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C.A. Declares Limits to Breadth of Decision By California Supreme Court in 2017
Third District Says Opinion Invalidating Clauses That Forbid Bringing Actions for ‘Public Injunctive Relief’ Applies Only to Representative Actions
By a MetNews Staff Writer
The Third District Court of Appeal has held that a 2017 decision of the California Supreme Court invalidating arbitration agreements that encompass a bar on seeking “public injunctive relief” under specified consumer protection statutes only comes into play where a representative action is brought.
Justice Ronald B. Robie authored an unpublished opinion, filed Wednesday, which affirms a judgment based on the confirmation of an arbitration award in favor of online sellers Sparc Group LLC and Eddie Bauer LLC. The opinion rejects the contention by plaintiff Alison Seger-Zawacki, a purchaser of goods, that, in light of the state high court’s decision in McGill v. Citibank, N.A., Sacramento Superior Court Judge Lauri Damrell erred in sending the case to arbitration.
In McGill, then-Justice Ming Chin, since retired, wrote:
“In previous decisions, this court has said that the statutory remedies available for a violation of…the unfair competition law…and the false advertising law…include public injunctive relief, i.e., injunctive relief that has the primary purpose and effect of prohibiting unlawful acts that threaten future injury to the general public….The question we address in this case is the validity of a provision in a predispute arbitration agreement that waives the right to seek this statutory remedy in any forum. We hold that such a provision is contrary to California public policy and is thus unenforceable under California law.”
He cited Civil Code §3513 which provides:
“Any one may waive the advantage of a law intended solely for his benefit. But a law established for a public reason cannot be contravened by a private agreement.”
Online Proviso
At issue in the case before the Third District was the enforceability of an online “term of use.” Aside from providing that disputes were subject to arbitration, it warned purchasers:
“You…agree to waive—that is, to give up—your right to claim through a class action lawsuit, class-wide arbitration, private attorney-general action, or any other proceeding where someone acts in a representative capacity or individual claims are combined.”
Damrell ruled that McGill is inapposite because Seger-Zawacki—who claimed that purported “specials” actually reflected the sellers’ normal prices—was not suing “in a representative capacity.”
Appellant’s View
Seger-Zawacki argued on appeal that she did, in fact, sue in that capacity, saying:
“Plaintiff and Appellant Alison Seger-Zawacki is bringing a private attorney general action because she is seeking a public injunction (which is also referred to in the caselaw as public injunctive relief). In her Complaint, Ms. Seger-Zawacki prays for an injunction that would prohibit Defendants and Respondents SPARC Group LLC and Eddie Bauer LLC (collectively, Eddie Bauer) from continuing to advertise ‘sales’ and discounts when, in reality, Eddie Bauer is selling the products at their normal and regular prices….
“Ms. Seger-Zawacki does not seek damages, restitution, disgorgement, or other monetary remedy to compensate for Eddie Bauer’s false advertising; her two-count Complaint seeks only public injunctive relief and alleges violations of the False Advertising Law…and the Unfair Competition Law….
“Ms. Seger-Zawacki will not personally benefit from the injunction….The benefits of her injunction will accrue to the general public. Ms. Seger-Zawacki is seeking the paradigmatic example of public injunctive relief—an injunction to stop false advertising.”
Robie’s Opinion
Agreeing with Damrell, Robie said that the language of the arbitration clause waiving the right to assert certain claims “identifies means that could be used to seek a public injunction—including a private attorney-general action—but the language addresses only how the claim is brought, not the relief obtained.”
He pointed to the final clause, reading: “or any other proceeding where someone acts in a representative capacity or individual claims are combined,” and said:
“This confirms the relevant shared characteristic of the named procedures is their representative nature. This is a bar in all forums, both court and arbitration, of representative claims.”
Support for Conclusion
Robie said that the conclusion is supported by the fact that Proposition 64 was enacted by voters on Nov. 2, 2004. Largely in response to tactics by the Trevor Law Group (no longer in existence) in exacting payments from small businesses rather than face costly lawsuits under the Unfair Competition Law (Business & Professions Code §17200 et seq.), it erected a standing requirement.
Sec. 17203 was amended to provide that “[a]ny person may pursue representative claims or relief on behalf of others only if the claimant meets the standing requirements of Section 17204” as well as a Code of Civil Procedure section, specifying that “these limitations do not apply to claims brought under this chapter by the Attorney General, or any district attorney, county counsel, city attorney, or city prosecutor in this state.”
Sec. 17204 authorizes actions for unfair competition “by a person who has suffered injury in fact and has lost money or property as a result of the unfair competition.”
Robie wrote:
“[A]s found in McGill, an individual can still obtain a public injunction if they [sic] have suffered an injury in fact and bring the claim individually….And, importantly, this is still permitted by the parties’ agreement. The arbitration provision here has no exclusion of public injunctive relief from the scope of available remedies to plaintiff as an individual. Indeed, there is no exclusion of any relief in the arbitration provision, only the means to obtain relief through representative actions. We therefore conclude the arbitration provision does not bar plaintiff from seeking a public injunction in arbitration, rendering the McGill rule inapplicable.”
The case is Seger-Zawacki v. Sparc Group, C099901.
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