In refusing to compel arbitration of the injunctive relief claims, the trial court cited Broughton v. Cigna Healthplans, 21 Cal. 4th1066 (1999), and Cruz v.Pacificare Health Systems, Inc., 30 Cal. 4th 303 (2003), which together invalidate agreements to arbitrate claims for public injunctive relief under the UCL, CRLA, or false advertising law. On appeal, the District Court of Appeal reversed and remanded.
Such a provision would waive the right to bring class or collective actions except for claims for public injunctive relief, and so maintain the class action waiver while presumably not offending the California Supreme Court’s recent ruling.  The Broughton–Cruz rule refers to California precedent established by two California Supreme Court decisions, Broughton v. Cigna Healthplans, 21 Cal. 4th 1066 (1999), and Cruz v. PacifiCare Health Systems Inc., 30 Cal. 4th 303 (2003), which together hold that agreements to arbitrate claims for public injunctive relief under the CLRA, UCL, or false advertising law are not enforceable in California.View Advisory as PDF [View source.]
Citibank moved to compel McGill’s claims to arbitration on an individual basis. The trial court granted in part and denied in part Citibank’s petition based on the California Supreme Court’s holdings in Cruz v. PacifiCare Health Systems, Inc., 30 Cal. 4th 303 (2003), and Broughton v. Cigna Healthplans, 21 Cal. 4th 1066 (1999), which established that agreements to arbitrate claims for public injunctive relief under the CLRA, UCL, or FAL are not enforceable in California (the “Broughton-Cruz rule”). The trial court ordered McGill to arbitrate all claims other than those for injunctive relief under the CLRA, UCL, and FAL.
Citibank moved to compel arbitration. Plaintiff opposed the motion, arguing that the arbitration agreement was unenforceable under the Broughton-Cruz rule, established by the California Supreme Court in Brougthon v. Cigna Healthplans, 21 Cal.4th 1066 (1992) and Cruz v. PacifiCare Health Systems, Inc., 30 Cal.4th 303 (2003). Plaintiff argued that pursuant to the rule, arbitration provisions that require arbitration of UCL, FAL, or CLRA injunctive relief claims brought for the public’s benefit are against California public policy and therefore unenforceable.
As to the contract term providing that arbitral grants of injunctive relief are subject to a second arbitration, the Court noted it had previously held that claims seeking injunctive relief designed to protect the public by stopping ongoing practices unlawful under the CLRA and the UCL, respectively, were inarbitrable. Broughton v. Cigna Healthplans (1999) 21 Ca. 4th 1066, 1082-1084, and Cruz v. PacificCare Health Systems, Inc. (2003) 30 Cal. 4th 303, 316. However, the Court left undecided the extent to which Broughton and Cruz remain good law.
This decision calls into question the continued viability of California’s Broughton-Cruz rule, which was established by the California Supreme Court in Broughton v. Cigna Healthplans, 21 Cal. 4th 1066 (Cal. 1999), and Cruz v. PacifiCare Health Systems, Inc., 30 Cal. 4th 303 (Cal. 2003).Applying a narrow exclusion for representative claims under the state Labor Code Private Attorneys General Act of 2004 (“PAGA”), the Court of Appeal also ruled the plaintiff’s claims cannot be saved from arbitration by the California Supreme Court’s decision in Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (Cal.
The Goss court also decided that the plaintiff’s claims for injunctive relief under the California Unfair Competition law were likewise subject to arbitration. In doing so, the Goss court rejected the trial court’s reliance on Cruz v. PacificCare Health Systems, Inc., 30 Cal. 4th 303 (2003) (holding UCL claims not arbitrable because they were brought to prevent harm to the public), asserting that Cruz was invalidated by Concepcion, as recognized in Nelson v. Legacy Partners Residential, Inc., 207 Cal. App. 4th 1115 (2012). Goss, though unpublished, signals that the very muddy tide is turning in favor of employers in regard to enforcement of class action arbitration waivers.While the California Supreme Court continues to push back against Concepcion, and may do so again when it releases its decision in Iskanian, it has been forced to do so on narrower and narrower grounds.
In these circumstances, the California Supreme Court held that arbitration could not be compelled for such “public injunction” claims. Thereafter, in Cruz v. PacifiCare Health Systems, Inc., 66 P.3d 1157 (Cal. 2003), the California Supreme Court extended Broughton to claims for public injunctive relief under California’s UCL and FAL.Federal Arbitration ActThe Federal Arbitration Act provides that agreements to arbitrate are “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” It reflects, the U.S. Supreme Court stated, an “emphatic federal policy” in favor of arbitration.
Kilgore v. KeyBank, Nat'l Ass'n, --- F.3d ----, 2012 WL 718344, *10 (9th Cir. March 7, 2012). Referring to this as the "Broughton-Cruz rule," after the California Supreme Court's decisions in Broughton v. Cigna Healthplans of California, 21 Cal. 4th 1066 (1999), and Cruz v. Pacificare Health Systems, Inc., 30 Cal. 4th 303 (2003), the Ninth Circuit unanimously held that "the Broughton-Cruz rule does not survive" the United States Supreme Court decision in AT&T Mobility, Inc. v. Concepcion, 131 S. Ct. 1740 (2011) (FAA preempts California law refusing to enforce class action waivers in arbitration provisions).Plaintiffs in Kilgore obtained private loans through KeyBank to pay their tuitions for a helicopter vocational school and each signed a promissory note containing an arbitration clause.
Under FAA, Are Statutory Claims for Public Injunctive Relief Subject to Mandatory Arbitration? After the Court of Appeal reversed an order denying a petition to compel arbitration, the Court granted review on following issue: Does the Federal Arbitration Act (9 U.S.C. § 1 et seq.), as interpreted in AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 321, preempt the California rule (Broughton v. Cigna Healthplans (1999) 21 Cal.4th 1066; Cruz v. PacifiCare Health Systems, Inc. (2003) 30 Cal.4th 303) that statutory claims for public injunctive relief are not subject to compulsory private arbitration? McGill v. Citibank, N.A., S224086, (opinion below G049838, formerly 232 Cal.App.4th 753).