California: The Wild, Wild West of Arbitration Law
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The California Supreme Court recently issued a decision following its tradition of finding creative ways to avoid FAA preemption. The court’s analysis provides an interesting blueprint for other states to develop consumer and employee protection statutes that can avoid the the steamroller of FAA preemption.
In McGill v. Citibank, No. S224086 (Cal. Apr. 6, 2017) (click here for a copy of the decision), the California Supreme Court held that “a provision in a predispute arbitration agreement that waives the right to seek [public injunctive relief] in any forum” is not enforceable under California law, and the FAA does not preempt this California rule.
The plaintiff in this case, a Citibank cardholder, filed a class action against Citibank regarding its credit insurance program. Under this program, a customer’s credit card payments are deferred or forgiven based on certain events like disability or unemployment. The plaintiff’s lawsuit sought, inter alia, an injunction prohibiting Citibank from continuing to engage in allegedly deceptive business practices regarding its credit insurance program.
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