April 6, 2017

Anti-injunction provision in arbitration agreement is unenforceable

In McGill v. Citibank, N.A., the Supreme Court today holds that, notwithstanding the Federal Arbitration Act, California courts will not enforce arbitration agreement provisions that waive the right to seek, in any forum, public injunctive relief under consumer, unfair competition, and false advertising statutes.  The court’s unanimous opinion by Justice Ming Chin (with Fourth District, Division One, Court of Appeal Justice Judith Haller as the pro tem replacement for Justice Carol Corrigan) also concludes that a 2004 initiative — Proposition 64 — does not prevent private parties from seeking public injunctive relief and that the Federal Arbitration Act does not preempt the California unenforceability rule because the rule is “a generally applicable contract defense” rather than one peculiar to arbitration agreements.  The court finds the federal law “does not require enforcement of a provision in a predispute arbitration agreement that, in violation of generally applicable California contract law, waives the right to seek in any forum public injunctive relief under” the state statutes.

The court reverses the Fourth District, Division Three, Court of Appeal.

[Disclosure:  Horvitz & Levy filed an amicus brief in this case on behalf of the Association of Southern California Defense Counsel.]

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