the interests of . . . the general public.” Prop. 64, §§ 3, 5, 2004 Cal. Stat. A-338 to -340.2 No more private attorneys general. This led to a question for the California Supreme Court: Without the ability to act for the interests of the public, can individual UCL and FAL litigants still seek public injunctive relief in individual lawsuits? McGill, 393 P.3d at 92. The court held that, because individuals seeking public injunctive relief under the UCL and FAL do so “on [their] own behalf” and not “on behalf of the general public,” the relief remains available. Id. at 92-93 (emphasis added; cleaned up). Though the court’s discussion did not address the CLRA, there is no apparent reason why a suit under the CLRA for the same relief could not just as plausibly be brought “on [the plaintiff’s] own behalf.” As for the fee-shifting private attorney general, we do not think it affects the analysis for this particular Agreement. A ban on the actual shifting of fees would not be relevant. DiCarlo has not stated that she seeks attorney’s fees, so a fee-shifting ban would have no effect. In any case, we have no reason to think that the availability of public injunctive relief could hinge on whether those fees are up for grabs. Nor do we read the Agreement to bar any claims that could support fee shifting in court. Contract terms are interpreted in light of the company they keep. Eisen v. Tavangarian, 36 Cal. App. 5th 626, 248 Cal. Rptr. 3d 744, 760 (Ct. App. 2019) (applying noscitur a sociis to adopt a “more limited reading” of a term); Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 195-98 (2012). The prohibition on acting as a private attorney general is listed as a forbidden “proceeding” and surrounded by other limitations on how legal interests may be adjudicated in arbitration. ER 202 (capitals and emphasis omitted). Unlike the standing-to-sue private attorney general, the fee-shifting private attorney general is defined not by how a claim is adjudicated, but by what interests are asserted (and their success). See Cal. Civ. Proc. Code § 1021.5; Woodland Hills Residents Ass’n v. City Council of L.A., 23 Cal. 3d 917, 154 Cal. Rptr. 503, 593 P.2d 200, 206, 208-13 (Cal. 1979). The concept does not fit with the surrounding provisions. Thus, a plaintiff bringing an individual lawsuit may seek public injunctive relief. The McGill court made clear that a litigant proceeding as an “individual” “on his or her own behalf” may “request public injunctive relief.” 393 P.3d at 92; accord Blair, 928 F.3d at 829 (emphasizing that “arbitration of a public injunction does not interfere with the bilateral nature of a typical consumer arbitration”). It follows that, under the Agreement’s all-remedies clause, DiCarlo is free to seek public injunctive relief in arbitration. To be sure, DiCarlo’s contrary arguments have some force. Intuitively, one would think that a person seeking a remedy “that by and large benefits the general public and that benefits the plaintiff, if at all, only incidentally and/or as a member of the general public” is vindicating the public’s rights. McGill, 393 P.3d at 89 (cleaned up). So it is not surprising that the California Supreme Court has previously described plaintiffs “in a public injunction action” as “act[ing] in the purest sense as a private attorney general.” Cruz, 66 P.3d at 1162; see also Broughton v. Cigna Healthplans of Cal., 21 Cal. 4th 1066, 90 Cal. Rptr. 2d 334, 988 P.2d 67, 74 (Cal. 1999) (similar). HN15 Further, even after Proposition 64, the UCL and FAL authorize people “who ha[ve] suffered injury in fact” to bring the same action for “relief” that public officials are charged with bringing. Cal. Bus. & Prof. Code §§ 17204, 17535. Absent Proposition 64’s context, this looks like a private-attorney-general action. But see McGill, 393 P.3d at 93 (emphasizing the importance of “harmoniz[ing]” both the codified and uncodified “provisions of Proposition 64” (cleaned up)). But for four reasons, DiCarlo’s arguments fall short. HN16 First, we must remember that the ultimate inquiry is what was the parties’ “objective intent, as evidenced by the words of the contract.” Reilly, 160 Cal. Rptr. 3d at 249. The Agreement must be read as a whole, “so as to give effect to every part.” Cal. Civ. Code § 1641; accord Palmer v. Truck Ins. Exch., 21 Cal. 4th 1109, 90 Cal. Rptr. 2d 647, 988 P.2d 568, 572-73 (Cal. 1999). Recall the thesis of DiCarlo’s interpretation: Public injunctive relief is categorically unavailable. That cannot be squared with the clear text of the all-remedies clause: “The arbitrator . . . shall be authorized to award all remedies available in an individual lawsuit . . ., including, without limitation, . . . injunctive . . . relief.” ER 202-03. We do not honor the contracting parties’ expressed intent by creating internal contradictions in the Agreement. Second, Broughton and Cruz’s private-attorney-general quotations must be taken in context. Both cases focused on whether the FAA preempted a different California rule, the so-called “Broughton-Cruz rule,” against the arbitrability of claims for public injunctive relief.3 At the time, the Supreme Court of the United States had twice rejected a lower federal court’s reasoning that the FAA contained an exception for certain public-law litigation. Shearson/Am. Express Inc. v. McMahon, 482 U.S. 220, 242, 107 S. Ct. 2332, 96 L. Ed. 2d 185 (1987); Mitsubishi, 473 U.S. at 635. The lower federal courts had “likened” the plaintiffs in these kinds of suits to “private attorney[s]-general who protect[ed] the public’s interest.” Am. Safety Equip. Corp. v. J.P. Maguire & Co., 391 F.2d 821, 826 (2d Cir. 1968). Both times the Court held that no such exception (if it existed) applied to the facts presented. McMahon, 482 U.S. at 242; Mitsubishi, 473 U.S. at 635. The Broughton court distinguished Mitsubishi and McMahon on their facts to hold that a private-attorney-general exception did apply, and the Cruz court followed Broughton. Broughton, 988 P.2d at 74; Cruz, 66 P.3d at 1162-63. The term of art was borrowed from federal law for the limited purpose of distinguishing Supreme Court precedent. Third, the McGill decision cannot be reconciled with a reading of Broughton and Cruz that makes anything more of the private-attorney-general language. As explained, the McGill court explicitly rejected the notion that seeking public injunctive relief meant that a plaintiff was acting “on behalf of the general public”—the quintessential act of the standing-to-sue private attorney general. 393 P.3d at 92 (citation omitted). This reasoning makes clear that the remedy sought does not define the interests vindicated. Fourth, the appealing symmetry of DiCarlo’s theory between the rights vindicated and the relief sought is not enough to change the result. HN18 To say the least, McGill’s reasoning—an individual requesting relief for the entire public is suing only on her own behalf—is peculiar. Unlike “private injunctive relief,” this remedy is not tailored to “rectif[y] individual wrongs.” McGill, 393 P.3d at 89 (citation omitted); see Broughton, 988 P.2d at 76 & n.5. But that is the law in California, and it binds this court. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188 (1938).
Thus, the Court of Appeals ordered the case to arbitration.
In California, litigants proceeding in individual lawsuits may request public injunctive relief without becoming private attorneys general. That means that public injunctive relief is available to DiCarlo in arbitration with MoneyLion. Since the arbitration provision does not violate the McGill rule, it is valid. If any doubt remains, consider this. HN20 Only an interpretation that public injunctive relief remains available will render the arbitration provision “lawful” and “capable of being carried into effect.” Cal. Civ. Code § 1643. And only this interpretation facilitates arbitration. Mitsubishi, 473 U.S. at 626. So both California law and the FAA tell us what to do next—construe the Agreement to abide by McGill and allow arbitration.