Court of Appeal (Cal.) Finds Concepcion Overruled California’s Broughton-Cruz Anti-arbitration Rule.

In McGill v. Citibank, N.A., — Cal.Rptr.3d —-, 2014 WL 7202035 (Cal.App. 4 Dist. 2014), the California Court of Appeal held that Concepcion overruled California’s Broughton-Cruz rule.

Citibank petitioned to compel McGill to arbitrate her claims based on an arbitration provision in her account agreement. The trial court granted the petition on McGill’s claims for monetary damages and restitution, but denied the petition on the injunctive relief claims. In doing so, the court relied on the “ Broughton–Cruz rule” the California Supreme Court established in Broughton v. Cigna Healthplans (1999) 21 Cal.4th 1066, 90 Cal.Rptr.2d 334, 988 P.2d 67 ( Broughton ), and Cruz v. PacifiCare Health Systems, Inc. (2003) 30 Cal.4th 303, 133 Cal.Rptr.2d 58, 66 P.3d 1157 ( Cruz ). Under that state-law rule, arbitration provisions are unenforceable as against public policy if they require arbitration of UCL, FAL, or CLRA injunctive relief claims brought for the public’s benefit. Citibank appeals the trial court’s order on the injunctive relief claims; McGill does not challenge the order on the claims for monetary damages and restitution.  We reverse and remand for the trial court to order all of McGill’s claims to arbitration. As explained below, we join several federal court decisions in concluding the Federal Arbitration Act (9 U.S.C. § 1 et seq.; hereinafter FAA) preempts the Broughton–Cruz rule. In AT & T Mobility LLC v. Concepcion (2011) 563 U.S. ––––, 131 S.Ct. 1740, 179 L.Ed.2d 742 ( AT & T Mobility ), the United States Supreme Court unmistakably declared the FAA preempts all state-law rules that prohibit arbitration of a particular type of claim because an outright ban, no matter how laudable the purpose, interferes with the FAA’s objective of enforcing arbitration agreements according to their terms. The Broughton–Cruz rule falls prey to AT & T Mobility ‘s sweeping directive because it is a state-law rule that prohibits arbitration of UCL, FAL, and CLRA injunctive relief claims brought for the public’s benefit. We must reject McGill’s contention the California Supreme Court’s recent decision in Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 173 Cal.Rptr.3d 289, 327 P.3d 129 ( Iskanian ), “reaffirmed” the Broughton – Cruz rule. To the contrary, Iskanian confirmed the expansive scope of the FAA’s preemption and overturned another state-law rule invalidating class action waivers on claims for arbitration of unpaid wages. Iskanian also established a new rule invalidating predispute waivers of an employee’s right to bring a representative action under the Labor Code Private Attorneys General Act of 2004 (Lab.Code, § 2698 et seq.; hereinafter PAGA) to recover civil penalties for an employer’s Labor Code violations. The Iskanian court concluded the FAA did not preempt this new rule because a PAGA representative claim belongs to the state, and an aggrieved employee simply brings the claim as an agent or proxy of the state. Accordingly, a PAGA representative claim is not subject to a private arbitration agreement between an employer and an employee or the FAA. As explained below, a PAGA representative claim is not comparable to an injunctive relief claim under the UCL, FAL, or CLRA, and therefore Iskanian ‘s narrow exclusion does not save the Broughton–Cruz rule from preemption.