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McGill v. Citibank, N.A.

California Court of Appeals, Fourth District, Third Division

December 18, 2014

SHARON McGILL, Plaintiff and Respondent,
CITIBANK, N.A., Defendant and Appellant.


Appeal from an order of the Superior Court of Riverside County Super. Ct. No. RIC1109398 John W. Vineyard, Temporary Judge. (Pursuant to Cal. Const., art. VI, § 21.).

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Stroock & Stroock & Lavan, Julia B. Strickland and Marcos D. Sasso for Defendant and Appellant.

Capstone Law, Raul Perez, Melissa Grant, Glenn A. Danas and Katherine W. Kehr for Plaintiff and Respondent.

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Plaintiff and respondent Sharon McGill sued defendant and appellant Citibank, N.A. (Citibank) for unfair competition and false advertising in offering a credit insurance plan she purchased to protect her Citibank credit card account. Alleging claims under California’s unfair competition law (Bus. & Prof. Code, § 17200 et seq.; hereinafter UCL), false advertising law (Bus. & Prof. Code, § 17500 et seq.; hereinafter FAL), and Consumer Legal Remedies Act (Civ. Code, § 1750 et seq.; hereinafter CLRA), McGill seeks monetary damages, restitution, and injunctive relief to prevent Citibank from engaging in its allegedly unlawful and deceptive business practices.

Citibank petitioned to compel McGill to arbitrate her claims based on an arbitration provision in her account agreement. The trial court granted the petition on McGill’s claims for monetary damages and restitution, but denied the petition on the injunctive relief claims. In doing so, the court relied on the “Broughton-Cruz rule” the California Supreme Court established in Broughton v. Cigna Healthplans (1999) 21 Cal.4th 1066 [90 Cal.Rptr.2d 334, 988 P.2d 67] (Broughton), and Cruz v. PacifiCare Health Systems, Inc. (2003) 30 Cal.4th 303 [133 Cal.Rptr.2d 58, 66 P.3d 1157] (Cruz). Under that state-law rule, arbitration provisions are unenforceable as against public policy if they require arbitration of UCL, FAL, or CLRA injunctive relief claims brought for the public’s benefit. Citibank appeals the trial court’s order on the injunctive relief claims; McGill does not challenge the order on the claims for monetary damages and restitution.

We reverse and remand for the trial court to order all of McGill’s claims to arbitration. As explained below, we join several federal court decisions in concluding the Federal Arbitration Act (9 U.S.C. § 1 et seq.; hereinafter FAA) preempts the Broughton Cruz rule. In AT&T Mobility LLC v. Concepcion (2011) 563 U.S. ___ [179 L.Ed.2d 742, 131 S.Ct. 1740] (AT&T Mobility), the United States Supreme Court unmistakably declared the FAA preempts all state-law rules that prohibit arbitration of a particular type of claim because an outright ban, no matter how laudable the purpose, interferes with the FAA’s objective of enforcing arbitration agreements according to their terms. The Broughton-Cruz rule falls prey to AT&T Mobility’s sweeping directive because it is a state-law rule that prohibits arbitration of UCL, FAL, and CLRA injunctive relief claims brought for the public’s benefit.

We must reject McGill’s contention the California Supreme Court’s recent decision in Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348 [173 Cal.Rptr.3d 289, 327 P.3d 129] (Iskanian), “reaffirmed” the Broughton-Cruz rule. To the contrary, Iskanian confirmed the expansive scope of the FAA’s preemption and overturned another state-law rule

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Invalidating class action waivers on claims for arbitration of unpaid wages. Iskanian also established a new rule invalidating predispute waivers of an employee’s right to bring a representative action under the Labor Code Private Attorneys General Act of 2004 (Lab. Code, § 2698 et seq.; hereinafter PAGA) to recover civil penalties for an employer’s Labor Code violations. The Iskanian court concluded the FAA did not preempt this new rule because a PAGA representative claim belongs to the state, and an aggrieved employee simply brings the claim as an agent or proxy of the state. Accordingly, a PAGA representative claim is not subject to a private arbitration agreement between an employer and an employee or the FAA. As explained below, a PAGA representative claim is not comparable to an injunctive relief claim under the UCL, FAL, or CLRA, and therefore Iskanian’s narrow exclusion does not save the Broughton-Cruz rule from preemption.



Citibank is a national banking association that offers consumers a variety of financial services, including credit card accounts and credit insurance plans. Under its “Credit Protector” plan, Citibank defers or credits certain amounts on a consumer’s Citibank credit card account when one or more qualifying events occur, such as long term disability, unemployment, divorce, military service, and hospitalization. Citibank charges consumers who purchase the Credit Protector plan a monthly premium based on the consumer’s credit card balance.

McGill opened a Citibank credit card account and purchased the Credit Protector plan. The operative “Citibank Card Agreement” (Agreement) when McGill opened her account did not include an arbitration provision. Citibank, however, later sent McGill a “Notice of Change in Terms Regarding Binding Arbitration to Your Citibank Card Agreement” (Change in Terms Notice) that amended the Agreement to add an arbitration provision. The provision stated, “Either you or we may, without the other’s consent, elect mandatory, binding arbitration for any claim, dispute, or controversy between you and us (called ‘Claims’).”

The provision further provided, “All Claims relating to your account or a prior related account, or our relationship are subject to arbitration, including Claims regarding the application, enforceability, or interpretation of this Agreement and this arbitration provision. All Claims are subject to arbitration, no matter what legal theory they are based on or what remedy (damages, or injunctive or declaratory relief) they seek. This includes Claims based on contract, tort (including intentional tort), fraud, agency, your or our negligence, statutory or regulatory provisions, or any other sources of law;... and

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Claims made independently or with other claims.... Claims and remedies sought as part of a class action, private attorney general or other representative action are subject to arbitration on an individual (non-class, non-representative) basis, and the arbitrator may award relief only on an individual (non-class, non-representative) basis. [¶]... [¶]... This arbitration provision is governed by the Federal Arbitration Act (the ‘FAA’). [¶]... [¶]... Claims must be brought in the name of an individual person or entity and must proceed on an individual (non-class, non-representative) basis. The arbitrator will not award relief for or against anyone who is not a party. If you or we require arbitration of a Claim, neither you, we, nor any other person may pursue the Claim in arbitration as a class action, private attorney general action or other representative action, nor may such Claim be pursued on your or our behalf in any litigation in any court.”

Under the Change in Terms Notice, McGill could have refused to accept the arbitration provision by sending Citibank written notice within 26 days of the closing date for her next account statement. If McGill opted out, she could have continued to use her credit card under the existing terms “until the end of [her] current membership year or the expiration date on [her] card(s), whichever is later.” McGill did not opt out of the arbitration provision.

In 2011, McGill filed this class action based on Citibank’s marketing of the Credit Protector plan and the manner in which Citibank administered McGill’s claim under the plan when she lost her job in 2008. The operative complaint alleges claims against Citibank for (1) violation of the UCL; (2) violation of the FAL; (3) violation of the CLRA; and (4) improper sale of insurance (Ins. Code, § 1758.9). The relief McGill seeks includes restitution, monetary and punitive damages, attorney fees and costs, and injunctive relief enjoining Citibank from continuing to engage in its allegedly illegal and deceptive practices.

Citibank filed a petition to compel McGill to arbitrate her claims on an individual basis as required by the Agreement’s arbitration provision. The trial court granted the petition in part and denied it in part. Specifically, the court severed and stayed the claims for injunctive relief under the UCL, FAL, and CLRA, and ordered McGill to arbitrate all her other claims, including claims for restitution and damages under the UCL, FAL, CLRA, and Insurance Code. Despite finding the Agreement’s arbitration provision applied to all of McGill’s claims, the trial court refused to order arbitration of the injunctive relief claims based on the California Supreme Court’s Broughton-Cruz rule. Citibank timely appealed the trial court’s decision refusing to require McGill to arbitrate her injunctive relief claims.

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