Looking Ahead: Consumer
The Court is likely to continue to evaluate consumers’ right to have their day in court in the coming year. In the decade since the Supreme Court decided AT&T Mobility v. Concepcion, 563 U.S. 333 (2011), clauses requiring mandatory pre-dispute arbitration and prohibiting class actions have proliferated. In Concepcion, the Court held that the Federal Arbitration Act (FAA) preempted a California law under which class-action bans in arbitration clauses were deemed to violate state public policy and, thus, were unenforceable. Id. at 343. As of 2018, at least half of U.S. households and 25 million employees were subject to mandatory arbitration clauses prohibiting class actions.
The importance of arbitration clauses in civil litigation, thus, continues undiminished, and two cert petitions pending before the Court provide further opportunities for the Court to clarify the reach of arbitration. Both cases, Viking River Cruises, Inc. v. Moriana (No. 20-1573), and HRB Tax Group v. Snarr (No. 20-1570), challenge judicial decisions holding that California laws authorizing plaintiffs to proceed in representative capacities are not preempted by the FAA.
In Moriana, a plaintiff whose employment contract required her to waive her right to bring a private attorney general action sued her employer under California’s Private Attorneys General Act (PAGA) for allegedly violating California labor law. Moriana v. Viking River Cruises, Inc., No. B297327, 2020 WL 5584508, at *1 (Cal. Ct. App. Sept. 18, 2020). Under PAGA, a plaintiff can seek damages against her employer on behalf of herself and other employees if the State declines to intervene in the case. Petition for Writ of Certiorari, at 8, Moriana (20-1573). Those employees receive a quarter of any monetary recovery, with the remaining three-quarters going to the State. Id. at 9. The California Supreme Court has held that Concepcion does not require arbitration of a PAGA claim because such claims represent a dispute between an employer and the State, whereas the aim of the FAA is to ensure efficient resolution of disputes over a litigant’s private rights. Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348, 384 (Cal. 2014). (The Ninth Circuit has also rejected a challenge to Iskanian, though on the grounds that PAGA actions do not raise the same efficiency concerns as class actions.) The Viking Cruises cert. petition argues that Iskanian is nearly identical to Concepcion, in that both involved the State declining to enforce an arbitration agreement pursuant to an important public interest and asks the Supreme Court to overrule Iskanian. Petition for Writ of Certiorari, at 2-3, Moriana (20-1573).
The second case, HRB Tax Group v. Snarr, involves a California rule governing “public injunctions,” which are defined as injunctions that have “‘the primary purpose and effect of’ prohibiting unlawful acts that threaten future injury to the general public.’” Snarr v. HRB Tax Group, Inc., 839 Fed.Appx. 53, 54 (9th Cir. 2020) (quoting McGill v. Citibank, N.A., 393 P.3d 85, 90 (Cal. 2017)). California case law makes unenforceable a contract that waives the right to seek public injunctive relief in all forums. Snarr, 389 Fed. Appx. at 54. In Snarr, the plaintiff sought a public injunction against HRB, claiming the tax preparation company misleadingly steered tax filers away from a free service and toward a paid one, in violation of California consumer protection laws. Id. at 55. The plaintiff’s arbitration agreement with HRB forbids public injunctions and so is unenforceable under California law, and the Ninth Circuit refused to compel arbitration of the plaintiff’s claim. Id. at 54
In so doing, the court relied on Blair v. Rent-A-Center, Inc., 928 F.3d 819 (9th Cir. 2019), a prior circuit case holding that the FAA does not preempt the public-injunction rule. Blair rests on the premises that, unlike the ban on class-action waivers at issue in Concepcion, the public-injunction rule does not single out arbitration and does not undermine the purported efficiency and informality of bilateral arbitration, given that a plaintiff can seek a public injunction in a bilateral arbitration without resort to class-certification procedures. Id. at 827-29
In its petition seeking review of Snarr, HRB rejects these arguments, contending that the rule’s focus on the general public and the higher stakes and complexity at issue undermine the traditional benefits of bilateral arbitration. Petition for Writ of Certiorari, at 16-17, Snarr (No. 20-1573). HRB also argues that, in practice, the public-injunction rule allows plaintiffs to avoid arbitration by seeking public injunctions. Id. at 5. In opposing Supreme Court review, Snarr distinguishes substantively complex claims (like those for a public injunctions) from the procedural complexity at the heart of the Court’s arbitration jurisprudence and notes that the evasion HRB raises can occur only in the particular cases of arbitration provisions drafted as HRB’s is. Respondent’s Brief in Opposition, at 26-27, Snarr (No. 20-1573). Snarr additionally argues that, under Supreme Court precedent, the “FAA does not require enforcement of arbitration provisions that expressly waive statutory claims and remedies,” as HRB’s contract does, and that the public-injunction rule applies equally to all contracts, whether or not they contain arbitration clauses. Id. at 5-6.
If the Supreme Court takes up Viking Cruises or Snarr, we will learn how far the Court is willing to extend its arbitration jurisprudence. Any decisions will have important consequences for consumer litigation in California and other states authorizing private-attorney-general suits and public injunctions.