No. C 10-05663 WHA.
May 16, 2011
ORDER GRANTING MOTION TO COMPEL ARBITRATION AND STAY CLAIMS FOR INJUNCTIVE RELIEF
In this proposed class action dispute, the parties submitted supplemental briefs on defendants' previous motion to compel arbitration.
The facts are in the April 11 order. That order granted in part defendants' motion to compel arbitration and partially stayed the action. Specifically, plaintiff's seventh, eighth, and tenth claims, which did not seek injunctive relief, were ordered to proceed immediately to arbitration. Plaintiff's first, second, third, fourth, fifth, sixth, and ninth claims for injunctive relief were stayed pending the Supreme Court's decision in AT T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011), which concerned the issue of whether the Federal Arbitration Act preempts California's unconscionability law regarding arbitration of such claims. With the benefit now of that decision and further briefing, this order is compelled to do as follows.
ANALYSISPlaintiff seeks injunctive relief, among other remedies, for her claims brought under the California Unfair Competition Law, California Consumer Legal Remedies Act, California False Advertising Act, and Federal Communications Act. In her original brief opposing defendants' motion to compel arbitration, plaintiff argued that these claims for injunctive relief were not subject to arbitration. This proposition came from Broughton v. Cigna Healthplans of California, 21 Cal. 4th 1066, 1079-80 (1999) (holding that claims for public injunctive relief brought under the CLRA are not subject to arbitration), and Cruz v. PacifiCare Health Sys., Inc., 30 Cal. 4th 303, 316 (2003) (holding that claims for public injunctive relief brought under the UCL are not subject to arbitration).
The Act, however, preempts California's preclusion of public injunctive relief claims from arbitration, at least for actions in federal court. "Congress intended to foreclose state legislative attempts to undercut the enforceability of arbitration agreements." Southland Corp. v. Keating, 465 U.S. 1, 16 (1984). The United States Supreme Court explained:
In enacting § 2 of the federal Act, Congress declared a national policy favoring arbitration and withdrew the power of the states to require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration. . . . We discern only two limitations on the enforceability of arbitration provisions governed by the Federal Arbitration Act: they must be part of a written maritime contract or a contract "evidencing a transaction involving commerce and such clauses may be revoked upon "grounds as exist at law or in equity for the revocation of any contract." We see nothing in the Act indicating that the broad principle of enforceability is subject to any additional limitations under State law.Id. at 10-11 (quoting 9 U.S.C. 2). Unless one of these two limitations is present, arbitration agreements must be enforced "unless Congress itself has evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985).
The recent Concepcion decision compels preemption: "When state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA." Concepcion, 131 S.Ct. at *6. In sum, the Act preempts California's exemption of claims for public injunctive relief from arbitration, at least for actions in federal court.
Plaintiff's arguments to the contrary are unavailing. First, plaintiff argues that "the arbitration clause is void because it agrees to forego substantive rights afforded by statute. Such is accomplished . . . by the fact that the arbitration clause in question would preclude an individual from ever bringing these types of claims by foisting prohibitive costs on the individual plaintiff" (Dkt. No. 80 at 4). Perhaps regrettably, this argument was rejected by Concepcion: "The dissent claims that class proceedings are necessary to prosecute small-dollar claims that might otherwise slip through the legal system. But States cannot require a procedure that is inconsistent with the FAA, even if it is desirable for unrelated reasons." 131 S.Ct at *13 (citation omitted).
Second, plaintiff argues that "preclusion of injunctive relief on behalf of the class equates to preclusion of the ability to obtain effective relied [relief] — enjoining deceptive practices on behalf of the public in general" (Dkt. No. 80 at 7). As stated above, however, Concepcion held that "States cannot require a procedure that is inconsistent with the FAA, even if it is desirable for unrelated reasons." 131 S.Ct at *13.
Third, plaintiff argues that " Cruz further stated that the United States Supreme Court had never directly decided whether a legislature could restrict a private arbitration agreement when it inherently conflicted with a public statutory purpose and transcended private interests. Concepcion never addressed that specific question but rather focused on the availability of a class action procedure" (Dkt. No. 80 at 7). Concepcion, on the contrary, decided that states cannot refuse to enforce arbitration agreements based on public policy. See 131 S.Ct at *13 (holding that the rule in Discover Bank is preempted by the FAA because it is inconsistent with the FAA's purposes, despite "its origins in California's unconscionability doctrine and California's policy against exculpation"). Accordingly, despite public policy arguments thought to be persuasive in California, Concepcion has trumped these considerations, at least for cases in federal court.