“Agreements to arbitrate claims for public injunctive relief under [California’s Consumers Legal Remedy Act or Unfair Competition Law], or the false advertising law are not enforceable in California.” The California Supreme Court was tasked with determining whether an “arbitration provision is valid and enforceable insofar as it purports to waive [the Plaintiff’s] right to seek public injunctive relief in any forum.”
Looking at Plaintiff’s complaint and allegations, the Court determined the arbitration provision at issue did in fact waive Plaintiff’s right to request in any forum public injunctive relief, invalidating the arbitration provision. The Court found the California rule was not preempted by the FAA, as § 2 of the FAA “permits arbitration agreements to be declared unenforceable upon such grounds as exist at law or in equity for the revocation of any contract.” Thus, arbitration agreements “like other contracts, may be invalidated by generally applicable contract defenses, such as fraud, duress, or unconscionability.” Here, the contract defense at issue is that “a law established for a public reason cannot be contravened by a private agreement”.
Sharon McGill v. Citibank, N.A., Case No. S224086 (Cal. Sup. Ct. April 6, 2017)
This post written by Nora A. Valenza-Frost.
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