Claims — continued from Page 14
with the FAA, even if it is desirable for unrelated reasons.” (Id., quoting Concepcion, 131 S.Ct. at 1753, and collect- ing cases; See also Meyer v. T-Mobile USA Inc., Case No. C 10-05858, 2011 U.S. Dist. LEXIS 108249 (N.D. Cal. Sept. 23, 2011).) Two notable exceptions, both in the
Central District, are Ferguson v. Corinthian Colleges, et al, No. SACV 11-0127 DOC (AJWx), 2011 U.S. Dist. LEXIS 119261 (C.D. Cal. Oct. 6, 2011) and In re DirecTV Early Cancellation Fee Marketing and Sales Practices Litigation, No. 09-2093, 2011 U.S. Dist. LEXIS 102027 (C.D. Cal. Sept. 6, 2011). Ferguson is illustrative of the analysis. There plaintiffs alleged claims under the CLRA, UCL and FAL contend- ing that students enroll in Corinthian institutions believing they are receiving a quality education at an affordable price, when, in fact, they pay high tuition rates, incur crippling student loans, and gradu- ate with degrees that never qualify nor prepare them for job placement other than in low-wage, low-skill employment. Among other things, plaintiffs sought permanent injunctive relief. The court began its analysis by
acknowledging the “liberal federal policy favoring arbitration” and that any doubts concerning the scope of arbitrable issues must be resolved in favor of arbitration. It then noted the fact that numerous
other courts had already determined, with respect to a variety of arbitration agreements, that Concepcion compels arbi- tration of claims seeking public injunctive relief. But the Court boldly but simply stated that it disagrees with this line of cases, and that “The California Legislature’s decision to allow citizens to bring injunctive relief claims under the CLRA, UCL and FAL on behalf of the pub- lic is not inconsistent with the FAA. Notwithstanding Concepcion’s mandate that state law cannot prohibit arbitration of certain types of claims, the Supreme Court previously acknowledged that ‘not . . . all controversies implicating statutory rights are suitable for arbitration.’” (Id., citing Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc. (1985) 473 U.S. 614, 627.)
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courts’ two-step approach to 1) deter- mine whether the statutory issues were covered by the arbitration agreement, and 2) consider “whether legal con- straints external to the parties’ agree- ment foreclose[] the arbitration of those claims.” The Mitsubishi Court explained that although a private party may waive its right to a judicial forum, the language of a statute or its legislative history may evince Congress’ intent not to let a party do so. “Whether certain statutory claims were intended to be kept out of arbitra- tion depends on a statute’s text, the leg- islative history, or an ‘inherent conflict’ between arbitration and the statute’s underlying purpose,” albeit viewed with “a healthy regard for the federal policy favoring arbitration.” (Id., citing Gilmer v. Interstate/Johnson Lane Corp. (1991) 500 U.S. 20, 26 (quoting Moses H. Cone, 460 U.S. at 24).) The Ferguson Court then stated its
agreement with Broughton that “the Supreme Court has implicitly recognized where enforcement of a public right, as opposed to resolution of a private dis- pute, is the primary purpose of a statute, an ‘inherent conflict’ with arbitration may arise. ... While state law cannot prohibit outright the arbitration of a particular type of claim under Concepcion, Broughton and Cruz do not prohibit arbitration of
all injunctive relief claims. Instead, they provide a framework for analyzing whether injunctive relief claims are arbi- trable.” [Citations.] The Court then denied the motion to compel arbitration “because the statutory purpose of the injunctive relief provisions of the UCL, FAL, and CLRA and the public interest concerns in this case cannot likely be met through arbitration, because there is no apparent conflict with the FAA, and because Concepcion does not take a posi- tion on the arbitrability of public injunc- tion actions.” The California Court of Appeal, too,
has at least twice concluded that Concepcion does not preclude claims for injunctive relief in court: Brown v. Ralphs Grocery Co. (2011) 197 Cal.App.4th 489, 503, (employment agreement), and Sanchez v. Valencia, 2011 Cal.App. LEXIS 1327 (2d Dist., Div. 1, Oct. 24, 2011) (relating to Retail Installment Sale Contract for automobile). Brown held that Concepcion did not address California’s Private Attorney General Act of 2004 and that the Supreme Court has not addressed whether the FAA preempts California laws whereby a citizen sues as a proxy for enforcement of state laws. (See also Plows v. Rockwell Collins, Inc., 2011 U.S. Dist. LEXIS 88781, 2011 WL 3501872, *4-5 (C.D. Cal. Aug. 9, 2011).) The California Supreme Court
denied review of Brown on October 19, 2011 (Case No. S195850). Thus, it remains to be seen whether the U.S. Supreme Court will take up this issue on a writ of certiorari in Brown or in one of the many federal cases winding its way through the courts. Based upon the U.S. Supreme
Court’s recent interest in arbitration and class actions, it may only be a matter of time before the divide between Mitsubishi and Concepcion is closed.
Michael Geibelson is a partner at
Robins, Kaplan, Miller & Ciresi L.L.P. and the 2011-2012 Chair of the Litigation Section of the State Bar. He handles claims of misappropriation of trade secrets, consumer and business fraud, unfair competition and false advertising.
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