Reinsurance Focus

The California Court of Appeals recently held that the Federal Arbitration Act (“FAA”) preempts California’s Broughton-Cruz rule, which states that arbitration agreements for injunctive relief under California’s unfair competition and false advertising laws are against public policy and invalid.

In McGill v. Citibank, plaintiff sued Citibank for state law claims of unfair competition and false advertising, alleging that Citibank had violated her rights as a consumer in offering a credit insurance plan she purchased to protect her credit card account. Citibank moved to compel plaintiff to arbitrate her claims pursuant to the arbitration provision in her account contract. The trial court granted the motion with regard to plaintiff’s claims for monetary damages and restitution but refused to order arbitration of the claim for injunctive relief. Citibank appealed the decision as to the damages and restitution claims.

California’s appellate court held that the California Broughton-Cruz rule did not survive the Supreme Court’s decision in AT&T Mobility, LLC v. Concepcion, __ U.S. __, 131 S. Ct. 1740 (2011). In Concepcion, the Court held that the FAA preempts state laws, such as laws that prohibit class arbitration waivers in certain contexts or otherwise impede the FAA’s objective of enforcing arbitration agreements according to their terms. The California court reversed and remanded the case for the trial court to order all of plaintiff’s claims to arbitration. McGill v. Citibank, N.A., No. G049838 (Cal. Ct. App. Dec. 18, 2014).

This post written by Whitney Fore, a law clerk at Carlton Fields Jorden Burt in Washington, DC.

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