McGILL v. CITIBANK (To be called and continued to the December 2016 calendar.) (Corrigan, J., not participating; Haller, J., assigned justice pro tempore.)

Respondent’s Opening Brief on the Merits

Cal.July 31, 2015

No. S224086 IN THE SUPREME COURT OF THE STATE OF CALIFORNIA SHARON MCGILL, an individual, Plaintiff and Respondent, SUPREME COURT v. FILED CITIBANK,N.A., JUL 31 2015 Defendant and Appellant. Frank A. McGuire Clerk AFTER DECISION By THE COURT OF Deputy APPEAL, FOURTH APPELLATE DISTRICT, DIVISION THREE. CASE G049838 FROM THE SUPERIOR COURT, COUNTY OF RIVERSIDE, CASE No. RIC1109398, ASSIGNED FOR ALL PURPOSES TO JUDGE PRO TEM JOHN W. VINEYARD, DEPARTMENT 12 RESPONDENT’S OPENING BRIEF ON THE MERITS CAPSTONE LAWAPC GLENN A. DANAS (SBN 270317) RYAN H. WU (SBN 222323) LIANA CARTER (SBN 201974) 1840 CENTURY PARK EAST, SUITE 450 LOS ANGELES, CA 90067 TELEPHONE:(310) 556-4811 FACSIMILE: (310) 943-0396 GLENN.DANAS@CAPSTONELAWYERS.COM RYAN.WU@CAPSTONELAWYERS.COM LIANA.CARTER@CAPSTONELAWYERS.COM Attorneys for Plaintiff and Respondent SHARON MCGILL No. S224086 IN THE SUPREME COURT . OF THE STATE OF CALIFORNIA SHARON MCGILL, an individual, Plaintiff and Respondent, V. CITIBANK, N.A., Defendant and Appellant. AFTER DECISION BY THE COURT OF APPEAL, FOURTH APPELLATE DISTRICT, DIVISION _ THREE - CASE G049838 FROM THE SUPERIOR COURT, COUNTY OF RIVERSIDE, CASE NO. RIC1109398, ASSIGNED FOR ALL PURPOSES TO JUDGE PRO TEM JOHN W.VINEYARD, DEPARTMENT 12 RESPONDENT'S OPENING BRIEF ON THE MERITS CAPSTONE LAW APC GLENNA. DANAS (SBN 270317) RYAN H. WU (SBN 222323) LIANA CARTER (SBN 201974) 1840 CENTURY PARK EAST, SUITE 450 LOS ANGELES, CA 90067 TELEPHONE:(310) 556-4811 FACSIMILE: (310) 943-0396 GLENN.DANAS@CAPSTONELAWYERS.COM RYAN.WU@CAPSTONELAWYERS.COM LIANA.CARTER@CAPSTONELAWYERS.COM Attorneys for Plaintiff and Respondent SHARON MCGILL TABLE OF CONTENTS TABLE OF AUTHORITIES0.000...eeceecceeeeeenseneecesneeeaeeeesessseesensnaaees il STATEMENT OF ISSUES PRESENTED...ceecsceeeeeeeeeseneeeeneees1 INTRODUCTION.......ceeceeccceccceececeeceeeceseeseeseeessececesaauaeaeecssseaseeseeeaeeesensersanes 2 STATEMENT OF THE CASE.L.0oeeeee ccccecccceeeeceeeeseeeeeseeeeesesenesseeenanenaes 6 I. CITIBANK HAD A PRACTICE OF SELLING ITS “CREDIT PROTECTOR” SERVICE TO INELIGIBLE CONSUMERS...ceeccceecesececceeeeeseneteneceeseseeeeeeeeeneas 6, II. MCGILL SOUGHT A PUBLIC INJUNCTION, ALONG WITH OTHER REMEDIES, AGAINST CITIBANK’S UNLAWFUL BUSINESS PRACTICEoo...cceccccccssceneeeeeeeeeeeeeeseeesneebeeeeeseceeseeeenseesseseseeeseeeeeeseueesee 7 Ill. THE TRIAL COURT'S ORDER PARTIALLY DENYING CITIBANK’S PETITION TO COMPEL ARBITRATION BASED ON THE BROUGHTON- CRUZ RULE WAS REVERSED ON APPEAL ...eects9 ARGUMENT. 000... ccc ccccceeseceneceeceeeeeeeeeeeeceserseestassseceeeeessgessseseeenseegeeeseserseeneseea 12 I. INJUNCTIVE RELIEF UNDER THE CLRA, UCL, AND FAL IS A POWERFUL REMEDY THAT PROTECTS THE PUBLIC .......ccc ccc ecccccceeseeesseeeceeneeeeeeeeeeanes 12 A. The UCL And The CLRA Were Enacted To Protect The Public.............ccccccecceseceeccecceeeceeeeceesceneeseeeeeereseeeees 12 1. The UCL and FAL o...cccccccccccccccesceceeeeeeeessnneesseseeeeaaaeaaes 12 2. The CLRA ....icccccccccccccscessesseseceeeeccccaeececsssseeccececeeeeeeaeenseeees 13 B. Californians Benefit From The Availability of Public Injunctions..............cceeseeeeeeeee cee eeensneeereeeeeceeeeeeeeneneaees 15 II. CITIBANK’S CONTRACTUAL BAN ON A CONSUMER’S RIGHT TO PURSUE A PUBLIC INJUNCTION IN ANY FORUM IS UNENFORCEABLE...eeececceeeeeceee cece te teeceeeeceseeseeeeeeeesessguaaneaeaes 18 III, THE BROUGHTON-CRUZ RULE REMAINS GOOD LAW. .......ccccccccccccsceceeeceeeeeeeetsaceeecteneee gees seseeseeeseseegeeeesaeeeeesel 25 A. Broughton and Cruz Held That A Claim Seeking a Mandatory Injunction For The Public’s Benefit Is Incompatible With FW0):15(0)25 B. The FAA Does Not Preempt The Broughton- Cruz Rule As Applied Here u.0.......cceeecceeessseseccsscceessecceesneeeeeees 31 1. Broughton and Cruz Followed The Nonwaiver Principle Applicable to Both State and Federal Claims...........00.cccccceeceeeee eens 31 2. Concepcion Does Not Abrogate Broughton and CruZ......cccccccccccccescsccsessssssessssesssssessssseesees 39 3. The FAA Does Not Mandate The WaiverofA Claim Entirely For The Public’s Benefit...ccececeseeececcececeessecsesceecececccaceecee 44 C. AState’s Exercise Of Its Police Powers To Preserve The Availability Of Public Injunctive Relief Cannot Be Preempted Except By A Clear And Manifest Purpose Of Congress Wholly Absent Here..............cccccccccesssesssceeesssceeeseeeeees 50 IV. ALTERNATIVELY, THIS CASE SHOULD BE REMANDED FOR A DETERMINATIONAS TO WHETHER CITIBANRK’S AGREEMENTIS UNCONSCIONABLE0cecccccceceeceeseeeeenseeeeseceneesenecessessestesseeesnaees 54 V. ALTERNATIVELY, THE COURT SHOULD PERMIT THE ARBITRATOR TO DECIDE IF HE OR SHE HAS THE POWER TO ISSUE THE PROPOSED INJUNCTIVE RELIEF...cccccecseccceeeeseesseeerseeeens 56 CONCLUSION(occcccccceececeeneeesneeeseeseeesseeaeeneeesseeensesseseseecssesatessseeseesees 58 CERTIFICATE OF WORD COUNT...0......cccccesccsssceseeesscesessensesseesteesesseeens 59 rT TABLE OF AUTHORITIES STATE CASES Ajamian v. CANTORCOZ2E,L.P. (2012) 203 CalApp.4th 771 ooo. .cccccccccccccssceccceccccessneeceeeeeseesaeeesesteeeeeesseenaeees 55 Arias v. Super. Ct. (2009) 46 Cal.4th 969 20000...eee eeeseceeeteeenees 46 Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal. 4th 83 .........cccccccscccesstecceeceeetessssreesseeeessneeeees 55 Balboa Island Village Inn, Inc. v. Lemen (2007) 40 Cal.4th L141cccece cee eceeecssensecceseceeseeeesecoesseeseseeeeneeees 57 Barquis v. Merchants Collection Assn. (1972) 7 Cal.3d DA} ooo cee cecccseccececcscecseasccececcceeceececcescensasescetecsecnsecereeeetsnseseneesseeees 15 Brockey v. Moore (2008) 107 Cal.App.4th 86.00.00... ceeeeeeeeee 17 Broughton v. Cigna Healthplans of California (1999) 21 Cal.4th 1066.0...cece cccccccccsececececceecceeeeaeeceseeneeersesoeeneespassim Brownv. Ralphs Grocery Co. (2011) 197 Cal.App.4th ABO occcecceeccecucccceceveccescceecseeceetersesecseuseecesceeceenerseesasencceeneeees 22, 48 California v. ARC America Corp. (1989) 490 U.S. 93.0... 51 Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 168 ..........eeeee 12 Chern v. Bank ofAmerica (1976) 15 Cal.3d 866........0...eee 17 Colgan v. Leatherman Tool Group, Inc. (2006) 135 Cal.App.4th 668 ........ccccccccccccceecececceecessececeeecceeeesaeeeeseseeeeeeeeensaaes 17 Committee on Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197 ......ccceecccccecceececeseeeeeeeeenees 17 Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal. 4th 163.0... ccccccccccssescsescssecesseceeeeeeceeeeeeeaeeeeeeeeesegeeeeeees 17 Cruz v. PacifiCare Health Systems, Inc. (2003) 30 CalAth 308... cccccccccccccccessecceeeccescssseeeccceceececeeerceeaeeesersanespassim Farm Raised Salmon Cases (2008) 42 Cal.4th 1077.............. 51, 52 Fletcherv. Sec. Pac. Nat'l Bank (1979) 23 Cal.3d 442.000... 17 In re Marriage of Fell (1997) 55 Cal.App.4th 1058.0... 19 © In re Tobacco IT Cases (2009) 46 Cal. 4th 298 0.0.0... ceeceeeeceen eee 15 i Iskanian v.CLS Transportation Los Angeles LLC | (2014) 59 Cal.4th 348 oo...cccccsscscceeceecesseeserseseeseeeespassim Kasky v. Nike, Inc. (2002) 27 Cal.4th 939.0000.ee 12, 13, 17 Korea Philadelphia Presbyterian Church v. Calif. Presbytery (2000) 77 Cal.App.4th 1069 o0.......oeccccceeesssccceeseeeeee 16 Kraus v. Trinity Management Sucs. (2000) 23 Cal.4th L1G eee cccccccccccesssseseceeseceessessessssceceesccceceeesscsenssneasseneesseess 13, 22 Little v. Auto Stiegler (2003) 29 Cal.4th 1064.00. 24, 35 Madridv. Perot Systems Corp. (2005) 130 Cal.App.4th AAO ooo ec ceeceessssnescecesnccecceessssececcecensseeeceseesesnessssscesssscecceessesseeseesas 16 Nelson v. Pearson Ford. Co. (2010) 186 Cal.App.4th D883 oo eecceccccccsessssscsseceeceececcesesaeusuassessseueececcecceceususensecuseceueeceseusauaas 16 Schnall v. Hertz Corp. (2000) 78 Cal.App.4th 1144.....ccccccceceees 17 Smiley v. Citibank (1995) 11 Cal.4th 138.0...eeceeeeceeeeeeeeeeeees 51 Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th VVOD ooecccccccceccceesssesseeececeesssccsessseseceeasesteeeeceseseusenenesspassim Stop Youth Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal.4th 558.0... cccccccccecccsssssevcccececseeeeseesensesssssneeeeeaaenees 17 Swan Magnetics v. Super. Ct. (1997) 56 Cal.App.4th L504 ooocccccccccceeccccessessesesecccucssssusscreeccessssccecseeeeceessuraesesceanenss 57 Ticcont v. Blue Shield of California Life & Health Ins. Co. (2008) 160 Cal.App.4th 528 oooccceccseccessseescessneseeenees 17 Vasquez v. Super. Ct. (1971) 4 Cal.3d 800.0...cece 12,14 FEDERAL CASES 14 Penn Plaza LLC v. Pyett (2009) 556 U.S. 247 ww... 32, 33, 39 Agostini v. Felton (1997) 521 U.S. 208.00. ecceceeceeeseveneeeeee 30, 43 American Express Co. v. Italian Colors Restaurants (2018) 183 S.Ct. 2804 ooo.cccecceececeeseesssnesaueeeneeeespassim Arizona v. United States (2012) 132 S.Ct. 2492 ooo... eeeeeeeeeeeee 51 Arthur Andersen LLP v. Carlisle (2009) 556 U.S. 624... 54 AT&TMobility v. Concepcion (2011) 131 S.Ct. 1740............passim iv Bookerv. Robert HalfInternational (D.C. Cir. 2005) _ ALB FBG 17 cecscvscssessesssssssustiniisnnsrieieenee BT, 38 Chamber of Commerceof the United States ofAmerica v. Whiting (2011) 1381 S.Ct. 1968 .....ccccc ccccccccceeeceeeeeeteneees 51 Circuit City Stores, Inc. v. Adams (2001) 532 U.S. 105......... 33, 37 Comedy Club, Inc. v. Improv West Assocs. (9th Cir. 2009) 553 F.3d 1277 oo... ccccessceseeseecceccessssenseeeeeeceeeeesstaeeees 30 CompuCredit v. Greenwood (2012) 132 S.Ct. 665............0008. 32, 34 Dean Witter Reynolds, Inc. v. Byrd (1985) 470 U.S. 218 ieeecc ccccceesssssesecesseesseecesseeassseecasessseeceeseaeseeeeaasseeeeeeseeeeuecs 28 Doctor’s Associates, Inc. v. Casarotto (1996) 517 U.S. GBD a eccccccccccscccssssssessssssssiussesseceecececesssssssusessesesesseceesessasanee 24, 42, 54 EEOCv. Waffle House, Inc. (2002) 534 U.S. 279 veececcseseeseenpassim Ferguson v. Corinthian Colleges, Inc. (9th Cir. 2013) 733 F.3d 928.00... ceccceeecccescecesscsssceeesessssseeeeeeaeaees 35, 38, 43, 44 Gilmerv. Interstate/Johnson Lane Corp. (1991) 500 US. 20 o.oo cccccceccecesesssessesecesssssesessssessseessesseeseeeeeesaaseeeeneespassim Granite Rock Co. v. Intl Broth. of Teamsters (2010) BOL U.S. 267oooccccseeeecesesssseeescesceesesesscceeeeseeceneneesseseeues 53 Green Tree Fin. Corp. -Ala. v. Randolph (2000) 531 US. 19 eiccccccccceccccclecccccccecececcccessessesseesessesssecesseessesteeescessesseestenesees 54 Kilgore v. Keybank, N.A. (9th Cir. 2013) 718 F.3d 1052.............. 31 Kristian v. Comcast Corp. (1st Cir. 2006) 446 F.3d 25.... 37, 38, 39 Lollard Tobacco Co. v. Reilly (2001) 533 U.S. 525... 51 Marmet Health Care Center v. Brown (2012) 132 S.Ct. L201occcccc cence cneeceneceuscscneeseneneeecceeeecteeceseeteuecceaeceeecesees 44 Mitsubishi Motors v. Soler Chrysler-Plymouth (1985) AT3US. 614ceecccccccccc ccc ccssssctenensseceeeteeeeeeseuaeaeeseeeeeeeeeespassim Moses H. Cone Hospital v. Mercury Constr. Corp. (1983) 460 U.S.1 ooocceceece cece ccceseesseeeeseescceseseessecaseececceesessenees 45 Perry v. Thomas (1987) 482 U.S. 483..........cc:cccccccccscesseeseeeeteeeeeees 42 Preston v. Ferrer (2009) 552 U.S. 346.0...eee 24, 33, 36, 42 Printz v. United States (1997) 521 U.S. 898.0000...cece eeeeees 51 Rent-A-Center, West, Inc. v.Jackson (2010) 130 S.Ct. QTD oocicccccccssscccssesssssssssssccessssesssssseesssececesseeeeseeeeeecsseeesesssseeseeeseeens 56 Scherk v. Alberto-Culver Co. (1974) 417 U.S. 506.0...eee 32 SEC v. Worthen (9th Cir. 1996) 98 F.3d 480.0... eeeeeeeece cette ee 30 Shearson/American Express, Inc. v. McMahon (1987) M82 U.S. 220 ...ecccccceecceeccccessceeeeecececeeeeeeeessaeeeeeeess 27, 33, 34, 43 Southland Corp. v. Keating (1984) 465 U.S. 1 oo. ceeeeceeeeeeees 42 Trafficante v. Metropolitan Life Ins. Co. (1972) 409 U.S. 205 wooo ccecccccecccsccecssssssceccessseeceeesseeescececsessseeeeeesceeeessesessseaees 13 Transgo Inc. v. Ajac Transmission Parts Corp. (9th Cir. 1985) 768 F.2d 1001 ooo...ccceceessssseceeeeeesssessnseeneeeaes 29 United States v. United Shoe Machinery Corp. (1968) B91 US. 244cecccccesseccesseceeeececceeceeeeeeessnenseeseeseensneeceeeeeeeeeass 29 United Steelworkers ofAm. v. United States (1959) SEL US. 89 ciecccccccessscceececesesseeeeeeeccceceeceececssssseeeeeseeenseresseaneeees 29 Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ. (1989) 489 U.S. 468 ...... 54 STATE STATUTES Bus. & Prof. Code §§ 17200 et seq. (Unfair Comp. Law (OCL)) occ eeececccecccccccccccccceeeccecccccecececeascueeseessnessseneceeeeeaaeeecetsaespassim Bus. & Prof. Code §§ 17500 et seq. (False Advertising Law (PAL)) oo... cceeeccccccsssseseseeseeecuaceeneneeeceesecsseseaseeeseaeeesespassim Civ. Code § 1668.00.00... ccccccsscscceeeesescceeeeceseessecseessessessteeessseeeees 19 Civ. Code § 3518 .......ccccccccccccessesecceceeceeccceceeesensessssseesssesstneseeeeeeees 47 Civ. Code § 8515... cccccccccecccccccccccccceeeceeeseceeeesaunsceeeeeceeseeeetsneeeeeeea 19 Civ. Code §§ 1750 et seq. (Cons. Legal Remedies Act (CLRA)) woeccccccccceccccccccessececceceeecseeeeeeceaesceseeasseseeseeseeseseesenenespassim Civ. Proc. Code § 1286.2 ooo. ..ccccccccccccccccccccccesecesseesscnseeccceseeseaenseeeeess 30 Civ. Proc. Code § 1286.6 .......ccccccccccccceecccceeeseeesesscccneececceceesenenseeecees 30 Civ. Proc. Code § 382 o.oo... ceecceccccccccaeeeceeeeeeseeseeeesenseeeeeeteeeseaeseeeeess 14 Civ. Proc. Code §§ 1280 et seq. (Arb. (CAA))...cccesesscssesseesteseeseeseene 29 Vi Civ.Proc.Code § 1286 o......eccecccccccccceeeseeceeceeesssceeeessseneeeseeeensseeee 57 Civ.Proc.Code § 1287.4 .....ccccccccccccccssssscceceeessssseeceessseseeceeeeessnneees 57 Ins. Code §§ 1758.9 et seq. Improper Saleof TNSULANCE) 0....cec cece ceeeececeeecececeeeceeccceccceececcacsssceseeececcesececeesasessneetenees 8 Lab. Code § 229 ooo. ccecccccssssneseesneesecceeecesececessssnssseaesesseceeseeeeees 42 Lab. Code §§ 2698 et seq. (Priv. Atty's. Gen. Act of 2004 (PAGA))....ccccccc cece ccccsssseeessssseeeeceesesssseaseeseaeeseesesseeseeaaespassim FEDERAL STATUTES 9 U.S.C. §§ 1 et seg. (Arb. Act (FAA)).......ccccccceesscceeeeeeeeenespassim SECONDARY AUTHORITIES Cohen & Dayton, The New Federal Arbitration Law, 12 Va. L.Rev. 265 (1926) oo.eccccsesessseeeceseeecceeensssnssssseees 53 H.R.Rep. No. 96, 68th Cong., Ist Sess., 1 (1924) .00..eee 54 vil STATEMENTOF ISSUES PRESENTED 1. Does the FAA require enforcementof a private arbitration agreement that completely prohibits a consumer claimant from pursuing a statutory remedy that the California Legislature provided for the purposeof protecting public rights, such as a public injunction to protect California consumers? 2. Does the Federal Arbitration Act, 9 U.S.C. §§1 et seq. (“FAA”) impliedly preempt the rule announced in Broughton v. Cigna Healthplans of California (1999) 21 Cal.4th 1066 and Cruz v. PacifiCare Health Systems, Inc. (2003) 30 Cal.4th 303, especially under the circumstancesin this case, where Citibank’s arbitration agreement prohibits the award of public injunctive relief against it in any forum? INTRODUCTION California’s robust consumer protection regime empowers those harmed by an unlawful business practice not only to seek damagesfor themselves, but to serve as private attorneys general to protect the public. Among the host of remedies available to a plaintiff is the right to enjoin a defendant from further unlawful, unfair or fraudulent practices directed at the general public. This Court has repeatedly recognized the importance of such public- interest enforcement actions to supplement the actionsof law enforcement and regulatory agencies in protecting Californians from deceptive consumerpractices. Asserting claims on behalf of herself and the general public, Plaintiff and Respondent Sharon McGill filed suit, in part, to enjoin Defendant and Appellant Citibank, N.A. (“Citibank”) from continuing its deceptive marketing of its Credit Protector program andits practice of charging a fee to applicants who later fail to qualify for enrollment in the program. However, within a unilateral amendmentto its cardholder agreement, Citibank inserted a mandatory arbitration provision (the “Agreement”) that not only forced all future claims into arbitration, but also precluded any arbitrator from awarding injunctiverelief to benefit the public. Citibank’s Agreementfurther bannedall private attorney general actions or other representativesuits. Enforcing this provision, as authorized by the court below, would essentially insulate Citibank from private enforcementactions altogether. On a strikingly similar set of facts, this Court in Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348 invalidateda ban on representative actions as applied to actions under the Private Attorneys General Act (“PAGA,” Labor Code | sections 2698 et seq.). Iskanian held that waiversof actions for the public’s benefit violate California law, and that this California law is not preempted by the Federal Arbitration Act (“FAA”), which covers private disputes, not public law enforcement actions. Iskanian’s reasoning dictates that this Court invalidate Citibank’s ban on private attorney general and representative actions, to the extent it bars McGill from seeking injunctive relief for the public’s benefit in any forum. Moreover, this Court in Broughton and Cruz preserved the right of California consumers to seek injunctiverelief in court. Creating what has become knownasthe “Broughton-Cruz rule,” this pair of decisions provided that, in the narrow area of public injunctions, the institutional shortcomingsof arbitration— namely, the inability of arbitrators to supervise conduct and modify injunctions after the award has been confirmedor to bind third parties—render these remedies ineffective in arbitration. The fundamental premise of the Broughton-Cruz rule is that claims for public injunctive relief may not be forced into arbitration where an arbitrator cannot grant the remedy sought. Where, as here, the arbitration agreementitself explicitly denies the arbitrator that authority, application of Broughton-Cruz to deny enforcement of the agreementasto claims for public injunctive relief is not preempted, as the FAA itself incorporates the principle that arbitration agreements may not waive substantive rights, such as the right to seek public injunctive G o relief under California law. Indeed, U.S. Supreme Court precedent, including American Express Co. v. Italian Colors Restaurants (2013) 133 S.Ct. 2304 (“Italian Colors”), strongly reinforces that an arbitration agreement that precludes pursuit of public injunctiverelief is unenforceable. The Court in Italian Colors held that, though arbitration agreements should generally be enforced according to their terms, an agreementis not enforceable to the extent it seeks prospectively to waive a claimant’s right to assert statutory rights or to pursue statutory remedies. As Citibank’s Agreement requires arbitration ofall claims, yet precludes the arbitrator from awardingrelief that would benefit any non-party to the arbitration, it effectively forbids signatories like McGill from pursuing the remedyof public injunctive relief under California’s consumerprotection statutes in any forum. Citibank’s Agreement therefore violates one of the key limits placed on the enforcementof arbitration agreements by the U.S. Supreme Court. Even absent such an agreementthat explicitly bans public injunctive relief, the Broughton-Cruz principle that institutional limits on arbitrators’ power renderclaimsfor public injunctive relief nonarbitrable remains valid and escapes FAA preemption for the reasons given in Broughton and Cruz themselves as well as becauseof the limits on FAA preemption recognized in subsequentopinions such as Iskanian and Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109. However, the Court need not reach the continued validity of the full extent of the Broughton-Cruz rule to reverse the Court of Appeal’s holding. Indeed, Citibank’s ban on McGill’s right to pursue public injunctive relief in any forum should be invalidated solely on the principles articulated by this Court in Iskanian and bythe U.S. Supreme Court in Jtalian Colors. Alternatively, based on the fundamental proposition that the claim for public injunctive relief must remain available in some forum, this Court may remand the matter so that the trial court, or the arbitrator, if appropriate, can decide whether McGill’s proposed injunctive relief would be within the arbitrator’s powers to grant. In any case, the decision below should be reversed. STATEMENT OF THE CASE I. CITIBANK HAD A PRACTICE OF SELLING ITS “CREDIT PROTECTOR”SERVICE TO INELIGIBLE CONSUMERS Citibank markets andsells to its cardholders an insurance service called Credit Protector.! (1 Clerk’s Transcript [“CT’] 2 [{92-4].) A cardholder who purchases the Credit Protector service pays a monthly premium calculated as a pro rata portion of his credit card balance. (1 CT 2 [95]; 1 CT 4 [918]; 1 CT 5 ({19].) Citibank advertises that, should a cardholder with Credit Protector face certain types of financial hardship, the service will protect him from becoming delinquent on his account. (1 CT 2 [14]; 1 CT 5 [9]19-20].) Citibank represents, for example, thatit will defer or credit certain amountsor even cancel new balances for qualifying events. (/d.) However, the Credit Protector’s limitations, exclusions and conditions are so numerous and complex thatit is extremely difficult or impossible for the cardholder to obtain its benefits. (1 CT 5-7 []{21-24].) Before marketing the Credit Protector service to a given cardholderor accepting the cardholder's monthly premium payment, Citibank makesnoeffort to determine whether that cardholder ever could be eligible to receive benefits under the service. (Id.) Citibank does not disclose all limitations and conditions to prospective customersat or before the time of sale. (Id.) Citibank also systematically processes claims in such a way as to delay or deny benefits under the service despite the 1 These facts are based on the allegations stated in the complaint. Due to Citibank’s promptfiling of the motion to compel arbitration, no discovery has yet been conducted. 6 cardholder's eligibility for them—for example, by purporting to lose documents provided by cardholders required to evaluate a claim for benefits. (1 CT 7-8 [27-30].) McGill was a Citibank cardholder who purchased the Credit Protector service from Citibank and paid a monthly premium for that coverage. (1 CT 8-9 [33-36, 42].) Shortly after McGill became unemployed, she applied for benefits under the Credit Protector service, providing documentsandfilling out forms as Citibank requested. (1 CT 8-9 [[37-39].) However, Citibank then told her the documents were insufficient and claimed to havelost some of the documents she hadprovided. (1 CT 9 [§39].) Due to Citibank’s delays in providing her with the benefits of the service she had purchased, McGill incurred late fees and interest charges on her Citibank credit card account and her credit score was damaged. (1 CT 9 []44-45].) Il. MCGILL SOUGHT A PUBLIC INJUNCTION, ALONG WITH OTHER REMEDIES, AGAINST CITIBANK’S UNLAWFUL BUSINESS PRACTICE McGill filed suit on May 27, 2011, asserting four causes of action arising from Citibank’s marketing,sale, and implementation of its Credit Protector service. (1 CT 1-3 [|{2- 6].) She brought claims both on her own behalf and on behalf of a proposed class under California’s Unfair Competition Law (the “UCL,” Business & Professions Code sections 17200, et seq.), the False Advertising Law (the “FAL,” Business & Professions Code sections 17500,et seq.), the Consumer Legal Remedies Act (“CLRA,” California Civil Code sections 1750, et seq.) and Insurance Codesection 1758.9, et seg. Improper Sale of Insurance). (1 CT 1.) Through these claims, McGill sought to enjoin Citibank from continuing to improperly market and sell the Credit Protector insurance program to the public at large, andfor failing to implement the program lawfully by charging applicants whodo not qualify for the program fee, as well as for monetary damages andrestitution. (1 CT 23-24 [41-13].) On August 26, 2011, Citibankfiled a petition to compel McGill to arbitrate her claims on an individual basis, which McGill opposed. (1 CT 31-57; 3 CT 859-881.) Citibank relied on arbitration terms provided to McGill through a “Notice of Change of Terms” to her Citibank card, which read in relevant part: Effective on the day after the Statement/Closing Date indicated on your November 2001 billing statement, we are amending your existing Citibank Card Agreementto include the following provision regarding binding arbitration. Either you or we may, without the other’s consent, elect mandatory, binding arbitration for any claim, dispute, or controversy between you and us (called “Claims’”). All Claims relating to your account or a prior related account, or our relationship are subject to arbitration... A party who initiates a proceeding in court mayelect arbitration with respect to any Claim advanced in that proceeding by any other party. Claims and remedies sought as part of a class action, private attorney general or other representative action are subject to arbitration on an individual (non-class, . .non- representative) basis, and the arbitrator may award relief only on an individual (non-class, non-representative) basis. Claims must be brought in the name of an individual person or entity and must proceed on an individual (non-class, non- representative) basis. The arbitrator will not award relief for or against anyone whois not a party. If you or we require arbitration of a Claim, neither you, we, nor any other person may pursue the Claims in arbitration as a class action, private attorney general action or other representative action, nor may such Claim be pursued on your or our behalf in any litigation in any court. (1 CT 109-10.) The trial court compelled individual arbitration of all claims for restitution or damages underall four causesof action. (6 CT 1409-15; 6 CT 1481-88.) However, the trial court denied the petition to compel arbitration only as to McGill’s claimsfor public injunctive relief under the UCL, the FAL and the CLRA, staying those claims pending arbitration. (/d.) In partially denying the petition to compel arbitration as to the claimsfor injunctive relief, the trial court relied on the Broughton-Cruz rule. (6 CT 1436, 1439 [lines 19-21].) II. THE TRIAL COURT’S ORDER PARTIALLY DENYING CITIBANK’S PETITION TO COMPEL ARBITRATION BASED ON THE BROUGHTON-CRUZ RULE WAS REVERSED ON APPEAL Citibank appealed thetrial court’s order partially denying the petition to compel arbitration as to McGill's injunctive relief claims. In a court-ordered supplemental letter addressing the impact of Iskanian v. CLS Transportation Los Angeles LLC (2014) 59 Cal.4th 348, McGill argued that Iskanian, which held that the FAA did not mandate enforcement of a waiverof the right to pursue a representative action under PAGA,preserves the right to pursue an analogous private attorney general action for public injunctive relief in court under California’s consumer protection statutes. (McGill’s Letter Brief of July 23, 2014.) Separately, McGill argued that even if the FAA preempted Broughton-Cruz, forcing her claimsinto arbitration would be tantamount to extinguishing her substantive state-law claims. (Id.) At oral argument, McGill respondedto the Court’s questions and Citibank’s arguments, and argued that even if the. Broughton-Cruz rule were preempted, Citibank’s Agreement would be unenforceable to the extent that it expressly bars the arbitrator from awarding public injunctive relief, thereby foreclosing McGill from obtaining that relief in any forum. On December18, 2014, the Court of Appeal issued a published decision reversing thetrial court’s order and remanding with instructions for “the trial court to orderall claimsto arbitration,” including the injunction claims. (Slip op. at p.23.) In so holding, the Court of Appeal concluded that “the Federal Arbitration Act ... preempts the Broughton-Cruz rule” under a broad reading ofAT&T Mobility v. Concepcion (2011) 131 S.Ct. 1740, which preempted a California rule that invalidated class action waivers in consumer agreements. (/d. at p.14.) The 10 Court of Appeal further reasoned that the “effective vindication” exception to FAA preemption does not apply to state statutory _ claims (id. at pp.15-17), and that public injunctive relief claims are too dissimilar from PAGAclaimsto fit under the hmitations of FAA preemption recognized in Iskanian. (Id. at p.22.) The Court of Appeal did not address whether Citibank’s express ban on the awardof public injunctive relief is enforceable. McGill timely filed a Petition for Rehearing in the Court of Appeal on January 2, 2015. She argued that the Court of Appeal should have addressed and accepted her argumentthat, even if the Broughton-Cruz rule were preempted, the trial court’s order | should be affirmed because the contractual provisions prohibiting awards of public injunctive relief amount to a total bar on McGill’s right to pursue statutory remedies provided for under the UCL, the FAL, and the CLRA, running afoul of binding case law. However, the Court ofAppeal denied the Petition for Rehearing, stating that this argument had been waived and declining to reachit. McGill then filed a petition for review, which this Court granted on April 1, 2015. 1] ARGUMENT . I. INJUNCTIVE RELIEF UNDER THE CLRA,UCL, AND FAL IS A POWERFUL REMEDY THAT PROTECTS THE PUBLIC A. The UCL And The CLRA Were Enacted To Protect The Public As this Court has recognized, the “[p]rotection of unwary consumers from being duped by unscrupuloussellers is an exigency of the utmostpriority in contemporary society.” (Vasquez v. Super. Ct. (1971) 4 Cal.3d 800, 808.) To protect California’s consumersfrom deceptive business practices, the legislature enacted three important laws, each with aninjunctive relief component: the UCL, the FAL, and the narrower CLRA. 1. The UCL and FAL The UCL providesthat “unfair competition shall mean and include any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by” the FAL. (Bus. & Prof. Code § 17200.) The FAL, in turn, prohibits a person or corporation from making, or causing to be made, any statement thatis untrueorlikely to mislead consumers regarding the nature of a productorservice. (Bus. & Prof. Code § 17500.) One distinctive attribute of the UCL is that it “borrows’ violations of other laws and treats them as unlawful practices that the [statute] makes independently actionable.” (Cel-Tech Communications v. Los Angeles Cellular Telephone (1999) 20 Cal.4th 163, 180.) The FAL is thus a componentof the UCL, and “any violation of the false advertising law necessarily violates the UCL.” (Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 950-51 12 [internalcitations and punctuation omitted].) The FAL prohibits “not only advertising whichis false, but also advertising which, although true, is actually misleading or which hasa capacity, likelihood, or tendency to mislead the public.” (bid. [citation omitted].) Sections 17204 and 17535 of the Business and Professions Code authorize a private party to enforce the UCL and FAL: Through the UCL, a plaintiff may obtain restitution and/or injunctive _ relief against unfair or unlawful practices in order to protect the public and restore to ~ the parties in interest money or property taken by means of unfair competition. These actions supplement the efforts of law enforcement and_ regulatory agencies. This Court has repeatedly recognized the importance of these private enforcement actions. (Kraus v. Trinity Management Svcs. (2000) 23 Cal.4th 116, 126 [citations omitted]; see also Trafficante v. Metropolitan Life Ins. Co. (1972) 409 U.S. 205, 211 [creation of private attorney general action “is not uncommon in modernlegislative programs” to augment the limited resources of government agencies in implementing importantlegislative policy].) 2. The CLRA The CLRAproscribes a wide array of “unfair methods of competition and unfair or deceptive acts or practices undertaken by any person”with theintent to “result or whichresults in the sale or lease of goods or services to any consumer...” (Civ. Code § 1770.) The CLRA’s scope is narrower than the UCL’s,is expressly limited to transactions involving a “consumer”as defined by the CLRA,proscribes 22 specific acts or practices, and is “confined largely to deceptive representations.” (Vasquez, supra, 4 Cal.3d at p.818.) The CLRA expressly provides: “Any waiver by a consumerofthistitle is contrary to public policy and shall be unenforceable and void.” (Civ. Code § 1751.) The legislature intended the CLRAto 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.” (Civ. Code § 1760.) As part of these economical procedures, the CLRA requires a consumerfirst to notify the person alleged to have committed acts in violation of §1770 of the alleged violations and “[d]Jemand that such person correct, repair, replace or otherwiserectify the goodsor services allegedto be in violation of Section 1770.” (Civ. Code § 1780, subd.(a)(1).) Ifthe person to whom notice has been given has not provided the appropriate correction or remedy, or has not agreed to do so, within 30 days, the consumer maythenfile a court action. (/d.) Thus, under the CLRA,the prospective defendant may avoid the filing of the court action by remedyingor agreeing to remedy the problem. (/d.) These and other heightened protections? for California consumers embody thevital importance of protecting consumers from fraud and misrepresentations in California’s statutory scheme. 2 The CLRA also authorizes a more permissive procedure for certifying a CLRAclass than is set forth under Codeof Civil Procedure § 382. 14 B. Californians Benefit From The Availability of Public Injunctions Injunctive reliefis a critical tool in protecting California citizens, and is widely available for consumers pursuing private attorney general actions under the UCL, the FAL, and/or the CLRA. The focus of the UCL is “on the defendant’s conduct, rather than the plaintiffs damage, in service of the statute’s larger purpose of protecting the general public against unscrupulous business practices.” (In re Tobacco IT Cases (2009) 46 Cal.4th 298, 312.) To that end, the UCLvests a trial court with broad powerto “enjoin on-going wrongful business conduct in whatever context such activity might occur.” (Barquis v. Merchants Collection Assn. (1972) 7 Cal.3d 94, 111.) Likewise, the CLRA expressly provides for the issuance of “an order enjoining such methods,acts or practices.” (Civ. Code § 1780 subd.(a)(2).) Issuance of injunctiverelief is particularly important because unlawful practices utilized against one consumerwill often evidence a broader, continuing course of conduct. The availability of public injunctive relief permits courts to prohibit such unlawful conduct to protect all consumers subject to the sameor similar practices and the public interest. Thus, the statutory authorization of injunctive relief is an explicit example of the “efficient and economical proceduresto secure[] protection” from the unlawful actions enumerated in the CLRA. (Id. § 1760.) Injunctiverelief, like other remedies authorized by the CLRA,is not exclusive, and maybe issued with other remedies. (Id. § 1752.) 15 _. To obtain injunctiverelief, the plaintiff must show that the wrongful conduct alleged in the complaint is ongoingoris likely to recur. (Madrid v. Perot Systems Corp. (2005) 130 Cal.App.4th 440, 464-466.) The plaintiff must proffer “actual evidence that thereis a realistic prospect that the party enjoined intends to engage in the prohibited activity.” (Korea Philadelphia Presbyterian Churchv. Calif. Presbytery (2000) 77 Cal.App.4th .1069, 1084.) For instance, in a case involving unlawful practices relating to a dealer’s automotive purchase agreements, the court affirmed a mandatory injunction against defendantfor backdating contracts, finding that over 228 contracts had been backdated during the relevant period. (Nelson v. Pearson Ford. Co. (2010) 186 Cal.App.4th 983, 1021.) However, the court reversed a mandatory injunction to prevent the defendant from adding insurancecosts to the cash price of vehicles because the evidence did not support the implication that the practice “is ongoingor likely to recur.” (Id.) Injunctive relief that bars a party from continuing to engage in an unlawful business practice maybe issued so long as substantial evidence supports such relief. While there are different kinds of injunctive relief, a public injunction “benefits the public directly by the elimination of the ‘deceptive practices, and the plaintiff benefit[ting], if at all, only by virtue of being a memberof the public.” (Broughton v. Cigna Healthplans (1999) 21 Cal.4th 1066, 1081, fn.5.) As Broughton explained, an order that enjoins a defendant’s “deceptive methods, acts and practices” would “obviously not benefit [the 16 plaintiffs] directly, since they have already been injured.” (Id.) Case law demonstrates the need for public injunctions to prevent a wide array of harmful practices. (See Stop Youth Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal.4th 553 [enjoining sale of cigarettes to minors]; Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163 [enjoining unlawful wage and hour/overtime practices]; Kasky v. Nike, Inc. (2002) 27 Cal.4th 939 [enjoining false advertising regarding inhumane factory conditions]; Committee on Children's Television, Inc.v. General Foods Corp. (1983) 35 Cal.3d 197 [enjoining false advertising of children’s breakfast cereal]: Fletcher v. Sec. Pac. Nat'l Bank (1979) 23 Cal.3d 442 [enjoining a business from misrepresenting a finance charge]; Chern v. Bank ofAmerica (1976) 15 Cal.3d 866 [enjoining a business from misrepresenting interest rate calculations]; Schnall v. Hertz Corp. (2000) 78 Cal.App.4th 1144 [enjoining deceptive fuel charges for rental cars]; Brockey v. Moore (2003) 107 Cal.App.4th 86 [enjoining false advertising of unlicensed practice of legal services]; Ticcont v. Blue Shield of California Life & Health Ins. Co. (2008) 160 Cal.App.4th 528 [enjoining post-claims underwriting]; Colgan v. Leatherman Tool Group, Inc. (2006) 135 Cal.App.4th 663 [enjoining false statementof origin of product].) Thus, in furtheranceof its strong policy protecting the public from harmful business practices, California deputized consumerswith the legal right to obtain and enforce injunctions against businesses. The state andits citizens have a strong interest in preservingthe efficacy of this powerfultool. 17 Il. CITIBANK’S CONTRACTUAL BAN ON A CONSUMER’S RIGHT TO PURSUE A PUBLIC INJUNCTION IN ANY FORUM IS UNENFORCEABLE Citibank’s Agreementexpressly prohibits claimants from asserting claims for public injunctiverelief in any forum and therefore runs afoul of binding law. In relevant part, the Agreementstates that “[aJn award in arbitration shall determine the rights and obligations between the named parties only, and only in respect of the Claims in arbitration, and shall not have any bearing on the rights and obligations of any other person, or on the resolution of any other dispute.” (1 CT 109.) Separately, Citibank’s Agreementprovides that “[t]he arbitrator will not awardrelief for or against anyone whois not a party.” (1 CT 110.) And Citibank’s Agreementprovides that “the arbitrator may awardrelief only on an individual (non-class, non- representative) basis.” (1 CT 109.) Finally, the Agreement disallows a plaintiff from pursuing public injunctiverelief, or any other private attorney general action, in any forum: If you or we require arbitration of a Claim, neither you, we, nor any other person may pursue the Claims in arbitration as a class action, private attorney general action or other representative action, nor may such Claim be pursued on your or our behalf in any litigation in any court. (1 CT 110.) Because these provisions prohibit a consumer from obtaining relief for anyone whois not a party, they foreclose public injunction claims, which by definition are brought for the 18 benefit of non-parties,? in arbitration or in court. Citibank’s absolute ban on the pursuit of public injunctive relief contravenes California law. This Court stated that, “unlike private suits for damages, in a public injunction action a plaintiff acts in the purestsense as a private attorney general.” (Cruz v. PacifiCare Health Systems, Inc. (2003) 30 Cal.4th 303, 312.) That right to pursue public injunctiverelief as a private attorney general is unwaivable under three separate statutes. First, the CLRAexpressly provides that its protections may not be waived by the consumer. (Civ. Code § 1751.) Second, under Civil Code section 1668, agreements “whoseobject, directly or indirectly, is to exempt[their] parties from violation of the law are against public policy and maynot be enforced.” (In re MarriageofFell (1997) 55 Cal.App.4th 1058, 1065.) Third, Civil Code section 3515 provides that “a law established for a public reason cannot be contravenedby a private agreement.” In Iskanian v. CLS Transportation Los Angeles LLC (2014) 59 Cal.4th 348, this Court invoked thelatter two provisions to hold that an agreement cannotforce the waiveroftheright to pursue a representative action under PAGA. (Id. at pp.382-83.) PAGA’s purpose was“to augmentthe limited enforcement capability of the Agency by empowering employeesto enforce the Labor Code as representatives of the Agency,” and wastherefore “clearly established for a public reason.” (Id. at p.383.) Iskanian ° See Broughton, at p. 1080 [“[T]he benefits of granting injunctive relief by and large do not accrueto [the plaintiff], but to the general public in dangerof being victimized by the same deceptive practices as the plaintiff suffered’). 19 held that the FAA does not mandate enforcement of a waiver of the right to pursue a private attorney general action for the public benefit. (/d. at pp.387-88.) That the “fundamental character” of PAGAis that of a “public enforcement action” distinguishesit from other types of representative actions (such as class actions) where a suit is brought by “employee A to bring a suit for the individual damages claims of employees B, C, and D.” (Id. at p.387.) The latter type of representative action,for “victim-specific relief’ such as money damages, may be waived by agreement. (/d. at pp.387-388.) Iskanian’s reasoning applies with equalforce to Citibank’s Agreement’s waiver of public remedies—including public injunctions. As with PAGA,the statutes providing for public injunction relief have a “public statutory purpose that transcends private interests.” (Broughton, at p.1083.) Citibank’s waiver, like the one in Iskanian, prohibits anyrelief for the benefit of non-namedparties, which directly forecloses public injunctions brought for the public’s benefit. (Compare Iskanian, supra, 59 Cal.4th at p.360 with 1 CT 109-110.) Citibank’s Agreementalso specifically prohibits “private attorney general actions” along with “other representative actions.” (1 CT 110.) More broadly, Citibank’s waiver expressly precludes any covered claim from “he[ing] pursued on youror our behalf in any litigation in any court.” (1 CT 110) This means that not only can McGill not pursue injunctive relief for anyoneelse in courtor in arbitration, she is banned even from being a beneficiary of any representative 20 action.* . . That the Agreementoperates to ban a claimant from pursuing public injunctive relief under California consumer laws is not in dispute, as Citibank has avowedly sought to enforce its Agreementto preclude public injunctiverelief. (See 1 CT 31-57.) Like the waiver invalidated in Iskanian, Citibank’s waiver expressly prohibits the plaintiff from pursuing any private attorney general action whatsoever in any forum and mustfall on the same ground. Moreover, any argument that the Agreementis enforceable becauseit conceivably permits “individual” injunctive relief to be awarded in arbitration should be rejected. This Court in Iskanian rejected the similar argument that the pre-dispute waiverat issue in that case was enforceable becauseit might permit single-claimant PAGAarbitration, reasoning that reducing a PAGAaction to a single claimant “w[ould] not result in the penalties contemplated under the PAGAto punish and 4 Citibank’s ban thusprohibits any consumerfrom pursuing any type of private attorney general action, and deprives any of its customers from obtaining any benefits—even as a third party—from any representative action taken against Citibank. So under the Agreement, for instance, McGill would be unable to submit a claim from class action settlement against Citibank to which she is an absent class member. More significantly, McGill would be unable to benefit from any of the protections provided by a public injunction. Thus, hypothetically, if Citibank were enjoined from engaging in an unlawful overcharge practice, under this Agreement, Citibank arguably wouldstill be permitted to engagein the otherwise enjoined practice with respect to the signatories of this Agreement, such as McGill. This provision is therefore more pernicious and broader than the waiver invalidated in Iskanian. 21 deter employer practices that violate the rights of numerous © employees under the Labor Code.” (bid. [quoting Brown v. Ralphs Grocery Co. (2011) 197 Cal.App.4th 489, 502].) Likewise, public injunctive relief—the kind that McGill is pursuing here— is necessarily for the benefit of third parties and cannot be extinguished by a pre-dispute contractual waiver. (Broughton, at p.1080, fn.5 [defining public injunctions as where “the public is generally benefitted directly... and the plaintiff benefitted, if at all, only by virtue of being a memberof the public.”].) To do otherwise and enforce Citibank’s ban would cripple what this Court has repeatedly stated were “importan[t]... private enforcement actions” (Kraus, supra, 23 Cal.4th at p.126) that protect California consumers from unscrupulous business practices. Citibank’s Agreementis also unenforceable under binding U.S. Supreme Court case law, most recently American Express Co. v. Italian Colors Rest. (2013) 133 S.Ct. 2304 (“Italian Colors’). While Jtalian Colors held that the class-action ban in the defendant’s arbitration agreement was enforceable under section 2 of the FAA even thoughit had the practical effect of making the pursuit of particular claims too costly for the plaintiffs (id. at p.2312), Italian Colors reiterated the long-established principle that arbitration agreements may not prospectively waive the right to pursue statutory claims and remedies. As Italian Colors explained, the principle that an arbitration agreement may not foreclose the assertion of particular types of claimsor statutory remedies “finds its origins in the desire to prevent ‘prospective 22 waiverof a party’s right to pursue statutory remedies.” (Id. at p.2310 [quoting Mitsubishi Motors v. Soler Chyrsler-Plymouth (1985) 473 U.S. 614, 637 fn.19 (“Mitsubishi”)].) The Italian Colors Court found that the desire to prevent such waiver would “certainly cover a provision in an arbitration agreement forbidding the assertion ofcertain statutory rights.” (Ibid.) Justice Chin’s concurring opinion in Iskanian, joined by Justice Baxter, relied on Italian Colors to reach the same conclusion as the majority that representative action waivers are unenforceable against a PAGAplaintiff. According to Justice Chin, although the FAA “generally requires enforcement of arbitration agreements according to their terms,” the U.S. SupremeCourt has recognized an exception to that requirement for “a provision in an arbitration agreementforbidding the assertion of certain statutory rights.” (skanian, supra, 59 Cal.4th at p.395 (conc. opn. of Chin, J.) [citing Ztalian Colors, supra, 133 S.Ct. at p. 2310].) Justice Chin concluded that because the defendant’s mandatory arbitration agreement barred its employees from seeking PAGA penalties in any forum,it fell within the exception stated in Italian Colors. (Ibid.) Here, Citibank’s Agreementprospectively forbids the assertion of any claim for public injunctive relief, in any forum. Like the right to pursue PAGAcivil penalties on a representative basis in Iskanian, the right to pursue public injunctive relieffor the public’s benefit under the UCL, FAL, and CLRA cannot be prospectively waived and must remain available in some forum under Jtalian Colors. Moreover, the savings clause of FAA section 2, which provides that arbitration agreements are enforceable “save upon such groundas exist in law or equity for the revocation of any contract” (9 U.S.C. § 2), includes illegal agreements under Civil Code section 1668, which exempts the parties from a violation of the law, and those that “would force a party to forgo unwaivable public rights.” (Little v. Auto Stiegler (2003) 29 Cal.4th 1064, 1079.) An illegal contract that prohibits the assertion of public rights falls within the savings clause becauseit applies equally to ’ arbitration agreements and other contracts. It does not “take its meaning precisely from the fact that a contract to arbitrate is at issue,” but is a “generally applicable contract defens[e].” (Doctor’s Associates, Inc. v. Casarotto (1996) 517 U.S. 681. 685, 687.) Nor does such a principle “stand as an obstacle to the accomplishment of the FAA’s objectives.” (AT&TMobility LLC v. Concepcion (2011) 131 S.Ct. 1740, 1748 (“Concepcion”).) Rather, application of this principle only prevents arbitration in a limited set of cases where arbitration would amount to a waiver of substantive rights, and the FAA’s objectives do not include requiring a party to relinquish “any substantive right... [state] law may afford him.” (Preston v. Ferrer (2009) 552 U.S. 346, 359.) Citibank’s ban on public injunctive relief must be invalidated, and the Court should remand the matterto determine whether McGill's proposed public injunction can be issued by an arbitrator. 24 I. THE BROUGHTON-CRUZ RULE REMAINS GOOD LAW In Broughton and Cruz, decided four years apart, this Court held that claims for public injunctive relief may not be forced into arbitration where an arbitrator cannot grant the remedy sought. As applied here, where the arbitration agreementitself explicitly denies the arbitrator that authority, the Broughton-Cruz rule simply preservestheright of the party to seek public injunctive relief in some forum—inthis case, the Court. Under these circumstances, where Broughton and Cruz simply incorporate the FAA principle that arbitration agreements may not waive substantive rights, the validity of their holding is not in doubt, and this Court need not reach any determination into any broader application of the Broughton-Cruz rule. A. Broughton and Cruz Held That A Claim Seeking a Mandatory Injunction For The Public’s Benefit Is Incompatible With Arbitration In Broughton, the Court considered whetherplaintiffs claims under the CLRA—including for damages and an order enjoining the deceptive practices against a defendant who allegedly misrepresented the quality of medical services provided underits health care plan in its advertisements—should be compelled to arbitration. (Broughton, at pp.1072-1073.) In Cruz, the Court considered whetherthe claims broughtunder the UCL and FAL forrestitution, disgorgement, and injunctive relief relating to the defendant’s sale, marketing, and rendering of medical services should be compelled to arbitration. (Cruz, at p.307.) The Court in both cases highlighted the federal statutory 25 mandate andstrong public policy in favor of enforcing arbitration agreements. (Broughton, at p.1073; Cruz, at pp.311-312.) This Court in both cases then enforced the at-issue arbitration agreementsfor plaintiffs’ claims of damages,restitution, and disgorgement. Broughton found that the malpractice claim, as well as the statutory damages claims under the CLRA, may be sent to arbitration. (Id. at p.1078.) Similarly, Cruz affirmed the order compelling the arbitration of the plaintiffs restitution and disgorgement claims underthe UCL. (Cruz, at pp.317, 320.) However, while it refused to hold that an arbitrator may never issue a permanent injunction under the CLRA,the Broughton Court “conclude[d] on narrower groundsthat the injunction plaintiffs seek in the present case is indeed beyond the arbitrator’s powerto grant.” (Broughton, at p.1079.) Under Broughton, a specific type of injunction pursued by a plaintiff “functioning as a private attorney general[to] enjoin[{] future deceptive practices on behalf of the general public” is not subject to arbitration. ([d. at pp.1079-80.) Notably, Broughton did not extend its ruling to other types of injunctions that have “effect beyond the parties themselves,” such as to prevent copyright infringementor prohibit a labor strike where the benefits to the public “were incidental to the primary purpose ofresolving a conflict between the parties and rectifying private individual wrongs.” (d.) In exempting public injunctive relief from forced . arbitration, this Court invoked a cardinal principle of the FAA— that, by agreeing to arbitration, “the parties do not forego 26 substantive rights, but merely agree to resolve them ina. different forum.” (Broughton, at p.1075 [citing Mitsubishi, supra, 473 U.S. at p. 614 and Shearson/American Express, Ine. v. McMahon(1987) 482 U.S. 220].) The Broughton Court then applied the U.S. Supreme Court’s “inherentconflict” test under which a claim’s unsuitability for the arbitral forum maybe found in an “inherentconflict between arbitration and the [statute’s] underlying purposes.” (ld.[citing Gilmer v. Interstate/Johnson Lane Corp. (1991) 500 U.S. 20, 26.].) Underthis test, this Court found that public injunctive relief is fundamentally incompatible with arbitration due-to the confluence of two issues. | “First, that relief is for the benefit of the general public rather than the party bringing the action.” (Broughton, at p.1082.) The Broughton Court emphasized that the public—not the private party—reapsall of the benefits of the injunctive relief. Wd.) Thus, Broughton distinguished public injunctions from remedieswhere the public benefit “was merely incidental to private compensation”such as treble damagesin federal antitrust law. (Ud. [distinguishing Mitsubishi, supra, 482 U.S. at pp.635-636].) Both Broughton and Cruz expressly stated that the holding does not extend to injunctive relief “designed primarily to rectify individual wrongs.” (Cruz, at p.315.) Because the at-issue injunctive relief involves a “public statutory purpose that transcends private interests” (Broughton, at p.1082), it falls outside the ambit of the FAA, which facilitates arbitration to “voluntarily resolve private disputes in an expeditious and efficient manner.” (/d. at p.1080 [citing Dean Witter Reynolds, 27 Inc. v. Byrd (1985) 470 U.S. 213, 221].) Second, the Broughton and Cruz Court found that “institutional shortcomingsof private arbitration in thefield of such public injunctions” rendered the statutory remedy of a pubic injunction unavailable in arbitration. (Broughton, at p. 1081.) To be sure,this finding does not reflect any “judicial hostility” towardsthe arbitral forum. (Id. at p.1083.) The Court in Broughton and Cruz did not cast doubt on the effectiveness of private arbitration to resolve claims for damages, even for claims involving California consumerprotection statutes. (See Broughton, at pp.1085-86; Cruz, at pp.317-318.) Rather, in this narrow areaof injunctiverelief for the public benefit, the Court recognized that specific institutional limitations of the arbitral forum would render the remedyineffective. For a permanentinjunction for the public’s benefit to be effective, judicial monitoring is required. This is to “ensure the efficacy” of a public injunction, where a court must have the capacity to “reassess the balance between the public interest and the private rights as changing circumstancesdictate.” (Broughton, at p.1081.) In certain cases, supervising such an injunction is so complex that judges “may assume quasi-executive functions of public administration that expandfar beyond the resolution of private disputes.”® (Id. at p.1081.) > For instance, following a ten-year permanent injunction against anti-trust practices of a shoe machinery manufacturer, the district court was ordered by the U.S. Supreme Court to investigate the efficacy of the injunction to determine whetherit should be modified. (United States v. United Shoe Machinery 28 Conversely, “an arbitrator lack[s} the institutional continuity and the appropriate jurisdiction to sufficiently enforce and, if needed, modify a public injunction.” (Cruz, at p.312.) Arbitrators do not exercise powers over third parties, and they do not have continuing jurisdiction to enforce a mandatory injunction. (Broughton, at p.1081.) Moreover, because arbitration awards do not have preclusiveeffect, other parties are not bound by the award. If an injunction were “imperfectly enforced,” another party would havetorelitigate the matter. (d.) “Thus, a superior court that retains its jurisdiction over a public injunction until it is dissolved provides a necessary continuity and consistency for which a series of arbitrators is an inadequate substitute.” (d.) Aside from Broughton’s explanations, many other cases demonstrate the necessity of lengthy court supervision over public injunctions. (See United Shoe Machinery, supra, at fn. 5, 391 U.S. at p.251 [modifying a permanentinjunction after ten years]; United Steelworkers ofAm. v. United States (1959) 361 U.S. 39, 56 [issuing public injunction affecting “hundredsof thousands of employees”].) Only courts may exercise continuing jurisdiction after the injunction is issued, see Transgo Inc. v. Ajac Transmission Parts Corp. (9th Cir. 1985) 768 F.2d 1001, 1030, and only courts have the inherent powerto modify or dissolve permanentinjunctions as changing circumstancesdictate.® (See Corp. (1968) 391 U.S. 244, 251.) This type of long-term supervisory role would be impossible for an arbitrator. 6 While the FAA and the California Arbitration Act (“CAA”) provide limited powersfor a court to modify or vacate arbitral 29 SEC v. Worthen (9th Cir. 1996) 98 F.3d 480, 482.) Further, a court maywell vacate an arbitration award of mandatory injunctive relief that binds third parties based on the arbitrator having “exceed[ed] his powers” in rendering that award. (See, e.g., Comedy Club, Inc. v. Improv West Assocs. (9th Cir. 2009) 553 F.3d 1277, 1287-88 [vacating an award that enjoinedlicensee’s affiliates and other non-parties to the operative trademark agreement from openingor operating improv businesses].) The transfer of such claims to arbitration would therefore likely result in court challenges to the final arbitral award. Thus, arbitration’s speediness,efficiency, and “finality’— the very fundamental attributes that makeit an attractive forum for resolving certain disputes—impairits effectiveness regarding broad injunctive relief, which requires protracted supervision, public accountability, and, most importantly, authority over third parties. Due to institutionalinability of arbitrators to enforce the remedy as well as the injunction’s statutory purpose to protect the public, Broughton held that the FAA doesnot override law preservingthe right to pursue public injunctive relief for CLRA claims in court. (Broughton, at p.1082.) To be sure, the Broughton-Cruz rule “applies only when awards, see 9 U.S.C. §§ 9, 10; Civ. Proc. Code §§ 1286.2, 1286.6, none of these grounds includes material changesin factor law, whichis the traditional equitable basis for tailoring public injunctions. (See Agostini v. Felton (1997) 521 U.S. 203, 215 [overruling prior precedent and dissolving permanentinjunction on that basis].) ‘the benefits of granting injunctive relief by and large do not accrue to that party, but to the general public in dangerof being victimized by the samedeceptive practices as the plaintiff suffered.” (Kilgore v. Keybank, N.A. (9th Cir. 2013) 718 F.3d 1052, 1060 [en banc, quoting Broughton, at p.1080].) In Kilgore, the plaintiffs requested prohibitions would not redoundto the benefit of a large numberof consumers, but only a small portion of the putative class, and therefore did not implicate Broughton- Cruz. (Id. at pp.1060-61.) As the Kilgore en bancdecision confirms, Broughton-Cruz comesinto play only where an injunction benefiting non-parties would clearly not be effective if rendered by an arbitrator. B. The FAA Does Not Preempt The Broughton- Cruz Rule As Applied Here 1. Broughton and Cruz Followed The Nonwaiver Principle Applicable to Both State and Federal Claims The Court of Appealerred in finding that the Broughton- Cruz rule violates the longstandingrule that the FAA preempts a state law that “prohibits outright the arbitration of a particular type of claim.” (Slip op. at p.14 [quoting Concepcion, supra, 131 S.Ct. at p.1747].) In fact, as applied here, that rule must give way to the FAA’s non-waiverprinciple, incorporated by Broughton-Cruz, which prevents enforcement of any agreement that operates to extinguish a substantive claim uponits transfer to arbitration. The FAA’s primary purposeis to authorize a choice of forum for resolving disputes, not to provide a mechanism for preventing assertion of claims. Section 2 of the FAA provides that: “[a] written provision in any ... contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist in law or in equity for the revocation of any contract.” (9 U.S.C. § 2 [emphasis added].) Section 2 specifically requires enforcement of agreements to resolve disputes by arbitration, not agreements that foreclose assertion and resolutionof claims. In Scherk v. Alberto-Culver Co. (1974) 417 U.S. 506, 519, . the U.S. Supreme Court, in enforcing an agreementto arbitrate federal securities claims, described arbitration agreements asa “specialized kind of forum-selection clause.” The Court has repeated its characterization of arbitration agreements underthe FAA as“forum selection”or “choice-of-forum” clauses regularly in the decades since Scherk. (See, e.g., CompuCredit v. Greenwood (2012) 132 S.Ct. 665, 671; 14 Penn Plaza LLCv. Pyett (2009) 556 U.S. 247, 269; EEOCv. Waffle House, Inc. (2002) 534 U.S. 279, 295 & fn.10; Gilmer, supra, 500 U.S. at p.29; Mitsubishi, supra, 473 U.S. at pp. 629-31.) A forum-selection clause determines wherea claim will be decided, not whether it may be pursued. Thus, the Supreme Court has emphasized that under the FAA an arbitration agreement “only determines the choice of forum.” (Waffle House, supra, 534 U.S. at p.295, fn.10 [emphasis added].) As the Court emphasized in Mitsubishi, “[b]y agreeing to arbitrate a statutory claim, a party does not forgo the substantiverights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum.” (473 U.S. at p.628.) Not only does the FAA not require enforcement of agreements that deprive parties of substantive rights in the guise of arbitration:it prohibits their enforcement. Mitsubishi stated that if an arbitration agreement “operated as a prospective waiverof a party’s right to pursue statutory remedies, we would havelittle hesitation condemning the agreementas against public policy.” (473 U.S. at p.637, fn.19.) This point has been repeated numerous times in subsequent cases. (See, e.g., Pyett, supra, 556 U.S. at p.266; Preston, supra, 552 U.S. at p.359; Waffle House, supra, 534 U.S. at p.295, fn.10; Circuit City Stores, Inc. v. Adams (2001) 532 U.S. 105, 123; Gilmer, supra, 500 U.S.at p.26; McMahon, supra, 482 U.S. at pp.229-30.) This non-waiver principle was mostrecently stated in Italian Colors, where the Court confirmed that an arbitration agreementcannot be enforcedif it “forbid[s] the assertionof... statutory rights.” (133 S.Ct. at p.2310.) As explained, because Citibank’s Agreementbansall remedies benefitting non-parties as well asall private attorney general actions to be brought in arbitration or in court, the Broughton-Cruz rule operates to invalidate that term. Broughtonitself expressly followed the principle that a party cannot forgo substantive rights when claims are transferred to arbitration. Broughton observed that Mitsubishi and McMahoninvoked the nonwaiverprinciple but permitted arbitration of statutory claims due to the “private nature of the G o O Q damages remedyat issue” that made “‘the private attorney general role’ for such plaintiffs relatively ‘implausible.” (Broughton, at p.1076.) Broughton then reasoned that Mitsubishi and McMahon's analyses “imply... that when the primary purposeandeffect of a statutory remedyis not to compensate for an individual wrong but to prohibit and enjoin conduct injurious to the general public, i.e., when the plaintiff is acting authentically as a private attorney general, such a remedy may be inherently incompatible with arbitration.” (Id.) Broughton thus followed the Mitsubishiline of case law in stating that the FAA does not “compelstates to permit the vitiation through arbitration of the substantive rights afforded” by such statutes. (Id. at p.1083.) Only for this particular type of remedy, “whichis beyondthe arbitrator’s power to grant,” is the FAA’s mandate withdrawn. (/d. at p.1079.) Likewise, the U.S. Supreme Court has stated that arbitration may not be precluded “so longas. . . the guarantee of the legal powerto impose liability—is preserved.” (CompuCredit v. Greenwood (2012) 132 S.Ct. 665, 671 [emphasis in origina]].) That guarantee is not available here because the arbitral forum lacks the ability to issue and enforce public injunctions, as discussed.’ Again, the Courts in Broughton and Cruz did not find a categorical exemption from arbitration based on a merepolicy 7 And, as discussed above, the Agreement here expressly prohibits the arbitrator from awardinganyrelief that would benefit non-parties to the arbitration, ensuring that the “the legal powerto imposeliability” not only is not guaranteed, butit is conclusively foreclosed. (1 CT 109-10.) preferenceforlitigation. Some decisions, including Ferguson v. Corinthian Colleges, Ine. (9th Cir. 2013) 733 F.3d 928, have questioned whether public injunctions would actually be nullified in arbitration without addressing the specific “institutional shortcomings” detailed by Broughton. That issue should not be reached here. Broughton- Cruz, as applied to an agreementprohibiting the assertion of public injunctive relief in any forum,is fully consistent with the FAA’s non-waiver principle and is not preempted. The fact that remedies understate statutes (rather than federal statutes) are at issue does not change the FAA’s preemption analysis.’ This Court has, on numerousoccasions,. expressly rejected the argument that the FAA requires enforcementof arbitration agreements that waive otherwise unwaivable state law rights. (See Little, supra, 29 Cal.4th at pp.1078-79.) Similarly, this Court in Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, applied the Mitsubishi principle that the FAA “disallows formsof arbitration that in fact compel claimantsto forfeit certain statutory rights” to rights created by a state statute, and held that the FAA doesnot require arbitration of state statutory claims unless the agreement 8 Fergusonrelied on dicta from Justice Kagan’s dissent in Italian Colors for this point, even though the majority did not so limit its analysis regarding prospective waivers only to federal statutes. (See Italian Colors, supra, 133 S.Ct. at p. 2320 [dis. opn. of Kagan, J].) Justice Kagan asserted only that procedures incompatible with arbitration cannotbe justified by the need to make it more practical to pursue state-law claims(see id.), but did not state that an arbitration clause may waive a state-law claim. | permitsa party to “fully ‘vindicate [his or her] statutory cause of action in the arbitral forum.” (Jd. at pp.99-101 [citation omitted]; see also Iskanian, supra, 59 Cal.4th at p.395 (conc. opn. of Chin, J.) [finding that “a provision in an arbitration agreement forbidding the assertion of certain [state] statutory rights” will be invalidated under the FAA].) The Cruz Court also observed that the U.S. Supreme Court has neverprohibited a state from restricting a private arbitration agreement that inherently conflicts with a law primarily serving a public purpose. (Cruz, at p.313.) Extending theFAA in sucha mannerto extinguish a remedy enactedfor a wholly public purpose, simply because it was a state rather than federal law, would be “perverse.” (Broughton, at p.1083.) This Court is not alone in concluding that an enforceable arbitration agreement must permit effective vindication of state- created rights. The U.S. Supreme Court expressed the same view in Preston. There, while holding that the FAA requires arbitration of a claim underthe California Talent Agencies Act, the Court observed that the issue was “only a question concerning the forum in whichthe parties’ dispute will be heard,” because “[b]y agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits their resolution to an arbitral forum.” (Preston v. Ferrer, supra, 552 U.S. at p.359 [quoting Mitsubishi, supra, 473 U.S.at p.628].) Underscoring that Mitsubishi applies equally to state andfederal claims, the Court in Preston stated that under the FAA,a party to an arbitration agreement“relinquishes no substantive rights... California law mayaccord him.” (Ibid. {emphasis added; see also Circuit City, supra, 532 U.S. at p.123 [quoting Mitsubishi's statement in a case involving state-law claims]. Similarly, in Kristian v. Comcast Corp. (1st Cir. 2006) 446 F.3d 25, the court invalidated arbitration provisions that would “prevent the vindication of statutory rights understate and federal law.” (Id. at p.29.) The court explained that “fujnless the arbitral forum provided by a given agreement providesfor the fair and adequate enforcementof a party's statutory rights, the arbitral forum... loses its claim as a validalternative to traditionallitigation.” (Id. at p.37.) Finding this principle equally applicable to state and federal claims (seeid. at p.63), the court separately analyzed the plaintiffs’ state and federal antitrust claims before determining that certain provisions of the arbitration agreements could not be applied to either. (Seeid. at pp.44-60, 64.) Likewise, in Booker v. Robert HalfInternational(D.C.Cir. 2005) 413 F.3d 77, the D.C. Circuit, in an opinion by then-Judge John Roberts, recognized that the FAA permitted arbitration of claims underthe District of Columbia law onlyif arbitration allowed for the assertion of those claims without limitation on a party’s substantive rights. Judge Roberts began with the unqualified statement that “statutory claims may be subject to agreements to arbitrate, so long as the agreementdoes not require the claimantto forgo substantive rights afforded under the statute.” (Ud. at p.79.) The court therefore refused to enforce a provision in the arbitration agreementforeclosing punitive damagesavailable under D.C. law. (Id. at pp.79-83.) The Court of Appeal dismissed thesecases, finding that Kristian and Booker “applied the exception to state statutory rights without considering whetherthe exception’s underlying rationale supported its application to state statutory rights.” (Ship op. at p.17.) The Court in Ferguson did likewise. (733 F.3d at p.936.) In categorically rejecting the principle that state substantive rights are preserved in arbitration, the Court of Appeal implied that the FAA’s preemptive power would mandate ~ the enforcementof termsof any arbitration agreement and override any state law to the contrary. (Slip op. at p.16.) Under this reading, the FAA would mandate enforcementof an arbitration agreement that would, for instance, simply force employees to waive their right to pursue overtimeclaims under the Labor Code. The notion that the FAA authorizes nullification of such substantive state-law claimsis badly mistaken. Of course, the FAA displaces contrary state law under the Supremacy Clause, but the non-waiverprinciple is not based on the idea that substantive rights displace the FAA;it rests on the recognition that the FAA itself does not provide for waiver of substantive rights. As explained above, Section 2 of the FAA provides for enforcement only of agreements to resolve claims by arbitration, not agreements that waive claims and preclude their resolution by arbitration. Put another way, when anarbitration clause imposes terms requiring a party to forgo substantive rights, it exceeds what the FAA requires courts to enforce. A state-law doctrine that likewise prohibits enforcementof arbitration agreements that effectively waive substantive rights does not improperly attempt to override federal law, but is fully consistent with the FAA and implements the FAA’s own policy. Thatis, the Mitsubishi non-waiverprinciple is “part of the body of federal substantive law of arbitration” (Kristian, supra, 446 F.3d at p.63), and therefore a corresponding state law doctrine does not conflict with federal law. The Court of Appeal’s suggestion that it would violate the Supremacy Clauseto apply Mitsubishi’s non-waiverprinciple to state-law rights “confuse[s] an agreement to arbitrate’—-whichis protected by the FAA and, hence, the Supremacy Clause—‘with a prospective waiver of the statutory right”—which the FAA does not authorize. (Pyett, supra, 566 U.S.at p. 265.) 2. Concepcion Does Not Abrogate Broughton and Cruz Aside from mistakenly holding that the non-waiver principle applies only to state rights, the Court of Appeal incorrectly held that the Broughton-Cruz rule cannot survive Concepcion’s sweeping “directive.” (Slip op. at p.14.) The Court of Appeal’s apparently limitless view of Concepcion’s holding— construing Concepcion to “dramatically broaden the FAA’s permissive scope” (slip op. at p.14)—is at odds with this Court’s reading of the samecase. In Concepcion, the United States Supreme Court overruled the Discover Bank rule becauseit “interferes with arbitration.” (131 S.Ct. at p.1750.) According to Concepcion, the principal problem with Discover Bank wasthatit “allowed any party toa consumerarbitration to demand [classwide arbitration] expost.” ([bid.) By allowing consumers in mostcases to avoid arbitration unless classwide arbitration were offered, Discover Bank “interfere[d] with fundamentalattributes of arbitration and thus create[d] a schemeinconsistent with the FAA.” (Id.at p.1748.) Accordingto this Court, “what is new is that Concepcion clarifies the limits the FAA places on state unconscionability rules as they pertain to arbitration agreements.” (Sonic- Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1143 (“Sonic IT’).) Concepcion held that even “facially nondiscriminatory rules[] must not disfavor arbitration as applied by imposing procedural requirements that ‘interfere[] with the fundamental attributes of arbitration,’ especially its ‘lowercosts, greater efficiency and speed, andthe ability to choose expert adjudicators to resolve specialized disputes.” (Ibid. [quoting Concepcion, supra, 131 S.Ct. at pp.1748, 1751; emphasis in original]) Sonic IT concluded that while Concepcion preempts suchrules, “[ilmportantly, state-law rules that do not ‘interfere with the fundamental attributes’ of arbitration’ [citation] do not implicate Concepcion’s limits on state unconscionability rules.” (bid [emphasis added]) Applying this understanding of Concepcion, this Court in Sonic IT overruled an earlier decision that required a “Berman hearing”prior to a wage arbitration, whichit held to impermissibly engraft a procedure that “significantly delays the commencementof arbitration.” (57 Cal.4th at p.1126.) And in Iskanian, the Court overruled an earlier decision invalidating 40 class waivers undercertain circumstances becauseit permitted the availability of class proceedings that “Concepcion held [to] interfere with the fundamental attributes of arbitration.” (59 Cal.4th at p.364.) However, as explained above, Iskanian separately held that Concepcion does not preempt state law that invalidates a waiver of the right to pursue a representative PAGA action, regardless of whether the waiver appears in an arbitration agreement. (59 Cal.4th at pp.384-388.) And Sonic IT instructed courts to rigorously examine arbitration agreements for substantive unconscionability in-cases where parties surrender statutory benefits. (57 Cal.4th at pp.1149-50.) These decisions confirm that the FAA does not override just any state law touching on arbitration; rather, Concepcion operates to specifically displace lawsin conflict with the fundamentalattributes of arbitration. Here, the Court ofAppeal did not find that the Broughton- Cruz rule interfered with the fundamentalattributes of arbitration of speed,efficiency, or lower costs. And it could not. Broughton-Cruzis, at bottom, not a rule of procedure, but a rule that preserves a right to pursue a statutory remedy, public injunction, that would be renderedineffective in arbitration. Moreover, Broughton and Cruz explicitly addressed the authority discussing the rule that displaces any state law that “prohibits outright the arbitration of a certain type of claim” (Concepcion, supra, 131 S.Ct. at p.1747), which the Court of Appeal stated was dispositive in abrogating Broughton and Cruz. In fact, the case on which Concepcion relied for this rule, 4] Preston, summarized a body of FAA jurisprudenceestablishing this rule (See 552 U.S. at pp.353 [citing Southland Corp.v. Keating (1984) 465 U.S. 1 [preempting a California statute exempting franchise law claims from arbitration]; Perry v. Thomas (1987) 482 U.S. 483 [preempting California Labor Code section 229 insulating wage suits from arbitration], and Doctor’s Assocs., supra, 517 U.S.at p.687 [striking down state law requiring special notice for arbitration provisions in contracts].)9 Broughton and Cruz expressly considered thesecases. In reviewing these precedents, Broughton and Cruz recognized that the U.S. Supreme Court “has rejected numerous efforts and argumentsbystate courts, federal courts andlitigants to declare certain classes of cases not subject to arbitration.” (Cruz, at p.311-13; Broughton, at pp.1074-75.) Devoting a lengthy openingsection to the consideration of Supreme Court case law on Section 2 of the FAA “over the past 15 years,” Broughton and Cruz recognized that Southland andits progeny withdrew the state’s power to prevent parties from arbitrating statutory claims as well as those purely contractualif the parties so intend. (Cruz, at pp.313; Broughton, at pp.1073-78.) As Broughton noted, Southland, Perry, Doctor’s Associates, among other cases, stand for the proposition that any rule that disfavors arbitration agreements—that treats arbitration with suspicion— ’ Notably, the Court of Appealinitially recognized that the rule that the FAA preempts state rules that prohibit outright arbitration of a private claim is “well-established and has been repeated reaffirmed.” (Slip op. at p. 8 [citing Preston, supra, 552 U.S.at p. 353].) 42 is preempted by Section 2 of the FAA. (Id. at pp.1073-75, 1078.) At the sametime, the FAA does not permit the “vitiation through arbitration of the substantiverights” afforded by statute. (Broughton, at p.1083.) Relying on a separate lineofcases, includingMitsubishi, Gilmer, and McMahon, Broughton held that “in a narrowclass”of “private attorney general actions” where the protections of substantive law would be eviscerated by the transfer of such claimsto arbitration, the matter is resolved in court. Ud.) Broughton harmonized the competinglines ofcase law, and cannot be found to have been preempted by a doctrine deriving from casesit already incorporated intoits decision. (See Agostini, supra, 521 U.S. at p.237 [admonishing that lower courts should refrain from concluding that the Supreme Court’s “more recent cases have, by implication, overruled an earlier precedent”].) Other errors afflict Ferguson and the decision below. First, Broughton and Cruz applied the FAA’s “outright prohibition” mandatecorrectly, by sending private claims to arbitration. (See, e.g., Cruz, at pp.317-319 [overruling a lower court decision exempting disgorgement and restitution claims in class actions from arbitration]; Broughton, at pp.1085-1087 [sending damages claims under CLRAto arbitration].) Second, contrary to the decision below, Concepcion broke no new ground onthis issue. (See slip op. at p.14.) Concepcion did not itself implicate the “straightforward”rule displacing state laws that prohibit outright claims from arbitration. (131 S.Ct. at p.1747.) Rather, the case called for the Court to engage in a “more complex” inquiry regarding generally applicable contract rules, such as unconscionability, “that [are] alleged to have been applied in a fashion that disfavors arbitration.” (Id.) Concepcion’s passing invocation of a previously established rule adds nothing new that would abrogate California Supreme Court case law. In short, the relevant legal principles have not changed since the issuance of Broughton and Cruz. Rather, cases cited by Ferguson, such as Marmet Health Care Center v. Brown (2012) 132 S.Ct. 1201, simply applied long-established law to preempt state laws that purported to exemptprivate claims from arbitration. They do not cast doubt on the application of the Broughton-Cruz rule to an agreementthat expressly prohibits a statutory remedy from being asserted in any forum. 3. The FAA Does Not Mandate The Waiver of A Claim Entirely For The Public’s Benefit The Broughton-Cruz rule, as applied to this case, also cannot be preempted because the FAA does not mandate enforcementof a waiverof claims brought solely for the public’s benefit. Rather, the FAA governsprivate claims by “aim[ing] to ensure an efficient forum for the resolution ofprivate disputes.” Uskanian, supra, 59 Cal.4th at p. 384 [emphasis in original].) The FAA’s focus on private disputes is embodied in the statutory language of Section 2, which enforces “a contract evidencing a transaction involving commerce tosettle by arbitration a controversy thereafter arising out of such contract or transaction.” (Uskanian, supra, 59 Cal.4th at p.384 [emphasis in original, quoting 9 U.S.C. § 2].) As this Court explained, this 44 phraseis “most naturally read to mean a dispute about the respective rights and obligationsof parties in a contractual relationship.” (d. at p.385.) Moreover, the FAA’slegislative history shows that “the FAA’s primary objective was the settlement of ordinary commercial disputes.” (Ud.) The Court concludedthat “there is no indication that the FAA wasintended to govern disputes between the governmentin its law enforcement capacity and private individuals.” (d.) Consistent with the understanding that the FAA applied to private claims, the Court observed that every U.S. Supreme Court decision save one involved a dispute involving a private party’s ownrights. (See id. at pp.385-386[citing all FAA cases since Moses H. Cone Hospital v. Mercury Constr. Corp. (1983) 460 U.S. 1, 6-7, where the Court first announceda liberal policy favoring the enforcementof arbitration agreements].) In a separate portion of the opinion, Jskanian held that the — FAA preemptsa state rule that invalidates a class action waiver in an arbitration agreement undercertain circumstances. (59 Cal.4th at p.364.) The split decision in Iskanianillustrates the FAA’s scope: where private disputesare at issue, a rule that requires the availability of class actions, which is a “procedural device that interferes with the fundamental attributes of arbitration” of “streamlined proceedings and expeditiousresults,” cannot survive FAA preemption. (/d. at p.365.) Conversely, the FAA does not preempt a rule that preserves a public right—that of employees to pursuecivil penalties by bringing a “law enforcement action designed to protect the public andnot benefit 45 private parties.” (/d. at pp.387-388 [quoting Arias v. Super. Ct. (2009) 46 Cal.4th 969, 986].) It follows from Iskanian’s reasoning that the FAA does not preempta rule preserving the right to seek public injunctive relief under California’s consumerprotection statutes. A plaintiff pursuing public injunctive relief under the UCL, CLRA and FAL on behalf of the general public does so as a bonafide private attorney general, as she is seeking not “to resolve a private dispute but to remedy a public wrong.” (Broughton, at pp.1079- 80.) As in Iskanian, both Broughton and Cruz drew a sharp distinction between claims seeking specific relief for victims and public injunctions, which is “designed to prevent further harm to the public at large rather than to redress or prevent injury to plaintiff.” (Cruz, at p.1165; Broughton, at p.1084.) Based on the reasoning of these decisions, the FAA does not override rules protecting a party’s right to pursue non-victim specific relief— relief that either directly benefits the public at large or the state. The Court of Appeal differed, agreeing with /skanian’s reasoning but limiting the scope of its holding to the unique attributes of PAGA. (Slip op. at pp.17-23.) Accordingto the decision below, /skanian’s invalidation of PAGA representative action waivers has no bearing on the continued validity of Broughton and Cruz because the “state retains ‘primacy over private enforcementefforts” in a PAGA action. The court below also noted that the initiation of a PAGA suit necessitates a pre- litigation notice to the state, which is not required for in UCL, FAL and CLRAactions, and a judgment in a PAGAaction, unlike 46 in consumerlaw actions, binds the state itself. Ud. at pp.22-23.) This cramped reading of [skanian limits this Court’s holdingto just one type of action, a PAGA suit, even though the Court’s reasoningis not so limited.!© Only a PAGA suit—orat most, a qui tam action—hasthe precise attributes that the Court of Appeal identified as falling outside of the FAA’s mandate. But this inverts the logic of Iskanian: Iskanian concluded that while FAA mandated enforcementof arbitration agreements for private disputes, it did not similarly require enforcementof a waiver of the right to bring a representative law enforcement actions on behalf of the public. Nothing in [skanian precludesits - © application to anothertype of private attorney generalaction, regardless of whetherit binds the state, or whether it requires pre-litigation notice to the state. No single attribute uniqueto the PAGAaction itself is necessary to Iskanian’s holding. Left out of the analysis below are the central pillars of the Iskanian decision. First, as explained above, Iskanian established that the right to bring a representative PAGAsuit is an unwaivable public right because a “law established for a public reason cannot be contravened by private agreement.” (59 Cal.4th at p.383 [quoting Civ. Code § 3513].) Second, the Court held that this unwaivable right to pursue PAGAclaimsis not preempted because it does not stand “as an obstacle to the 10 Although Jskanian stated that its FAA holding applies specifically to the facts before it, that the Court, undoubtedly familiar with the holdings of Broughton and Cruz, did not identify either of those cases as being precluded from Iskanian’s holding, is telling—particularly since /skanian’s reasoning would naturally extend to cover public injunctiverelief. 47 accomplishmentof the FAA’s objectives.” (Id. at p.384 [citation omitted]). This is because the FAA primarily covers disputes involving “the parties own rights and obligations,” and not public disputes such as thosethat involve a state enforcement agency. (Id. at p. 385.) Similarly, in pursuing a public injunction, the plaintiff is acting as a law enforcer in preventing further harm; sheis not vindicating a private right or resolving a private dispute that would be covered by the FAA. A permanentpublic injunction against Citibank in this case would spare the public from deceptive or misleading marketing practices, and potentially require reformationof Citibank’s Credit Protector serviceitself, thereby benefitting Citibank’s customers. Such an injunction would only incidentally benefit McGill as a memberofthe public. Indeed, another court expressly connected public injunctive relief to PAGAin a decision that pre-figured Iskanian: Here, the relief [of civil penalties provided by PAGAJ is in large part “for the benefit of the general public rather than the party bringing the action” (Broughton, supra, 21 Cal.4th at p. 1082), just as the claims for public injunctive relief in Broughton and Cruz, supra, 30 Cal.4th 303. (Brown v. Ralphs, supra, 197 Cal.App.4th at p.501.) Under Iskanian, the FAA doesnot override a rule preserving the right to pursueprivate attorney general actions for public injunctive relief under the California consumerprotection statutes. Broughton and Cruz are also fully consistent with U.S. 48 SupremeCourt case law. While Broughton observed that, at the time of its holding, the Supreme Court had never“directly considered” a claim involving “a public statutory purpose that transcends private interests” (21 Cal.4th at p.1083), one subsequentcase did address precisely that issue. In EEOC v. Waffle House, Inc. (2002) 534 U.S. 279 “Waffle House’), identified by Iskanian as the sole Supreme Court case addressing public enforcementactions (59 Cal.4th at p.386), a six-member majority concluded that the Equal Employment Opportunity Commission (HEOC) maysueto enjoin discriminatory employment practices and for victim-specific relief, notwithstanding an arbitration agreement to which EEOC was not party. In so holding, the Court also emphasized that the HEOC’s statutory function as an enforcer of public rights would be underminedif such agreements were enforced. (Id. at p.295.) Indeed, this Court in Cruz observed that, in Waffle House, “the three-person dissent agreed with the majority that the EEOC was not bound by employee arbitration agreements whenit pursued non-victim-specific relief’ but disagreed only on whether “victim-specific relief” should be sentto arbitration. (/d. at p.319 [citing Waffle House, supra, 534 U.S. at p.298 (dis. opn. of Thomas, J.)].) The implication of this observation is that the U.S. Supreme Court unanimously agreed that the EEOC’s pursuit of claimsstrictly for the public’s benefit is not covered by the FAA— drawing a stark distinction beween public enforcementactions andvictim-specific relief. Expandingon its observation, Cruz found that “Waffle 49 House suggests that the Supreme Court’s agreement that a person acting entirely on behalf of the public—in the EEOC’s case in all of its actions and in Cruz’s case when he pursues a public injunction—acts beyond the scopeof any arbitration agreement.”!! (Cruz, at p.320, fn.6.) In other words, Waffle House, as interpreted by this Court, supports McGill’s position that the FAA does not cover injunctive relief brought entirely for the public’s benefit. | There have been no Supreme Court decisions since Waffle House addressing the enforceability of an arbitration agreement relating to aparty pursuing purely public rights. Thus,in light of Waffle House and Iskanian’s reasoning, this Court should reverse the erroneous decision below and confirm the continued validity of the Broughton-Cruz rule as applied here. C. A State’s Exercise Of Its Police Powers To Preserve The Availability Of Public Injunctive Relief Cannot Be Preempted Except By A Clear And Manifest Purpose Of Congress Wholly Absent Here The Court of Appeal also erred in failing to apply settled Supremacy Clause principles. The Court of Appeal described Concepcion as having broadened the FAA to have preemptive 11 Both Cruz and Iskanian expressly stated that Waffle House does not support the position that the FAA operates to preempt public claims. (See Cruz, at p. 320, fn. 6 [“Nothing in Waffle House contradicts or calls into question that conclusion [that public injunctions are withdrawnfrom arbitration].”]; Iskanian, supra, 59 Cal.4th at p. 386 [“Nothing in Waffle House suggests that the FAA preempts a rule prohibiting the waiver of this kind of qui tam action on behalf of the state for such remedies.”].) | 50 effects without regard to the purpose of the underlying state _ statute or rule. (Slip op. at pp.8, 16.) But if that were the case, | the FAA would operate like no other federal statute, exempt from rules governing federal preemption that undergird ourfederalist system of government. (See Printz v. United States (1997) 521 U.S. 898, 928 [“It is an essential attribute of the States’ retained sovereignty that they remain independent and autonomous within their proper sphere of authority.”].) The Court of Appeal is mistaken. In assessing a potential conflict between federal and state law, courts must examine the purposeofboth the state rule and the federal law in conflict. If the “federal law is said to preempt a traditional area of state regulation” (Lollard TobaccoCo.v. Reilly (2001) 533 U.S. 525, 541), then courts start “with the assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress.” . (Arizona v. United States (2012) 132 S.Ct. 2492, 2501.) “[A] high threshold must be met ifa state law is to be preemptedfor conflicting with the purposesof a federal act.” (Chamber of Commerce of the United States of America v. Whiting (2011) 131 S.Ct. 1968, 1985.) It is “well established that the party who asserts that a state law is preempted bears the burden of so demonstrating.” (Farm Raised Salmon Cases (2008) 42 Cal.4th 1077, 1088.) Consumerprotection laws are part of the “historic police powersof the States.” (Smiley v. Citibank (1995) 11 Cal.4th 138, ' 148: see California v. ARC America Corp. (1989) 490 U.S. 93, 101 51 [finding unfair business practices claims understate law not preempted because there was no clear and manifest intent for Congress to do so].) This Court has expressly held that “fTcJonsumerprotection laws such as the [UCL], false advertising law, and CLRA,are within the states’ historic police powers and therefore are subject to the presumption against preemption.” (Farm Raised Salmon Cases, supra, 42 Cal.4th at p.1088.) This presumption against preemption “applies with particular force” to a state’s efforts to protect its consumers. (/d.) Thus, a presumption against preemption applies to the Broughton-Cruz rule, which seeks to preserve public injunctive relief under the- - state’s consumerprotection laws from being nullified in arbitration. Furthermore, to determine whethera state law is preempted, the Court must ascertain whether Congress had a “clear and manifest purpose” to preempt the conflicting state law. Ud.) While the FAA displaces law that facially discriminates against arbitration or interferes with the “fundamentalattributes of the arbitration,” state rules that do neither fall within the presumption against implied preemption. (See Sonic I, supra, 57 Cal.4th at p.1154 [finding that the unconscionability analysis relating to “prompt paymentof wages” falls within the state’s police powers and is not preempted].) The state’s right to “structure its own law enforcement authority lies at the heartof state sovereignty.” (/skanian, supra, 59 Cal.4th at p.388.) Iskanian found “no purpose, muchless a clear or manifest purpose, to curtail the ability of states” to enact a private 52 enforcement scheme for wage laws under PAGA. (Id.) . Likewise, as explained above, the Broughton-Cruz rule preserves a substantive statutory remedy from being nullified by ‘being transferred to a forum unequippedto issue or enforce the remedy. The rule neither facially discriminates against arbitration nor requires, ex post, the availability of procedures that interfere with the fundamentalattributes of arbitration, like Discover Bank. Thereis no indication that the 1925 Congress sought to displace state rules that preserve the availability of a substantive state remedy, such as the Broughton-Cruzrule. Indeed, Broughton delved into the legislative history of the FAA in finding that there was no “clear and manifest” intent of Congressto strip a state from deputizingits citizens with the © right to enjoin unfair business practices. (See Broughton, at pp.1083-84 {finding that nothing “in the legislative history of the FAA suggest that Congress contemplated‘public injunction’ arbitration to be within the universe of arbitration agreements that it was attempting to enforce.”].) Rather, in enacting the FAA, Congress’s overarching “purposewasto reverse the longstanding judicial hostility to arbitration agreements... and to place [them] upon the samefooting as other contracts.” 3 (Waffle 12 See Cohen & Dayton, The New Federal Arbitration Law, 12 Va. L.Rev. 265 (1926) [describing the intent and purpose of the 1925 Congress in passing the FAA using contemporaneous sources]. 13 The Supreme Court has repeatedly described the congressionalintent in enacting the FAA in those words. (See, e.g., Granite Rock Co. v. Int'l Broth. of Teamsters (2010) 561 U.S. 267, 302; Arthur Andersen LLP v. Carlisle (2009) 556 U.S. 624, House, supra, 534 U.S.at p.289 [quoting H.R.Rep. No. 96, 68th Cong., lst Sess., 1 (1924)].) Therefore, the Broughton-Cruz rule, which neitherfacially discriminates against arbitration nor creates procedures that interfere with the fundamentalattributes of arbitration, is not preempted. IV. ALTERNATIVELY, THIS CASE SHOULD BE REMANDED FOR A DETERMINATION AS TO WHETHER CITIBANK’S AGREEMENTIS UNCONSCIONABLE Alternatively, the decision below must be reversed because Citibank’s Agreement expressly bans consumers from pursuing a public injunction andis thus unconscionable. The matter should be remandedfor further factual development based on Sonic I, and potentially, this Court’s upcomingdecision in Sanchez v. Valencia Holdings, No. S199119 (submitted for decision). The savings clause of FAA section 2 permits arbitration agreements to be declared unenforceable “upon such grounds as exist at law or in equity for the revocation of any contract.” (9 U.S.C. § 2.) Recently, this Court reaffirmed that unconscionability is a viable defense under the savings clause, post-Concepcion. (See Sonic I, supra, 57 Cal.4th at pp.1143-45.) As Sonic IJ clarified, states may develop particular rules on a general unconscionability defense so long as their application does not pose an obstacle to the fundamental attributesof 630; Green Tree Fin. Corp. v. Bazzle (2003) 539 U.S. 444, 458: Randolph, supra, 531 U.S. at p. 89; Doctor’s Assocs., supra, 517 U.S. at p. 687; Gilmer, supra, 500 U.S.at p. 24; Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ. (1989) 489 U.S. 468,478.) 54 arbitration, such as speed,efficiency and lack of expense. (/d. at p.1149.) | Sonic IT furtherclarified that an arbitration agreement may be unenforceable on unconscionability grounds if it entails the loss of substantive statutory benefits. (57 Cal.4th at p. 1152.) This Agreementis almost certainly unconscionable. The Agreement forecloses McGill or other consumers from pursuing any kind of private attorney general action or other representative action provided by statute. This ban requires McGill to surrender an important substantive right to pursue public claims and thus cannot be enforced on that basis alone. Indeed, a term that operates as a waiverof “California substantive law and theright to statutory and punitive damages and thusforces a [party] to waive her unwaivable statutory rights and remedies”is substantively unconscionable and cannot be enforced. (Ayamian v. CANTORCOZ2E, L.P. (2012) 203 Cal.App.4th 771, 799; Armendariz, supra, 24 Cal.4th at pp.103- 104 [arbitration agreement’s waiverof statutory remediesis unlawful].) Moreover, under Citibank’s Agreement, McGill is barred from benefiting from relief obtained by a third party against Citibankfor the covered claims. This provision bars her from recovering any settlement proceeds as an absent class member, or from enjoying injunctive relief against Citibank obtained by another plaintiff. This and other unconscionable provisions render Citibank’s Agreement so tainted with illegality as to be unenforceable. (See Armendariz, supra, 24 Cal.4th at p.124.) 55 However, because Sonic IJ announced a new test regarding unconscionability previously unavailable toMcGill, this issue should not be decided here. Rather, McGill should be afforded an opportunity to raise the unconscionability defense upon remand to the trial court if the Court does not accept her other grounds for reversing the decision below. Any argumentthat the matter has been waivedis belied by the timing of the intervening Sonic J/ decision, issued in 2013, two years after the trial court proceedings on the motion to compel to compel arbitration. In Sonic IJ, this Court permitted the plaintiff to raise, for the first time, an unconscionability defense on remand (57 Cal.4th at pp. 1158-59) after the law upon which she relied was held to have been abrogated. McGill should be permitted to do so as well, if this Court does not grant reversal based on her other arguments. Vv. ALTERNATIVELY, THE COURT SHOULD PERMIT THE ARBITRATOR TO DECIDE IF HE OR SHE HAS THE POWER TO ISSUE THEPROPOSED INJUNCTIVE RELIEF Assuming that this Court holds that a contractual ban on the right to pursue injunctive relief for the public’s benefitis unenforceable, the Court should at a minimum hold that California consumers must be allowed to pursue public injunctive relief in some forum. Generally, the court, not the arbitrator, decides questions of arbitrability in the first instance unlessthe parties “clearly and unmistakably” empowerthe arbitrator to do so. (See Rent-A- Center, West, Inc. v. Jackson (2010) 130 S.Ct. 2772, 2775, 2777, fn.1.) Here, the Agreementclearly delegates issues of 56 | “application, enforceability or interpretation of this Agreement and this arbitration provision” to the arbitrator. (1 CT 109.) Thus, assuming the arbitrator should decide the question of whetherheor she can issue the proposed injunctive relief, a few conditions should be imposed. First, if the arbitrator subsequently determines that the proposed injunctive reliefis outside the scope of his powers, he or she should be able to issue an interim ruling that transfers the matter back to thetrial court—the claim cannot be dismissed. Second, upon confirmation of an arbitral award for public injunctive relief (Civ. Proc.Code § 1286; 9 U.S.C. § 9), the court would be authorized to supervise the enforcementof the injunctiverelief, including any modification thereof. This is consistent with both thetrial court’s powerto “retain jurisdiction to monitor the enforcementof the injunction” (Balboa Island Village Inn, Inc. v. Lemen (2007) 40 Cal.4th 1141, 1161), andits powerto enforce an arbitral award reduced to judgment, which has the same force as any othercivil judgment. (Civ.Proc.Code § 1287.4; 9 U.S.C. § 13.) Another approach was taken by the court in Swan Magnetics v. Super. Ct. (1997) 56 Cal.App.4th 1504. There, the court held that a permanentinjunction issued by an arbitrator may be modified only by an arbitrator via a new arbitration proceedinginitiated by oneof the parties. (Id. at p.1512.) While the procedure presented in Swan is burdensometo the parties and prejudices non-parties,it likewise preserves the right of parties to pursue injunctive relief in arbitration that implicates 57 therights of non-parties. . | Under any approach, however, contractual bans on public injunctive relief, such as Citibank’s, cannot be held to be enforceable. Otherwise, any award issued by an arbitratorwill be subject to vacatur, even under the extremely deferential standards governing review of arbitral awards. Ultimately, McGill must be permitted to seek public injunctive relief to protect the public in some forum. CONCLUSION For the foregoing reasons, McGill respectfully requests that this Court reverse the CourtofAppeal’s decision and invalidate Citibank’s Agreementand order further proceedingsconsistent with that ruling. Dated: July 30, 2015 Respectfully submitted, Capstone Law APC By: feVifEZ> Gle n A. Danas RyAn H. Wu Liana Carter Attorneys for Plaintiff and Respondent SHARON MCGILL 58 CERTIFICATE OF WORD COUNT Counselof record herebycertifies that, pursuantto the California Rules of Court, Rule 8.504(d)(1) and 8.490, the enclosed Respondent Opening Brief on the Merits was produced using 13-point Century Schoolbook type style and contains 13,390 words. In arriving at that number, counsel has used Microsoft Word’s “Word Count” function. Dated: July 30, 2015 Respectfully submitted, -Capstone Law APC By: [Wli2z—— vA Danas fie nH. Wu Liana Carter Attorneys for Plaintiff and Respondent SHARON MCGILL 59 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PROOF OF SERVICE ' STATE OF CALIFORNIA, COUNTY OF LOS ANGELES Tam employedin the State of California, County of Los Angeles.I am over the age of 18 and nota party to the within suit; my business address is 1840 Century Park East, Suite 450, Los Angeles, California 90067. On July 30, 2015, I served the document described as: RESPONDENT’S OPENING BRIEF ON THE MERITSonthe interested parties in this action by sending onthe interested parties in this action by sending [ J the original [or] [V] a true copy thereofto interested parties as follows[or] as stated on the attachedservicelist: See attached servicelst. [XJ] BY MAIL (ENCLOSED IN A SEALED ENVELOPE): I deposited the envelope(s) for mailing in the ordinary course of business at Los Angeles, California. I am “readily familiar” with this firm’s practice of collection and processing correspondence for mailing. Underthat practice, sealed envelopes are deposited with the U.S. Postal Service that same day in the ordinary course of business with postagethereon fully prepaid at Los Angeles, California. [LJ] BY E-MAIL: I hereby’ certify that this document was served from Los Angeles, California, by e-mail delivery onthe parties listed herein at their most recent knowne-mail address or e-mailofrecord in this action. (_]] BY FAX:I hereby certify that this document was served from Los Angeles, California, by facsimile delivery on the parties listed herein at their most recent fax numberofrecord in this action. {L]] BY PERSONAL SERVICE:I personally delivered the document, enclosed in a sealed envelope, by handto the offices of the addressee(s) named herein. [Ll] BY OVERNIGHT DELIVERY: I am “readily familiar” with this firm’s practice of collection and processing correspondence for overnight delivery. Underthat practice, overnight packages are enclosed in a sealed envelope with a packingslip attached thereto fully prepaid. The packages are picked up by the carrier at our offices or delivered by our office to a designated collection site. Tare tet - I declare under penalty of perjury under the lawsofthe State of California that the foregoingis true and correct. Executed on July 30, 2015, at Los Angeles,California. Natalie Torbati Type or Print Name c Signature PROOF OF SERVICE 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 SERVICE LIST Julia B. Strickland Marcos D.Sasso STROOCK & STROOCK & LAVAN LLP 2029 Century Park East, #1800 Los Angeles, CA 90067 via US mail Attorneys for Defendant-Appellant Citibank, N.A. Honorable John W. Vineyard Department 12 c/o Clerk of the Court Riverside Superior Court Civil Department 4050 MainStreet Riverside, CA 92501 via US mail Trial Court The Honorable Richard M Aronson The Honorable William F. Rylaarsdam The Honorable David F. Thompson c/o Clerk of the Court California Court of Appeal 4th Appellate District Division 3 601 W. Santa Ana Blvd. Santa Ana, California 92701 via US mail Court of Appeals Office of the District Attorney County of Riverside Appellate Division 3960 Orange Street Riverside, CA 92501 via US mail Office of the District Attorney Per Cal. Rules of Court 8.29; Business & Professions Code § 17209 Appellate CoordinatorOffice of the Attorney GeneralConsumer Law Section300 South Spring StreetLos Angeles, CA 90013Via US mail Office of the Attorney GeneralPer Cal. Rules of Court 8.29; Business &Professions Code§ 17209 PROOF OF SERVICE