Filed 4/24/03
IN THE SUPREME COURT OF CALIFORNIA
JOSE E. CRUZ et al.,
Plaintiffs
and
Respondents,
) S101003
v.
Ct.App.
1/2
A093002
PACIFICARE HEALTH SYSTEMS, INC., et al.,)
San
Francisco
Defendants and Appellants.
Super. Ct. No. 307611
In
Broughton v. Cigna Healthplans (1999) 21 Cal.4th 1066 (Broughton),
we held that claims for injunctive relief under the Consumer Legal Remedies Act
(CLRA) designed to protect the public from deceptive business practices were not
subject to arbitration. In this case, we consider whether Broughton is good law in
light of two recent United States Supreme Court cases pertaining to arbitration,
Green Tree Fin. Corp.-Ala. v. Randolph (2000) 531 U.S. 79 (Green Tree) and
Circuit City Stores, Inc. v. Adams (2001) 532 U.S. 105 (Circuit City). We
conclude that it is.
We also consider whether Broughton’s holding on the inarbitrability of
CLRA public injunctions should be extended to include claims to enjoin unfair
competition under Business and Professions Code section 17200 et seq. and to
enjoin misleading advertising under Business and Professions Code section 17500
et seq. We conclude that Broughton should be extended to such claims, at least
under the circumstances of the present case.
1
We further consider whether Broughton should be extended to statutory and
common law claims for equitable monetary relief for restitution, disgorgement,
and unjust enrichment. We conclude that Broughton should not be thus extended.
I. STATEMENT OF FACTS
In November 1999, plaintiff Jose E. Cruz filed an action against defendants
PacifiCare Health Systems, Inc., and PacifiCare of California, Inc. (collectively
PacifiCare), alleging claims for unfair competition and false advertising in
connection with PacifiCare’s sale, marketing, and rendering of medical services.
In his first amended complaint, Cruz alleged that he was an enrollee in one of the
various health plans PacifiCare offers and operates in California. He also alleged
that “through its misleading and deceptive material representations and
omissions,” PacifiCare has employed a “fraudulent, unlawful, and/or unfair
scheme designed to induce” persons to enroll in its health plans by
“misrepresenting . . . that its primary commitment . . . is to maintain and improve
the quality of healthcare provided.” In fact, Cruz alleged, PacifiCare “has been
aggressively engaged in implementing undisclosed systemic internal policies that
are designed, inter alia, to discourage PacifiCare’s primary care physicians from
delivering medical services and to interfere with the medical judgment of
PacifiCare healthcare providers.” The result of these policies, he alleged, is a
“reduction in the quality of [provided] healthcare” that “is directly contrary to
PacifiCare’s representations.”
Cruz emphasized in his first amended complaint that he “does not challenge
the denial of medical benefits to any enrollee or subscriber,” but “challenges the
manner in which PacifiCare . . . induced persons to subscribe to its Health Plans
. . . by misrepresenting or failing to disclose internal policies that lower the quality
2
of services provided.” Cruz alleged that he was filing the action “in his individual
capacity and on behalf of the general public,” and he sought to represent a class of
“approximately 1.6 million PacifiCare Health Plan enrollees in California.”
Based on these general allegations, Cruz alleged four causes of action. In
the first, he alleged that PacifiCare had violated Business and Professions Code
section 17500 by “engaging in false advertising” that “reduce[d] the quality of
medical services available to . . . enrollees” and “decrease[d] the value of the
[health coverage] for which [they] paid.” To remedy this alleged violation, Cruz
requested “an order enjoining [PacifiCare] from violating [Business and
Professions Code section] 17500 and requiring [it] to disgorge . . . all of [its] ill-
gotten gains and monies wrongfully acquired.” The second cause of action
alleged that in violating various state statutes, PacifiCare had committed an unfair,
unlawful, or fraudulent business act or practice under Business and Professions
Code section 17200 that “reduce[d] the quality of medical services available to”
enrollees and “decrease[d] the value of their respective [h]ealth [p]lans.” To
remedy this alleged violation, Cruz requested “an order enjoining [PacifiCare]
from violating [Business and Professions Code section] 17200 and requiring [it] to
disgorge . . . all of [its] ill-gotten gains and monies wrongfully acquired.” The
third cause of action alleged that PacifiCare’s misrepresentations violated the
CLRA (Civ. Code, § 1770). To remedy this alleged violation, Cruz requested “an
order enjoining [PacifiCare’s] wrongful acts and practices” and requiring that
PacifiCare “make restitution . . . of all monies paid to” it. Cruz also stated his
intent to add a request for actual damages if PacifiCare failed to remedy the
damage from its violation. The fourth cause of action was for unjust enrichment,
and alleged that as a result of PacifiCare’s conduct, enrollees had “receiv[ed] a
lower quality of care than advertised and represented by” PacifiCare. As to
3
remedy, Cruz requested “restitution, refund, or reimbursement of” certain monies
paid by or on behalf of enrollees, and “disgorgement of the excessive and ill-
gotten monies obtained by [PacifiCare] as a result of the unlawful, fraudulent, or
unfair business acts and practices and untrue and misleading advertisements.”
PacifiCare moved for an order compelling Cruz to arbitrate his claims and
staying the action pending completion of arbitration. PacifiCare argued that Cruz,
who obtained health coverage through his employer, was required to arbitrate his
claims under several provisions of the subscriber agreement between his employer
and PacifiCare. PacifiCare relied primarily on paragraph 15.02 of the subscriber
agreement, which provides in part: “ARBITRATION. PACIFICARE USES
BINDING ARBITRATION TO RESOLVE ANY AND ALL DISPUTES
BETWEEN PACIFICARE AND GROUP OR MEMBER, INCLUDING . . .
DISPUTES RELATING TO THE DELIVERY OF SERVICES UNDER THE
PACIFICARE HEALTH PLAN. PACIFICARE, GROUP AND MEMBER
EACH UNDERSTAND AND EXPRESSLY AGREE THAT BY ENTERING
INTO THE PACIFICARE SUBSCRIBER AGREEMENT, PACIFICARE,
GROUP AND MEMBER ARE EACH VOLUNTARILY GIVING UP THEIR
CONSTITUTIONAL RIGHT TO HAVE ALL SUCH DISPUTES DECIDED
IN A COURT OF LAW BEFORE A JURY, AND INSTEAD ARE
ACCEPTING THE USE OF BINDING ARBITRATION.” PacifiCare also
relied on paragraph 7.01.01 of the subscriber agreement, which establishes a
procedure for “Member Appeals not related to quality of care” and provides that a
member who is not satisfied with the outcome of PacifiCare’s internal appeals
process “may . . . submit or request that PacifiCare submit the Appeal to binding
arbitration before the American Arbitration Association” (AAA). Paragraph
7.01.01 also provides: “Upon submission of a dispute to the [AAA], Member and
4
PacifiCare agree to be bound by the rules of procedure and decision of the
[AAA].” Paragraph 7.01.01 concludes by stating: “PACIFICARE AND
MEMBER UNDERSTAND THAT BY ENTERING INTO THIS
AGREEMENT, THEY ARE GIVING UP THEIR CONSTITUTIONAL
RIGHT TO HAVE ANY DISPUTE DECIDED IN A COURT OF LAW
BEFORE A JURY AND INSTEAD ARE ACCEPTING THE USE OF
ARBITRATION.” PacifiCare also relied on Cruz’s signed enrollment form,
which stated that he “agree[d] to and underst[ood]” several terms and conditions,
including: (1) “To be bound by the PacifiCare . . . Subscriber Agreement”; and (2)
that “[a]ny differences between myself . . . and PacifiCare . . . relating to
PacifiCare . . . or its performance are subject to binding arbitration.” Finally,
PacifiCare relied on the member handbook it sent to Cruz, which describes
PacifiCare’s internal appeals process and, for members unsatisfied with the result
of that process, the option of arbitration before the AAA. The member handbook
also states: “MEMBERS UNDERSTAND THAT BY ENROLLING IN
PACIFICARE, THEY AGREE TO GIVE UP THEIR CONSTITUTIONAL
RIGHT TO HAVE ANY DISPUTE DECIDED IN A COURT OF LAW
BEFORE A JURY AND INSTEAD ARE ACCEPTING THE USE OF
ARBITRATION FOR RESOLVING DISPUTES WITH PACIFICARE.”
Cruz opposed PacifiCare’s motion on several grounds. He first argued that
the applicable arbitration provision does not encompass this dispute because the
paragraph in the subscriber agreement requiring arbitration before the AAA
governs appeals “ ‘not related to quality of care’ ” and his complaint “is solely . . .
directed to the ‘quality of care’ provided by PacifiCare.” Second, he argued that
his requests for injunctive relief are inarbitrable under Broughton. Third, he
argued that the arbitration clause is unconscionable. Finally, he argued that
5
because PacifiCare did not enter into any agreement with either him or his
employer, it may not invoke the arbitration clause.
PacifiCare offered several arguments in response. Regarding Cruz’s
contention under Broughton, PacifiCare argued that Broughton prohibits
arbitration only of claims for injunctive relief under the CLRA, and does not
prohibit arbitration of Cruz’s “monetary” claims for disgorgement, restitution and
reimbursement or his request for injunctive relief under Business and Professions
Code sections 17200 and 17500. Regarding the scope of arbitration, PacifiCare
argued that because the language of paragraph 15.02 of the subscriber agreement
requires “BINDING ARBITRATION TO RESOLVE ANY AND ALL
DISPUTES BETWEEN PACIFICARE AND GROUP OR MEMBER” (italics
added), it includes claims related to quality of care. Supporting this interpretation,
PacifiCare asserted, is the fact that “the one example [paragraph 15.02] provides
of a covered dispute—‘allegations against PacifiCare of medical malpractice’—
addresses a claim involving quality of care.” PacifiCare also argued that “even if
‘quality of care’ issues were exempt from arbitration,” Cruz does not raise quality
of care issues, and his claims therefore do not fall within this exemption. Finally,
PacifiCare argued that the arbitration clause was not unconscionable.
The trial court denied PacifiCare’s motion to compel arbitration. It
reasoned that Broughton expressly precludes arbitration of Cruz’s claim for
injunctive relief under the CLRA, and it “extended” Broughton’s reasoning to
claims for injunctive relief under Business and Professions Code sections 17200
and 17500 “by an individual acting as a private attorney general.” The court also
reasoned that Cruz’s claims for disgorgement, restitution, and unjust enrichment
are inarbitrable as essentially equitable remedies distinct from damages. Given
6
these conclusions, the court expressly declined to rule on any of Cruz’s other
objections to PacifiCare’s motion.
The Court of Appeal affirmed, relying on Broughton and rejecting
PacifiCare’s argument that the United States Supreme Court had abrogated
Broughton in subsequent decisions. It also upheld the trial court’s extension of
Broughton to claims for disgorgement and restitution under Business and
Professions Code section 17200 et seq., relying primarily on the public benefit
derived from those remedies and the interrelationship between those remedies and
injunctive relief. The court limited its holding to equitable remedies within the
context of class action claims. Like the trial court, the Court of Appeal did not
consider any of Cruz’s other arguments against arbitration. We then granted
PacifiCare’s petition for review.
II. DISCUSSION
A.
Did Green Tree and Circuit City Overrule Broughton?
PacifiCare
contends that our decision in Broughton, supra, 21 Cal.4th 1066,
holding that injunctive relief claims under the CLRA are inarbitrable, should be
overruled in light of Green Tree, supra, 531 U.S. 79, and Circuit City, supra, 532
U.S. 105. According to PacifiCare, these two post-Broughton decisions, read in
conjunction with earlier United States Supreme Court decisions, make clear that
only Congress—and not state legislatures—may create exceptions to the Federal
Arbitration Act’s (FAA) requirement that arbitration agreements be enforced
according to their terms, and that therefore state courts cannot hold that certain
requests for public injunctive relief are inarbitrable. We disagree.
In
Broughton, we recognized that the United States Supreme Court has
emphasized Congress’s and its own policy in favor of arbitration and, at least since
7
1984, has rejected numerous efforts and arguments by state courts, federal courts
and litigants to declare certain classes of cases not subject to arbitration.
(Broughton, supra, 21 Cal.4th at pp. 1074-1075.) Indeed, we acknowledged the
Supreme Court’s broad statement in its seminal arbitration case, Southland Corp.
v. Keating (1984) 465 U.S. 1, 10, that “ ‘[i]n enacting § 2 of the [FAA], Congress
declared a national policy favoring arbitration and withdrew the power of the
states to require a judicial forum for the resolution of claims which the contracting
parties agreed to resolve by arbitration.’ ” (Broughton, supra, 21 Cal.4th at
p. 1074.)
We nonetheless held that requests for injunctive relief designed to benefit
the public presented a narrow exception to the rule that the FAA requires state
courts to honor arbitration agreements. We reasoned that the Supreme Court has
acknowledged that Congress may “ ‘require a judicial forum for the resolution of
claims which the contracting parties agreed to resolve by arbitration’ ”
(Broughton, supra, 21 Cal.4th at p. 1074, quoting Southland Corp. v. Keating,
supra, 465 U.S. at p. 10), and that “[t]he unsuitability of a statutory claim for
arbitration turns on congressional intent, which can be discovered in the text of the
statute in question, its legislative history or in an ‘ “inherent conflict” between
arbitration and the [statute’s] underlying purposes.’ ” (Broughton, supra, 21
Cal.4th at p. 1075, quoting Gilmer v. Interstate/Johnson Lane Corp. (1991) 500
U.S. 20, 26 (Gilmer).)
We then concluded that there was indeed an inherent conflict between
arbitration and the CLRA’s authorization in Civil Code section 1780,
subdivision(a)(2) for injunctive relief designed to protect the public, e.g., to stop
deceptive business practices. As we stated: “[T]here are two factors taken in
combination that make for an ‘inherent conflict’ between arbitration and the
8
underlying purpose of the CLRA’s injunctive relief remedy. First, that relief is for
the benefit of the general public rather than the party bringing the action.”
(Broughton, supra, 21 Cal.4th at p. 1082.) In reaching this conclusion, we
distinguished requests for public injunctions from other sorts of actions, such as
antitrust suits, in which the public benefit is incidental to the plaintiff’s award of
damages; unlike private suits for damages, in a public injunction action a plaintiff
acts in the purest sense as a private attorney general. (Id. at pp. 1075-1077.)
“Second, the judicial forum has significant institutional advantages over
arbitration in administering a public injunctive remedy, which as a consequence
will likely lead to the diminution or frustration of the public benefit if the remedy
is entrusted to arbitrators.” (Id. at p. 1082.) We reasoned that an arbitrator lacked
the institutional continuity and the appropriate jurisdiction to sufficiently enforce
and, if needed, modify a public injunction. (Id. at p. 1081.)1 We concluded:
1
Justice Chin’s concurring and dissenting opinion finds significant the U.S.
Supreme Court’s holding that a decision of the New York Court of Appeals,
Garrity v. Lyle Stuart, Inc. (1976) 386 N.Y.S.2d 831, prohibiting arbitration of
punitive damages claims, is preempted by the FAA. (Mastrobuono v. Shearson
Lehman Hutton, Inc. (1995) 514 U.S. 52, 58.) In particular, the opinion points to
the Supreme Court’s implicit rejection of Garrity’s rationale that punitive damage
awards require “rather close judicial supervision” that would be lacking in
arbitration. (Garrity, supra, 386 N.Y.S.2d at p. 834.) Yet it is evident that what
Garrity meant by “judicial supervision” was simply adequate judicial and
appellate review of punitive damage awards, not the ongoing monitoring,
enforcement, and modification that is required of public injunctions. (See id. at p.
835.) As we have recognized, the supposed inadequacy of judicial review of
arbitration awards is not grounds for holding a claim inarbitrable, even when the
arbitration involves a matter of public importance. (Broughton, supra, 21 Cal.4th
at p. 1086.) Moreover, punitive damages, unlike public injunctions, confer a
direct benefit on the plaintiffs seeking them, and are in principle little different
from the treble-damages antitrust awards that we acknowledged in Broughton to
be fully arbitrable. (Id. at pp. 1075-1076.)
9
“Given this inherent conflict, we will presume, absent indications to the contrary,
that the Legislature did not intend that the injunctive relief claims be arbitrated.”
(Id. at p. 1082.) We discerned no such legislative intent. (Ibid.)
We further concluded that denying arbitration in this one area would not
violate the FAA. As we stated: “[A]lthough the court has stated generally that the
capacity to withdraw statutory rights from the scope of arbitration agreements is
the prerogative solely of Congress, not state courts or legislatures (Southland,
supra, 465 U.S. at p. 18), it has never directly decided whether a legislature may
restrict a private arbitration agreement when it inherently conflicts with a public
statutory purpose that transcends private interests. In the present case, as
discussed, we believe there is such an inherent conflict between arbitration and a
statutory injunctive relief remedy designed for the protection of the general public.
Although both California and federal law recognize the important policy of
enforcing arbitration agreements, it would be perverse to extend the policy so far
as to preclude states from passing legislation the purposes of which make it
incompatible with arbitration, or to compel states to permit the vitiation through
arbitration of the substantive rights afforded by such legislation.
“In other terms, our holding does not represent a ‘ “suspicion of arbitration
as a method of weakening the protections afforded in the substantive law to
would-be complainants” . . . “out of step with our current strong endorsement of
the federal statutes favoring this method of resolving disputes” ’ [Citation.]
Rather, it is a recognition that arbitration cannot necessarily afford all the
advantages of adjudication in the area of private attorney general actions, that in a
narrow class of such actions arbitration is inappropriate, and that this
inappropriateness does not turn on the happenstance of whether the rights and
remedies being adjudicated are of state or federal derivation.
10
“Nor does anything in the legislative history of the FAA suggest that
Congress contemplated ‘public injunction’ arbitration within the universe of
arbitration agreements it was attempting to enforce. Indeed, the primary focus of
the drafters of the FAA appears to have been on the utility of arbitration in
resolving ordinary commercial disputes. [Citations.] Although the court has
interpreted the FAA to extend to noncommercial statutory claims, it is doubtful
Congress would have envisioned the extension of the FAA to enforce arbitral
jurisdiction over a public injunction.” (Broughton, supra, 21 Cal.4th at pp. 1083-
1084, fn. omitted.)
The recent United States Supreme Court cases cited by PacifiCare have
little if any bearing on our holding in Broughton. In Circuit City, supra, 532 U.S.
105, the court concluded that section 1 of the FAA, which exempts from the scope
of the FAA “contracts of employment of seamen, railroad employees, or any other
class of workers engaged in foreign or interstate commerce” (9 U.S.C. § 1), did
not exempt most employment contracts. The opinion was principally concerned
with an analysis of the meaning of section 1, not the preemptive scope of section
2. The majority rejected the position of various amici curiae, including attorneys
general of 22 states, who argued that applying the FAA to employment contracts
would interfere with the employment policies of the states. In rejecting this
argument, the court reaffirmed Southland, and declined to “chip away” at that case
by what the majority termed “an unconventional reading” of section 1. (Circuit
City, supra, 532 U.S. at p. 122.) Broughton, of course, was neither predicated on
overruling Southland nor on construing section 1 of the FAA. The Circuit City
court did not address the central question in Broughton whether public
injunctions were arbitrable. Nor did it shed any further light on the “inherently
incompatible” exception to arbitrability.
11
Still less is Green Tree, supra, 531 U.S. 79, relevant to Broughton. That
case was narrowly focused on the issue of cost sharing in the arbitration of federal
statutory claims. Green Tree’s holding did not concern federal preemption of state
arbitration claims. Nor did its reiteration of Congress’s strong pro-arbitration
policy (id. at p. 92) call Broughton into question. As discussed above, Broughton
takes such a policy as a given. (Broughton, supra, 21 Cal.4th at pp. 1074-1075.)
In sum, nothing that is novel about Green Tree or Circuit City has any
bearing on Broughton. The only parts of these opinions that remotely pertain to
Broughton are recapitulations of familiar themes regarding the importance of
enforcing arbitration agreements and the inability of states to prevent that
enforcement. These were amply considered in Broughton. Moreover, we were
presented in Broughton with extensive argument that CLRA public injunctions
were arbitrable. (See Broughton, supra, 21 Cal.4th at pp. 1088-1103 (dis. opn. of
Chin, J.).) We decline PacifiCare’s invitation to revisit this argument.
B.
Are Injunctions under Business and Professions Code Sections
17200 and 17500 Arbitrable?
PacifiCare contends that even if we affirm our holding in Broughton that
claims for injunctive relief under the CLRA are inarbitrable, the same should not
hold true for injunctive relief claims under the unfair competition law (UCL),
Business and Professions Code section 17200 et seq., and claims of false
advertising under Business and Professions Code section 17500. We disagree
under the circumstances of the present case.
The UCL is intended to proscribe “unfair or fraudulent business act[s] or
practice[s] and unfair, deceptive, untrue or misleading advertising . . . .” (Bus. &
Prof. Code, § 17200.) The law provides that any person engaged in unfair
competition may be enjoined. (Id., § 17203.) Moreover, “[s]tanding to sue under
12
the UCL is expansive . . . . Unfair competition actions can be brought by a public
prosecutor or ‘by any person acting for the interests of itself, its members or the
general public.’ ” (Korea Supply Co. v. Lockheed Martin Corp. ((2003) 29 Cal.4th
1134, 1143 (Korea Supply), quoting Bus. & Prof. Code, § 17204.) The UCL is
intended to protect competitors as well as consumers from unfair practices.
(Tippett v. Terich (1995) 37 Cal.App.4th 1517, 1536.) Thus, there may be
occasions in which the injunctive power of the UCL is used primarily to redress
injuries to competing businesses and only incidentally for the public benefit. (See,
e.g., Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co.
(1999) 20 Cal.4th 163, 188-190.) In Broughton, we declined to decide whether
requests for injunctive relief designed primarily to rectify individual wrongs were
arbitrable. (Broughton, supra, 21 Cal.4th at p. 1080, fn. 5.)
We need not decide whether UCL injunctive relief actions brought by
injured business competitors are arbitrable. In the present case, the request for
injunctive relief is clearly for the benefit of health care consumers and the general
public by seeking to enjoin PacifiCare’s alleged deceptive advertising practices.
The claim is virtually indistinguishable from the CLRA claim that was at issue in
Broughton. (Broughton, supra, 21 Cal.4th at p. 1072 [Broughton sought to enjoin
health care company’s alleged deceptive advertising of its medical services].)
The same is true of Cruz’s request to enjoin PacifiCare’s alleged
misleading advertising under Business and Professions Code section 17500. That
section makes unlawful “untrue or misleading” statements designed to “induce the
public to enter into any obligation” to purchase various goods and services. (Ibid.)
Section 17535 authorizes the enjoining of such statements by various government
officials and members of the public. Cruz’s injunctive relief claim under section
17535 is essentially requesting the same relief for the same reason as is his UCL
13
claim. (See Committee on Children’s Television, Inc. v. General Foods Corp.
(1983) 35 Cal.3d 197, 210 [same false advertising claim may give rise to actions
under the UCL and Bus. & Prof. Code, § 17500].) In other words, Cruz’s action
to enjoin PacifiCare’s alleged deceptive business practices is undertaken for the
public benefit, whether designated as a claim under the CLRA, Business and
Professions Code section 17200 or section 17500: it is designed to prevent further
harm to the public at large rather than to redress or prevent injury to a plaintiff. As
such, for the reasons discussed in Broughton, there is an “ ‘inherent conflict’
between arbitration and the underlying purpose of [those statutes’] injunctive relief
remedy.” (Broughton, supra, 21 Cal.4th at p. 1082.)
We therefore conclude that Cruz’s injunctive relief claim is inarbitrable
unless there are indications of legislative intent to the contrary in the UCL or
Business and Professions Code section 17500. (Broughton, supra, 21 Cal.4th at p.
1082.) We discern no such intent. Business and Professions Code sections 17203
and 17535 both provide that injunctive relief claims are to be brought in “any
court of competent jurisdiction.” (Italics added.) PacifiCare points to certain
features in the CLRA not present in the UCL, such as the CLRA antiwaiver
provision (Civ. Code, § 1751) and the fact that it provides for more extensive
remedies than the UCL or Business and Professions Code section 17500 (Civ.
Code, § 1780). (See Broughton, supra, 21 Cal.4th at p. 1077.) But these were not
the characteristics we relied on in concluding that requests for injunctive relief
under the CLRA are inarbitrable. (Broughton, at p. 1082.) The absence of these
features in the UCL or in Business and Professions Code section 17500 does not
persuade us that the Legislature intended to allow arbitration of public injunctive
14
relief requests under these statutes. We therefore conclude that each of Cruz’s
injunctive relief requests is inarbitrable.2
C.
Are Cruz’s Claims for Restitution and Disgorgement under the UCL
Arbitrable?
PacifiCare contends the Court of Appeal erred in extending Broughton to
hold that claims for restitution and disgorgement under the UCL are inarbitrable.
We agree.
In
Broughton, we held that damages claims under the CLRA are arbitrable,
notwithstanding the fact that such claims vindicate important statutory rights.
After reviewing United States Supreme Court precedent regarding the arbitration
of antitrust and other federal statutory claims, we concluded that such precedent
establishes that “statutory damages claims are fully arbitrable. Such an action is
primarily for the benefit of a party to the arbitration, even if the action incidentally
vindicates important public interests. [Citation.] In the context of statutory
damage claims, the United States Supreme Court has consistently rejected
plaintiffs’ arguments that abbreviated discovery, arbitration’s inability to establish
binding precedent, and a plaintiff’s right to a jury trial render the arbitral forum
inadequate, or that submission of resolution of the claims to arbitration is in any
sense a waiver of the substantive rights afforded by statute. [Citations.] ‘By
agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights
2
We note that the Courts of Appeal that have considered this issue have
reached a similar conclusion. (See Warren-Guthrie v. Health Net (2000) 84
Cal.App.4th 804, 817 [concluding injunctive relief request under Bus. & Prof.
Code, § 17200 inarbitrable under Broughton]; Coast Plaza Doctors Hospital v.
Blue Cross of California (2000) 83 Cal.App.4th 677, 692 [same]; Groom v. Health
Net (2000) 82 Cal.App.4th 1189, 1199 [same].)
15
afforded by the statute; it only submits to their resolution in an arbitral, rather than
a judicial, forum.’ ” (Broughton, supra, 21 Cal.4th at p. 1084.)3
Under the UCL, remedies are limited. “A UCL action is equitable in
nature; damages cannot be recovered. [Citation.] . . . ‘[P]revailing plaintiffs are
generally limited to injunctive relief and restitution.’ ” (Korea Supply, supra, 29
Cal.4th at p. 11440.) In the UCL context, an order for restitution is an order
“compelling a UCL defendant to return money obtained through an unfair
business practice to those persons in interest from whom the property was taken,
that is, to persons who had an ownership interest in the property or those claiming
through that person.” (Kraus v. Trinity Management Services, Inc. (2000) 23
Cal.4th 116, 126-127, fn. omitted.)
As we noted in Cortez v. Purolator Air Filtration Products Co. (2000) 23
Cal.4th 163, 173, Civil Code section 3381 defines “damages”: “Every person who
suffers detriment from the unlawful act or omission of another, may recover from
the person in fault a compensation therefor in money, which is called damages.”
We concluded that damages, thus broadly defined, “may include a restitutionary
element.” (Cortez, supra, 23 Cal.4th at p. 174.) Given this overlap, there appears
to be no reason why restitutionary claims, like CLRA claims for damages, should
not be arbitrable. Nothing in Broughton’s functional analysis suggests that the
mere designation of restitution as an equitable remedy makes the request for the
3
In Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24
Cal.4th 83, 99-113, we held that arbitration of unwaivable statutory claims
pursuant to a mandatory arbitration employment agreement required the
incorporation of certain procedural protections. Cruz does not raise the issue
whether those protections apply in the present context of arbitrating statutory
consumer protection claims, and we do not address this issue.
16
remedy inarbitrable. Moreover, although Cruz argues that restitution under the
UCL accomplishes a public purpose by deterring unlawful conduct, the same
could be said of damages under the CLRA or under various federal statutes. This
deterrent effect is, however, incidental to the private benefits obtained from those
bringing the restitutionary or damages action. (Broughton, supra, 21 Cal.4th at p.
1084.) The Supreme Court has made clear that such actions, notwithstanding the
public benefit, are fully arbitrable under the FAA. (Ibid.)4
The Court of Appeal in the present case expressly limited its holding of
inarbitrability to UCL class action suits. A class action may be primarily for the
public benefit. But public benefit is only one of the factors we identified in
Broughton as weighing in favor of the action’s inarbitrability. (Broughton, supra,
21 Cal.4th at p. 1082.) The other factor, the “institutional advantages” of the
judicial forum over arbitration in the administration of a public injunction, is not
present. (Ibid.) It may be the case that under the UCL, a class action would allow
for disgorgement into a fluid recovery fund and distribution by various means.
(See Kraus, supra, 23 Cal.4th at pp. 127, 137; Korea Supply, supra, 29 Cal.4th at
p. 1148, fn. 6.) But the establishment of such a fund and the distribution of its
proceeds does not present the same order of institutional difficulty as does the
maintenance of a permanent statewide injunction requiring judicial supervision.
4
We note that the language authorizing restitution for misleading advertising
practices under Business and Professions Code section 17535 is virtually identical
to the language authorizing restitution found in section 17203 under the UCL.
Both provisions declare that a “court may make such orders or judgments” as
“may be necessary to restore to any person in interest any money or property, real
or personal, which may have been acquired by” the business practices made
unlawful by the statute in question. We therefore assume, at least on the issue of
arbitrability, that section 17535 should be construed the same way as section
17203.
17
We agree with the one published case on this issue that “[u]nlike a public
injunction, disgorgement of funds does not need to be continuously monitored
because its object is limited in time and scope. Once the profits to be disgorged
and the recipients of those funds are identified, there is no need for long term
modification and correction necessitating judicial supervision. Therefore, . . .
disgorgement of funds is essentially the same as awarding money damages, and
within the power of the arbitrators to award. [T]here is no ‘inherent conflict’
between this remedy and arbitration.” (Arriaga v. Cross Country Bank (S.D.Cal.
2001) 163 F.Supp.2d 1189, 1197.)
Moreover, in this state we recognize classwide arbitration as a means of
bringing collective legal action by parties bound to an arbitration agreement.
(Keating v. Superior Court (1982) 31 Cal.3d 584, 612-613, overruled on other
grounds in Southland, supra, 465 U.S. 1; Blue Cross of California v. Superior
Court (1998) 67 Cal.App.4th 42.) Without addressing questions not before us, we
anticipate that courts may find it appropriate to become involved in supervising
the equitable distribution of assets resulting from a class recovery, assuming
entitlement to such recovery has been established. But we foresee that they would
be able to do so without becoming involved in the merits of the underlying
dispute. The same cannot be said for the supervision, continued enforcement, and
modification of a public injunction, wherein judicial involvement would appear to
be both inevitable and desirable. (See Broughton, supra, 21 Cal.4th at pp. 1080-
1082.)5
5
We note that the United States Supreme Court has recently granted a writ
of certiorari in a case that may decide the validity of classwide arbitration when
class action is not provided for in the arbitration agreement. (Green Tree Fin.
Corp. v. Bazzle, cert. granted Jan. 15, 2003, No. 02-634, __U.S. __ [123 S.Ct.
(footnote continued on next page)
18
Amici Curiae Trial Lawyers for Public Justice et al. argue that a recent
United States Supreme Court case, Equal Employment Opportunity Commission v.
Waffle House, Inc. (2002) 534 U.S. 279, supports their position that all UCL
claims are inarbitrable. In Waffle House, the Supreme Court majority held that the
EEOC may sue employers not only when it seeks to enjoin discriminatory
employment practices, but also for victim-specific relief, such as reinstatement and
back pay, even when the employee on whose behalf it is acting is a party to a
binding arbitration agreement. The court reasoned that the EEOC was neither a
party to the arbitration agreement nor a mere proxy for the employee on whose
behalf the action was brought, but rather an agency charged by Congress with the
vindication of the public interest. (Id. at pp. 288-291.) The court noted their
conclusion might have differed if the EEOC could prosecute the action without the
employee’s consent, or if the employee had the final say in the EEOC’s prayer for
relief. (Id. at p. 291.) The three-person dissent agreed with the majority that the
EEOC was not bound by employee arbitration agreements when it pursued
non-victim-specific relief, but would have held that it was prevented by the
arbitration agreement from bringing an action for victim-specific relief on those
employees’ behalf. (Id. at p. 298 (dis. opn. of Thomas, J.).)
(footnote continued from previous page)
817].) The unavailability of classwide arbitration would not alter our conclusion
in the present case. As the Supreme Court has stated in rejecting the argument that
the unavailability of classwide relief is grounds for not enforcing an arbitration
agreement: “ ‘[E]ven if the arbitration could not go forward as a class action or
class relief could not be granted by the arbitrator, the fact that [a statute] provides
for the possibility of bringing a collective action does not mean that individual
attempts at conciliation were intended to be barred.’ ” (Gilmer, supra, 500 U.S. at
p. 32.)
19
Amici curiae compare the private attorney general action brought under
Business and Professions Code section 17024 with an action brought by the
EEOC, and argue that anyone acting in a private attorney general capacity should
not be bound by an arbitration agreement. But in light of the United States
Supreme Court’s strong presumption in favor of enforcing arbitration agreements
reviewed above, we do not read Waffle House as permitting a party to an
arbitration agreement to evade its contractual obligation to settle its own
restitutionary claims through arbitration merely by acting as a representative on
behalf of other similarly situated claimants.6
We therefore conclude that Cruz’s actions for restitution and/or
disgorgement, whether brought as an individual or as a class action, are
arbitrable.7 By the same logic, his common law claim for unjust enrichment,
6
Although we do not agree with amici curiae that Waffle House requires us
to extend Broughton, neither do we agree with Justice Chin’s concurring and
dissenting opinion that the former case requires us to overrule the latter. (Conc. &
dis. opn. of Chin, J., post, at p. 18.) As we have discussed, Waffle House
recognizes that the EEOC’s action on behalf of parties to an arbitration agreement
in order to vindicate the public interest is not confined to injunctions, but can
encompass the full range of victim-specific relief. But it does not follow, either
logically or intuitively, that all forms of relief must therefore be arbitrable for
private parties bound by arbitration agreements. For reasons explained above, and
in Broughton, we hold that for consumers bound by arbitration agreements, public
injunctions are inarbitrable. Nothing in Waffle House contradicts or calls into
question that conclusion. If anything, Waffle House suggests the Supreme Court’s
agreement that a party acting entirely on behalf of the public in the EEOC’s
case in all of its actions and in Cruz’s case when he pursues a public injunction
acts beyond the scope of any arbitration agreement.
7
The question whether someone who is not a party to an arbitration
agreement may bring a representative action pursuant to Business and Professions
Code section 17204 for restitution on behalf of injured consumers who are parties
to the arbitration agreement is one that is not before us, and about which we
express no opinion.
20
which is essentially an action for restitution (see Lauriedale Associates Ltd. v.
Wilson (1992) 7 Cal.App.4th 1439, 1448), is also arbitrable.
Finally, we note that when there is a severance of arbitrable from
inarbitrable claims, the trial court has the discretion to stay proceedings on the
inarbitrable claims pending resolution of the arbitration. (Code Civ. Proc.,
§ 1281.4; Madden v. Kaiser Foundation Hospitals (1976) 17 Cal.3d 699, 714.)
We agree with the Court of Appeal in Coast Plaza Doctors Hospital v. Blue Cross
of California, supra, 83 Cal.App.4th at page 693, that such a stay is generally in
order under these circumstances. “A stay is appropriate where ‘[i]n the absence of
a stay, the continuation of the proceedings in the trial court disrupt the arbitration
proceedings and can render them ineffective.’ ” (Ibid.)8
8
In his brief, Cruz argues for the first time that under an FAA exemption
established by the federal McCarran-Ferguson Act (15 U.S.C. § 1011 et seq.), the
FAA does not apply to the arbitration agreement in this case. We decline to
address this argument because Cruz failed to raise it below. (See Cal. Rules of
Court, rule 29(b)(1); People v. Slayton (2001) 26 Cal.4th 1076, 1083.)
21
III. DISPOSITION
Although Cruz’s monetary equitable relief claims are not inherently
inarbitrable, he contends, as noted, that the arbitration agreement should not be
enforced for other reasons, such as because his claims are outside the scope of the
arbitration agreement and because the agreement is unconscionable. The trial
court, holding all of the claims inarbitrable per se, did not address these
contentions. These objections to arbitration may be reasserted on remand.
The judgment of the Court of Appeal is affirmed in part and reversed in
part, and the cause is remanded for further proceedings consistent with this
opinion.
MORENO, J.
WE CONCUR: GEORGE, C. J.
KENNARD,
J.
* REARDON, J.
*
Honorable Timothy A. Reardon, Associate Justice of the Court of Appeal,
First Appellate District, Division Four, assigned by the Chief Justice pursuant to
article VI, section 6 of the California Constitution.
22
CONCURRING AND DISSENTING OPINION BY BAXTER, J.
The Federal Arbitration Act (9 U.S.C. § 1 et seq. (FAA)) evinces a supreme
and preemptive federal policy favoring the enforcement of arbitration agreements
involving interstate commerce. In Broughton v. Cigna Healthplans (1999) 21
Cal.4th 1066 (Broughton), this court articulated the principle that, notwithstanding
the FAA, California may act in contravention of that policy by requiring a judicial
forum for public injunction requests that parties contracting in interstate commerce
have agreed to resolve by arbitration. There we held that claims by one party
against another for public injunctive relief under our state’s Consumer Legal
Remedies Act (CLRA) were inarbitrable despite the parties’ agreement to arbitrate
all their disputes.
I joined the majority opinion in Broughton, supra, 21 Cal.4th 1066. But as
Justice Chin cogently and compellingly explains in his concurring and dissenting
opinion herein, Broughton’s reasoning has been undermined by three subsequent
decisions of the United States Supreme Court: Equal Employment Opportunity
Commission v. Waffle House, Inc. (2002) 534 U.S. 279; Circuit City Stores, Inc. v.
Adams (2001) 532 U.S. 105; and Green Tree Fin. Corp.-Ala. v. Randolph (2000)
531 U.S. 79. Accordingly, while I concur fully in the majority’s conclusion here
that plaintiff Jose Cruz’s claims for restitution, disgorgement, and unjust
enrichment are arbitrable pursuant to the parties’ agreement, I cannot join in its
1
determination to follow and extend Broughton to bar arbitration of plaintiff’s
requests for injunctive relief under the CLRA, the unfair competition law (UCL)
(Bus. & Prof. Code, § 17200 et seq.), and Business and Professions Code section
17500.
Not only do the recent Supreme Court authorities cast grave doubt on
Broughton’s legal analysis and conclusion, but as Justice Chin also points out,
claims under the UCL are easily alleged in the context of business activities.
(Conc. & dis. opn. of Chin, J., post, at pp. 23-24.) Therefore, extending
Broughton to UCL injunctive relief requests will surely frustrate the legitimate
contract expectations of a great many who seek to secure the benefits of a
nonjudicial forum for resolving their disputes. Indeed, virtually every lawsuit
involving a business entity will be subject to compounded costs and delayed
resolution of claims when bifurcated litigation of the suit proceeds one part after
the other in dual fora: first, an arbitration proceeding in which any UCL-based
restitution, disgorgement, and unjust enrichment claims and any non-UCL
damages claims are resolved; and second, a judicial action in which the UCL
claims seeking public injunctive relief are litigated. (See maj. opn., ante, at p. 21.)
This additional consideration is a paramount one that further contributed to my
reevaluation of Broughton.
For all the foregoing reasons, I hereby dissent from the majority’s decision
that plaintiff’s requests for injunctive relief are inarbitrable.
BAXTER, J.
2
CONCURRING AND DISSENTING OPINION BY CHIN, J.
I concur in the majority’s holding that the claims of plaintiff Jose Cruz for
restitution, disgorgement, and unjust enrichment are arbitrable. However, I dissent
from the majority’s decision to follow and extend Broughton v. Cigna Healthplans
(1999) 21 Cal.4th 1066 (Broughton), in holding that Cruz’s requests for injunctive
relief under the Consumer Legal Remedies Act (CLRA) (Civ. Code, § 1750 et
seq.), the Unfair Competition Law (UCL) (Bus. & Prof. Code, § 17200 et seq.),
and Business and Professions Code section 17500 are not arbitrable. Broughton’s
holding that CLRA claims for so-called public injunctive relief are not arbitrable is
inconsistent and incompatible with the United States Supreme Court’s binding
construction of the Federal Arbitration Act (FAA) (9 U.S.C. § 1 et seq.) in three
post-Broughton decisions: Circuit City Stores, Inc. v. Adams (2001) 532 U.S. 105
(Circuit City), Equal Employment Opportunity Commission v. Waffle House, Inc.
(2002) 534 U.S. 279, 294-296 (Waffle House), and Green Tree Financial Corp.-
Alabama v. Randolph (2000) 531 U.S. 79 (Green Tree). Moreover, given the ease
with which a plaintiff may allege a claim under the UCL, the majority’s extension
of Broughton to UCL claims destroys the enforceability of arbitration agreements
and eviscerates the public policy—expressly established by both the California
Legislature and the United States Congress—that strongly favors enforcement of
arbitration agreements according to their terms. Finally, the majority sacrifices
this public policy for no good reason; even if we hold an individual plaintiff to his
or her agreement to arbitrate, under this court’s prior construction of the UCL, the
1
Attorney General of California and any other California citizen who has not signed
an arbitration agreement may bring a court action for injunctive relief to protect
the public and vindicate the public interest in enforcement of the statutes here in
question.
I. THE FAA PREEMPTS STATE LAWS THAT LIMIT THE ENFORCEABILITY OF
ARBITRATION AGREEMENTS.
In enacting the FAA, Congress “intended to ‘revers[e] centuries of judicial
hostility to arbitration agreements,’ [citation], by ‘plac[ing] [them] “upon the same
footing as other contracts.” ’ ” (Shearson/American Express Inc. v. McMahon
(1987) 482 U.S. 220, 225-226.) Section 2 of the FAA provides: “A written
provision in . . . a contract evidencing a transaction involving [interstate]
commerce to settle by arbitration a controversy thereafter arising out of such
contract or transaction, . . . shall be valid, irrevocable, and enforceable, save upon
such grounds as exist at law or in equity for the revocation of any contract.” (9
U.S.C. § 2.) This provision “requires courts to enforce privately negotiated
agreements to arbitrate, like other contracts, in accordance with their terms” (Volt
Info. Sciences v. Leland Stanford Jr. U. (1989) 489 U.S. 468, 478 (Volt)), and
“mandates enforcement of agreements to arbitrate,” even if they include “statutory
claims.” (Shearson, supra, 482 U.S. at p. 226.) “The ‘liberal federal policy
favoring arbitration agreements, [citation], manifested by this provision and the
[FAA] as a whole, is at bottom a policy guaranteeing the enforcement of private
contractual arrangements: the [FAA] simply ‘creates a body of federal substantive
law establishing and regulating the duty to honor an agreement to arbitrate.’
[Citation.]” (Mitsubishi Motors v. Soler Chrysler-Plymouth (1985) 473 U.S. 614,
625, fn. omitted.)
The United States Supreme Court has demonstrated the primacy and scope
of this duty by repeatedly invalidating, under the supremacy clause of the federal
2
Constitution, state laws that attempt to limit the enforceability of arbitration
agreements.1 In invalidating these state laws, the high court has explained that
section 2 of the FAA “ ‘is a congressional declaration of a liberal federal policy
favoring arbitration agreements, notwithstanding any state substantive or
procedural policies to the contrary.’ ” (Perry, supra, 482 U.S. at p. 489, italics
added.) According to the court, in enacting section 2 of the FAA, Congress
“withdrew the power of the states to require a judicial forum for the resolution of
claims which the contracting parties agreed to resolve by arbitration” (Southland,
supra, 465 U.S. at p. 10) in order “to foreclose state legislative attempts to
undercut the enforceability of arbitration agreements.” (Id. at p. 16, fn. omitted.)
Thus, “the FAA ensures” that an agreement to arbitrate specified claims “will be
enforced according to its terms even if a rule of state law would otherwise exclude
such claims from arbitration.” (Mastrobuono, supra, 514 U.S. at p. 58, italics
added.) “[A]ny . . . state policy” that purports to invalidate an arbitration clause in
a contract that is otherwise enforceable under state law is “unlawful, for that kind
of policy would place arbitration clauses on an unequal ‘footing,’ directly contrary
to the [FAA’s] language and Congress’ intent. [Citation.]” (Allied-Bruce, supra,
513 U.S. at p. 281, italics added.) In short, under the high court’s binding
construction of federal law, “the FAA pre-empts state laws which ‘require a
1
Mastrobuono v. Shearson Lehman Hutton, Inc. (1995) 514 U.S. 52, 58
(Mastrobuono) (FAA preempts New York prohibition against arbitrating punitive
damages); Allied-Bruce Terminix Cos., Inc. v. Dobson (1995) 513 U.S. 265, 268-
277 (Allied-Bruce) (FAA preempts Alabama statute making predispute arbitration
agreements unenforceable); Perry v. Thomas (1987) 482 U.S. 483, 489 (Perry)
(FAA preempts California statute prohibiting arbitration of wage collection
actions); Southland Corp. v. Keating (1984) 465 U.S. 1, 10 (Southland) (FAA
preempts California statute prohibiting arbitration of claims under the California
Franchise Investment Law).
3
judicial forum for the resolution of claims which the contracting parties agreed to
resolve by arbitration.’ [Citation.]” (Volt, supra, 489 U.S. at p. 478.)
Accordingly, “state courts cannot apply state statutes that invalidate arbitration
agreements” to which the FAA applies.2 (Allied-Bruce, supra, 513 U.S. at p. 272.)
II. BROUGHTON MANUFACTURES AN EXCEPTION TO THE RULE OF FAA
PREEMPTION.
In
Broughton, the plaintiffs sued a defendant that had provided them with
health care coverage. (Broughton, supra, 21 Cal.4th at p. 1072.) They alleged in
part that the defendant had violated the CLRA by deceptively advertising the
quality of medical services provided under its health plan. (Broughton, supra, 21
Cal.4th at p. 1072.) They requested actual damages, punitive damages, and an
order enjoining the defendant’s deceptive conduct. (Ibid.) The defendant moved
to compel arbitration, relying on a mandatory arbitration clause in its combined
evidence of coverage and disclosure form. (Id. at p. 1072.) The superior court
denied the motion as to the CLRA claim. (Ibid.)
In a closely divided decision, a four-justice majority of this court affirmed
the superior court’s decision insofar as it declined to order arbitration of the
plaintiffs’ request for an injunction under the CLRA. (Broughton, supra, 21
Cal.4th at pp. 1073-1084.) The majority opinion in Broughton concluded the
2
States “may,” however, “regulate contracts, including arbitration clauses,
under general contract law principles,” and thus “may invalidate an arbitration
clause ‘upon such grounds as exist at law or in equity for the revocation of any
contract.’ [Citation.]” (Allied-Bruce, supra, 513 U.S. at p. 281.) “Thus state law,
whether of legislative or judicial origin, is applicable if that law arose to govern
issues concerning the validity, revocability, and enforceability of contracts
generally. A state-law principle that takes its meaning precisely from the fact that
a contract to arbitrate is at issue does not comport with this requirement of [the
FAA]. [Citations.]” (Perry, supra, 482 U.S. at p. 492, fn. 9.)
4
California Legislature “did not intend” that requests under the CLRA for “this type
of injunctive relief . . . be arbitrated.” (Id. at p. 1080.) This conclusion rested on
“two factors.” (Id. at p. 1082.) First, according to Broughton, “the evident
purpose of the [CLRA’s] injunctive relief provision . . . is . . . to remedy a public
wrong” and to protect “the general public” from “being victimized by the same
deceptive practices as the plaintiff suffered,” not to “compensat[e]” the plaintiff
who brings and pursues the CLRA claim. (Id. at p. 1080.) “In other words,”
Broughton continued, “the plaintiff in a CLRA damages action is playing the role
of a bona fide private attorney general. [Citation.]” (Ibid.) Second, Broughton
found that private arbitration is “inherent[ly] unsuitabl[e] . . . as a means of
resolving” CLRA injunction requests. (Id. at p. 1088.) Broughton based this
finding on the view that “private arbitration” has several “institutional
shortcomings . . . in the field of such public injunctions,” specifically: (1)
arbitrators are not “accountable to the public”; (2) “continuing supervision of an
injunction” is problematic because arbitrators “are not necessarily bound by earlier
decisions of other arbitrators in the same case” and are “unconstrained by judicial
review”; (3) “an arbitration award does not have collateral estoppel effect in favor
of nonparties to an arbitration unless the arbitral parties so agree”; and (4)
“modification or vacation of [arbitral] injunctions involves the cumbersome
process of initiating a new arbitration proceeding.” (Id. at p. 1081.) According to
Broughton, these “two factors taken in combination . . . make for an ‘inherent
conflict’ between arbitration and the underlying purpose of the CLRA’s injunctive
relief remedy.” (Id. at p. 1082.) Based on this “inherent conflict,” Broughton
“presume[d] . . . the Legislature did not intend that [CLRA] injunctive relief
claims be arbitrated,” and found no “indications” of a contrary legislative intent to
overcome this presumption. (Ibid.) In reaching this conclusion, Broughton held
that despite the express statutory declaration in Code of Civil Procedure section
1281 that arbitration agreements are “valid, enforceable and irrevocable, save
5
upon such grounds as exist for the revocation of any contract,” the Legislature
“may express its intention to make a statutory right inarbitrable . . . implicitly in
those rare circumstances in which the fulfillment of the statutory purpose
inherently conflicts with arbitration.” (Broughton, supra, 21 Cal.4th at p. 1082,
fn. 7.)
Broughton next found that this construction of the CLRA, although
invalidating agreements to arbitrate CLRA injunction requests, did not violate the
FAA. (Broughton, supra, 21 Cal.4th at pp. 1082-1084.) Relying on Gilmer v.
Interstate/Johnson Lane Corporation (1991) 500 U.S. 20 (Gilmer), Broughton
concluded that despite the FAA, a court may invalidate an arbitration agreement if
it finds, based on an “ ‘inherent conflict’ ” between arbitration and a state statutory
right or remedy, that the state legislature intended to prohibit arbitration of claims
involving that state right or remedy. (Broughton, supra, 21 Cal.4th at pp. 1082-
1083.) Broughton acknowledged that the high court had “recognize[d] an
‘inherent conflict’ exception” to the FAA only with respect to “federal statutory
claims,” and that Gilmer and the other high court cases discussing that exception
“occurred in the context of an inquiry into whether Congress had intended federal
statutory claims to be exempt from arbitration.” (Ibid., first italics added.) Citing
Southland, Broughton also recognized that “the [high] court has stated generally
that the capacity to withdraw statutory rights from the scope of arbitration
agreements is the prerogative solely of Congress, not state courts or legislatures
[citation] . . . .” (Broughton, supra, 21 Cal.4th at p. 1083.) Nevertheless,
according to Broughton, the high court’s FAA preemption decisions “ha[d] never
directly decided whether a legislature may restrict a private arbitration agreement
when it inherently conflicts with a public statutory purpose that transcends private
interests.” (Ibid.) Broughton also reasoned that “it would be perverse to extend
the policy [of the FAA] so far as to preclude states from passing legislation the
purposes of which make it incompatible with arbitration . . . .” (Ibid.) Finally,
6
Broughton reasoned that the “inappropriateness” of arbitration as a means for
resolving certain “private attorney general actions . . . does not turn on the
happenstance of whether the rights and remedies being adjudicated are of state or
federal derivation.” (Ibid.) Broughton thus concluded that notwithstanding the
high court’s pronouncement that “the FAA pre-empts state laws which ‘require a
judicial forum for the resolution of claims which the contracting parties agreed to
resolve by arbitration’ ” (Volt, supra, 489 U.S. at p. 478), state legislatures and
state courts may require a judicial forum for public injunction requests that
contracting parties have agreed to resolve by arbitration.
Though invalidating agreements to arbitrate CLRA injunction requests,
Broughton also held that agreements to arbitrate CLRA claims for damages are
enforceable, “at least to the extent the FAA governs such claims.” (Broughton,
supra, 21 Cal.4th at p. 1084.) Broughton stated that the CLRA “might be
interpreted” as requiring that CLRA damage claims “be resolved solely in a
judicial forum.” (Ibid.) However, Broughton also explained: “[A]s [the high
court’s decisions] make clear, statutory damages claims are fully arbitrable [under
the FAA]. Such an action is primarily for the benefit of a party to the arbitration,
even if the action incidentally vindicates important public interests. [Citation.] In
the context of statutory damage claims, the [high court] has consistently rejected
[the] arguments that abbreviated discovery, arbitration’s inability to establish
binding precedent, and a plaintiff’s right to a jury trial render the arbitral forum
inadequate, or that submission of resolution of the claims to arbitration is in any
sense a waiver of the substantive rights afforded by statute. [Citations.] ‘By
agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights
afforded by the statute; it only submits to their resolution in an arbitral, rather than
a judicial, forum.’ [Citation.]” (Ibid.) “Thus,” in order to make the CLRA
“consistent with the FAA,” Broughton “interpret[ed] the CLRA as permitting
7
arbitration of damages claims, at least to the extent the FAA governs such claims.”
(Ibid.)
III. THE HIGH COURT’S POST-BROUGHTON DECISIONS REQUIRE THAT WE
OVERRULE BROUGHTON.
Since we decided Broughton, the high court has issued three relevant
arbitration decisions. The high court’s statements in these three decisions require
us to overrule Broughton’s holding that California may prohibit enforcement of
agreements to arbitrate CLRA requests for public injunctions.
The first decision—Circuit City—directly refutes one of Broughton’s
critical premises: that Gilmer’s “inherent conflict” exception to the FAA may
apply based on the intent of a state legislature—as opposed to Congress—and that
a state legislature therefore may, notwithstanding the FAA, prohibit enforcement
of an arbitration agreement where the legislature concludes that arbitration
inherently conflicts with a statutory right or remedy. In Circuit City, the high
court construed the FAA to apply to “all contracts of employment” except those of
“transportation workers.” (Circuit City, supra, 532 U.S. at p. 109.) Opposing this
conclusion, “[v]arious amici, including the attorneys general of 22 States,” argued
that this broad construction of the FAA would “intrude[] upon the policies of the
separate States” by “effect[ively] pre-empt[ing] . . . state employment laws [that]
restrict or limit the ability of employees and employers to enter into arbitration
agreements.” (Id. at pp. 121-122.) Amici curiae contended “that States should be
permitted, pursuant to their traditional role in regulating employment
relationships, to prohibit employees . . . from contracting away their right to
pursue state-law discrimination claims in court.” (Id. at p. 122.) The high court
responded that under Gilmer, arbitration agreements in employment contracts “can
be enforced under the FAA without contravening the policies of congressional
enactments giving employees specific protection against discrimination prohibited
by federal law.” (Circuit City, supra, 532 U.S. at p. 123, italics added.) As for the
8
policies of state laws, the court found them irrelevant under Southland’s holding
“that Congress intended the FAA . . . to pre-empt state antiarbitration laws to the
contrary. [Citation.]” (Circuit City, supra, 532 U.S. at p. 122; see also id. at p.
112 [Southland held that the FAA is “preemptive of state laws hostile to
arbitration”].) The court also declared that courts may “not chip away at
Southland by indirection.” (Circuit City, supra, 532 U.S. at p. 122.) Thus, Circuit
City holds that we may not, as Broughton did, chip away at Southland by applying
Gilmer’s exemption analysis, including the “inherent conflict” exception, based on
the intent or policies of a state legislature. Under Circuit City, only “the policies
of congressional enactments” are relevant to this analysis; state policies are simply
irrelevant unless, as the FAA provides, they establish grounds as exist at law or in
equity for the revocation of any contract. (Circuit City, supra, 532 U.S. at p. 123,
italics added.)
Circuit City also undermines Broughton’s analysis and conclusion in
another important respect. As I have explained, amici curiae in Circuit City
argued for a construction of the FAA that would leave states free to prohibit
employees from contracting away their right to a judicial forum for resolving
discrimination claims under state law. (Circuit City, supra, 532 U.S. at pp. 121-
122.) In rejecting this argument, the high court reasoned in part that amici curiae’s
construction would enable states to deprive parties of the “real benefits to the
enforcement of arbitration provisions.” (Id. at pp. 122-123.) “Arbitration,” the
court explained, “allow[s] parties to avoid the costs of litigation. . . . These
litigation costs . . . would be compounded by the difficult choice-of-law questions
that are often presented in disputes arising from the employment relationship
[citation], and the necessity of bifurcation of proceedings in those cases where
state law precludes arbitration of certain types of employment claims but not
others.” (Id. at p. 123.) The court also explained that amici curiae’s construction
would produce “considerable complexity and uncertainty” regarding “the
9
enforceability of arbitration agreements in employment contracts,” which “would
call into doubt the efficacy of alternative dispute resolution procedures adopted by
many of the Nation’s employers, in the process undermining the FAA’s
proarbitration purposes and ‘breeding litigation from a statute that seeks to avoid
it.’ [Citation.]” (Ibid.) As both Broughton and the case now before us amply
demonstrate, Broughton’s holding produces precisely these effects; it deprives
parties of the benefits of arbitration, necessitates bifurcated proceedings and
compounds litigation costs, and creates both complexity and uncertainty regarding
the enforceability of arbitration agreements, thereby placing in doubt arbitration’s
efficacy as an alternative dispute resolution procedure, “undermining the FAA’s
proarbitration purposes and ‘breeding litigation from a statute that seeks to avoid
it.’ [Citation.]” (Circuit City, supra, 532 U.S. at p. 123.)
The majority here errs in asserting that because Circuit City “was
principally concerned with” the construction of section 1 of the FAA, whereas
Broughton involved “the preemptive scope of section 2,” Circuit City has “little if
any bearing on” Broughton. (Maj. opn., ante, at p. 11.) First and foremost, as I
have explained, Circuit City expressly relied on “the preemptive scope of section
2” (maj. opn., ante, at p. 11) in rejecting the argument that the high court should
construe the FAA so as to leave states free to implement their own “policies”
regarding the nonarbitrability of discrimination claims under state law. (Circuit
City, supra, 532 U.S. at pp. 121-122.) Again, the high court found the argument
foreclosed by Southland’s holding—reaffirmed in Allied-Bruce—that section 2 of
the FAA “pre-empt[s] state antiarbitration laws.” (Circuit City, supra, 532 U.S. at
p. 122.) Second, the high court based its construction of section 1 on the language
and judicial construction of section 2. Regarding the former, the court contrasted
the expansive language of section 2 with the narrower language of section 1.
(Circuit City, supra, 532 U.S. at pp. 115, 117-118.) Regarding the latter, the court
explained that the plaintiff’s broad reading of section 1 was inconsistent with the
10
court’s “expansive reading of § 2.” (Circuit City, supra, 532 U.S. at p. 119.) The
court reasoned that the plaintiff’s construction of section 1 would deprive parties
of the arbitration benefits that section 2 confers and, by creating “considerable
complexity and uncertainty” regarding “the enforceability of arbitration
agreements,” would “undermin[e]” section 2’s “proarbitration purposes.” (Circuit
City, supra, 532 U.S. at p. 123.) The court also explained that “it would be
incongruous to adopt” a reading of section 1 that would “undo” the broad
“coverage in § 2” that “implement[s] proarbitration policies.” (Circuit City, supra,
532 U.S. at p. 122.) Third, the plaintiff’s argument in Circuit City regarding
section 1 was premised on the high court’s “construction of § 2’s coverage
provision.” (Circuit City, supra, 532 U.S. at p. 114.) Fourth, and finally, before
even discussing the scope of section 1, the high court considered, and rejected, the
plaintiff’s argument regarding the “construction of § 2,” i.e., that section 2 of the
FAA did not apply because “ ‘an employment contract is not a ‘contract
evidencing a transaction involving interstate commerce’ ” within the meaning of
section 2. (Circuit City, supra, 532 U.S. at p. 113.) Thus, the majority errs in
asserting that section 2 of the FAA—and specifically its “preemptive scope” (maj.
opn., ante, at p. 11)—were not critical components of the high court’s opinion in
Circuit City.
The majority also errs in asserting that Circuit City does not “shed any
further light on the ‘inherently incompatible’ exception to arbitrability.” (Maj.
opn., ante, at p. 12.) In Circuit City, the attorneys general essentially argued that
arbitration is inherently incompatible with state statutes that “prohibit employees
. . . from contracting away their right to pursue state-law discrimination claims in
court,” and that requiring arbitration of these claims would “intrude[] upon the
policies of the separate States” reflected in these statutes. (Circuit City, supra, 532
U.S. at pp. 121-122.) As I have explained, in rejecting this argument, the court
held that whereas Gilmer—which sets forth the inherent conflict analysis
11
Broughton adopted—“involved a federal statute” and thus governs enforcement of
agreements to arbitrate claims under federal law (Circuit City, supra, 532 U.S. at
pp. 123-124), enforcement of agreements to arbitrate claims under state law is
both governed and required by Southland’s holding that the FAA “pre-empt[s]
state antiarbitration laws.” (Id. at p. 122.) Thus, Circuit City establishes that an
exception to the FAA may not be based on a state’s view that arbitration is
inherently incompatible with some state policy.
In this regard, Circuit City is consistent with another high court decision
that Broughton completely ignored: Mastrobuono. There, the high court held that
the FAA preempts a New York rule prohibiting an arbitrator from awarding
punitive damages even where an arbitration agreement authorizes the award.
(Mastrobuono, supra, 514 U.S. at pp. 53-58.) New York established this rule
based on its view that punitive damages are exemplary social remedies intended to
punish and deter, not to compensate, and that as a matter of strong public policy,
only the state—and not private arbitrators—may wield the power to punish.
(Garrity v. Lyle Stuart, Inc. (1976) 386 N.Y.S.2d 831, 832-835 (Garrity).)
According to the state’s highest court, New York’s public policy requires “ ‘rather
close judicial supervision’ ” in the administration of this public penal sanction and,
contrary to this public policy, “ ‘there [is] no effective judicial supervision over
punitive awards in arbitration.’ ” (Id. at p. 834.) In finding that the FAA preempts
the New York rule, the high court explained that under its prior decisions, “if
contracting parties agree to include claims for punitive damages within the issues
to be arbitrated, the FAA ensures that their agreement will be enforced according
to its terms even if a rule of state law would otherwise exclude such claims from
arbitration.” (Mastrobuono, supra, 514 U.S. at p. 58, italics added.) Therefore,
“in the absence of contractual intent to the contrary, the FAA would pre-empt the
[New York] rule,” despite its basis in the state’s public policy. (Mastrobuono,
supra, 514 U.S. at p. 59.) According to the high court, the question thus came
12
“down to what the contract”—not New York law—“ha[d] to say about the
arbitrability of [the] claim for punitive damages.” (Id. at p. 58, italics added.) The
court found that “[a]t most,” one contractual provision “introduce[d] an ambiguity
into an arbitration agreement that would otherwise allow punitive damages
awards.” (Id. at p. 62.) Explaining that the FAA requires resolution of such
ambiguities in favor of arbitration, the court read the arbitration agreement to
permit arbitration of a punitive damages claim and it ordered enforcement of the
arbitrator’s award of punitive damages notwithstanding New York’s law
precluding such an award. (Mastrobuono, supra, 514 U.S. at pp. 62-64.)
Mastrobuono, which Broughton did not consider or even cite, undermines
Broughton’s analysis and conclusion in several critical respects. First, it directly
contradicts Broughton’s statement that the high court “ha[d] never directly decided
whether a legislature may restrict a private arbitration agreement when it
inherently conflicts with a public statutory purpose that transcends private
interests.” (Broughton, supra, 21 Cal.4th at p. 1083.) Second, it directly refutes
Broughton’s view that arbitration of CLRA injunction requests is impermissible
because of the need for continuing judicial supervision of CLRA injunctions.
(Broughton, supra, 21 Cal.4th at p. 1081.) Finally, and perhaps most importantly,
Mastrobuono directly refutes the fundamental premise of Broughton’s analysis:
that the high court cases leave states free to prohibit arbitration of a state remedy
if “the primary purpose and effect of” that remedy is to protect the public, “not to
compensate for an individual wrong.” (Broughton, supra, 21 Cal.4th at p. 1077.)
In the high court’s view, “by definition,” the purpose of punitive damages is “not
. . . to compensate the injured party, but rather to punish the tortfeasor” (Newport
v. Fact Concerts, Inc. (1981) 453 U.S. 247, 266) and to “ ‘protect[] the public by
[deterring] the defendant and others from doing such wrong in the future.’
[Citation.]” (Pacific Mutual Life Insurance Co. v. Haslip (1991) 499 U.S. 1, 19.)
Given the court’s view that the purpose of punitive damages is to protect the
13
public and not to compensate the victim in any sense, Mastrobuono’s invalidation
of New York’s rule against arbitration of punitive damages clearly established that
the FAA preempts state laws prohibiting arbitration of such public,
noncompensatory remedies.
The majority errs in suggesting that Broughton can be reconciled with
Mastrobuono because punitive damages are different from public injunctions in
some relevant sense. (Maj. opn., ante, at pp. 9-10, fn. 1.) Consistent with the high
court’s view, we have explained that the “purpose” of a punitive damages award
“is a purely public one”—“to punish wrongdoing and thereby to protect [the
public] from future misconduct, either by the same defendant or other potential
wrongdoers. [Citation.]” (Adams v. Murakami (1991) 54 Cal.3d 105, 110, fn.
omitted (Adams).) Thus, under existing California law, punitive damages have the
same “primary purpose and effect” that, according to Broughton, public
injunctions have: “not to compensate for an individual wrong but to prohibit and
enjoin conduct injurious to the general public.” (Broughton, supra, 21 Cal.4th at
p. 1077.) As the preceding quote demonstrates, Broughton held that arbitrability
depends not, as the majority suggests, on whether a remedy “confer[s] a direct
benefit on the plaintiff[]” (maj. opn., ante, at pp. 9-10, fn. 1), but on whether “the
primary purpose and effect of” the remedy is “to compensate for an individual
wrong” or “to prohibit and enjoin conduct injurious to the general public.”
(Broughton, supra, 21 Cal.4th at p. 1077.) Applying this test, Broughton held that
CLRA requests for public injunctions are inarbitrable because such relief is
“designed for the protection of the general public.” (Broughton, supra, 21 Cal.4th
at p. 1083.) Broughton’s analysis and conclusion are clearly irreconcilable with
Mastrobuono, which held that requests for punitive damages are arbitrable even
though their sole purpose is to protect the public and not to compensate the victim
in any sense. Thus, that this case involves a request for injunctive relief rather
than punitive damages is not a valid basis for distinguishing Mastrobuono.
14
Indeed, as I later explain in more detail, the high court rejected this very
distinction in its post-Broughton decision in Waffle House.3
The majority’s attempt to distinguish Mastrobuono fails for an additional
reason. The majority suggests that regarding “ ‘judicial supervision’ ” in
arbitration, the New York rule at issue in Mastrobuono was premised on the
inadequacy of “judicial and appellate review,” whereas Broughton was premised
on the “monitoring, enforcement, and modification that is required of public
injunctions.” (Maj. opn., ante, at p. 9, fn. 1.) However, Broughton’s discussion of
this subject stressed the fact that “[a]rbitrators” are “unconstrained by judicial
review” and “are not necessarily bound by earlier decisions of other arbitrators in
the same case.” (Broughton, supra, 21 Cal.4th at p. 1081.) Thus, for several
reasons, the majority’s attempt to distinguish Mastrobuono is unpersuasive.
3
The majority also errs in asserting that punitive damages “are in principle
little different from . . . treble-damages antitrust awards.” (Maj. opn., ante, at p.
10, fn. 1.) According to the high court, the antitrust treble-damages provision “is
in essence a remedial provision.” (Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc.
(1977) 429 U.S. 477, 485, italics added.) Congress “created” it “primarily as a
remedy for the victims of antitrust violations.” (American Soc. of M. E.’s v.
Hydrolevel Corp. (1982) 456 U.S. 556, 575, italics added.) Treble damages
“ ‘make the remedy meaningful by counter-balancing “the difficulty of
maintaining a private suit” ’ under the antitrust laws. [Citation.]” (Ibid., italics
added.) Based on the fact that antitrust treble damages, unlike punitive damages,
“serve as a means . . . of compensating victims,” the high court has held that
limitations on recovery of punitive damages do not apply to recovery of antitrust
treble damages. (Id. at pp. 575-576, italics added.) Thus, the high court has
rejected the majority’s view that punitive damages and antitrust treble damages are
the same “in principle.” (Maj. opn., ante, at p. 10, fn. 1.) Our prior decisions also
reject the majority’s view; they distinguish between punitive damages, which
serve a “purely public” function (Adams, supra, 54 Cal.3d at p. 110), and antitrust
treble damages, which principally provide “private compensation” and only
“incidental[ly]” confer a “public benefit.” (Broughton, supra, 21 Cal.4th at p.
1080, fn. omitted, italics added.) New York decisions draw a similar distinction.
(Garrity, supra, 386 N.Y.S.2d at p. 833.)
15
In
Circuit City and Mastrobuono, the high court simply applied the general
constitutional rule regarding the supremacy of federal law specifically in the
arbitration context. The supremacy clause of the United States Constitution (U.S.
Const., art. VI, cl. 2) “invalidates all state laws that conflict or interfere with an
Act of Congress. [Citations.]” (Rose v. Arkansas State Police (1986) 479 U.S. 1,
3, italics added.) According to the high court, this rule applies regardless of the
magnitude or nature of the public policy the state law seeks to implement. “The
relative importance to the State of its own law is not material when there is a
conflict with a valid federal law, for the Framers of our [federal] Constitution
provided [in the supremacy clause] that the federal law must prevail. [Citation.]”
(Free v. Bland (1962) 369 U.S. 663, 666.) Thus, the proper “inquiry” is “whether
there is a conflict” between the state law and federal law, not the significance of
the state public policy at issue. (Ibid.; see also Fidelity Federal Sav. & Loan Assn.
v. De La Cuesta (1982) 458 U.S. 141, 153 [federal preemption under the
supremacy clause applies even though “real property law is a matter of special
concern to the States”].) Broughton’s reliance on the importance of the public
interest at stake when a plaintiff seeks a CLRA injunction is inconsistent with
these binding high court precedents and pronouncements. Regardless of the
state’s interest, a “state statute [that] authorizes the precise conduct that Congress
sought to prohibit . . . is repugnant to the [s]upremacy [c]lause.” (Rose v.
Arkansas State Police, supra, 479 U.S. at p. 4.) Thus, under Broughton, the
CLRA is repugnant to the supremacy clause—and is therefore invalid—insofar as
it authorizes California courts to do precisely what the FAA prohibits: invalidate
FAA-governed agreements to arbitrate requests for CLRA injunctions on grounds
other than those that exist at law or in equity for the revocation of any contract. In
short, Mastrobuono and the high court’s post-Broughton decision in Circuit City,
consistent with and following the high court’s supremacy clause jurisprudence,
16
refute a foundational assumption of Broughton’s analysis: that states may create
FAA exceptions for public policy reasons.
Indeed,
Mastrobuono takes on increased importance with respect to this
issue in light of the high court’s second relevant post-Broughton decision in Waffle
House, which held that under the FAA, there is no difference in terms of
arbitrability between requests for public injunctive relief and requests for
compensatory or punitive damages. In Waffle House, the Equal Employment
Opportunity Commission (EEOC) filed a discrimination action under the
Americans With Disabilities Act (ADA) “both in the public interest and on behalf
of” the specific victim of the discrimination, who had signed an arbitration
agreement with the defendant. (Waffle House, supra, 534 U.S. at p. 284.) The
complaint requested “injunctive relief to ‘eradicate the effects of [the defendant’s]
past and present unlawful employment practices’ ” and “specific relief designed to
make [the victim] whole, including backpay, . . . compensatory damages, and . . .
punitive damages . . . .” (Id. at pp. 283-284.) The Court of Appeals held that the
victim’s arbitration agreement “precluded [the EEOC] from seeking victim-
specific relief in court,” but not from seeking “ ‘large-scale injunctive relief.’ ”
(Id. at p. 284.) In so “distinguish[ing] between injunctive and victim-specific
relief,” the Court of Appeals concluded that “the EEOC is barred from obtaining
the latter because any public interest served when the EEOC pursues ‘make
whole’ relief is outweighed by the policy goals favoring arbitration.” (Id. at p.
290.) However, the Court of Appeals reasoned, “when the EEOC seeks broad
injunctive relief, . . . the public interest overcome[s] the goals underpinning the
FAA.” (Ibid., fn. omitted.)
The high court in Waffle House held that under the FAA, a distinction in
terms of arbitrability between requests for broad, large-scale injunctive relief to
protect the public and requests for monetary relief, including punitive damages, is
invalid. (Waffle House, supra, 534 U.S. at pp. 294-296.) The court explained that
17
this distinction does not serve “its avowed purpose of preserving the EEOC’s
public function while favoring arbitration. For that purpose, the category of
victim-specific relief is both overinclusive and underinclusive. For example, it is
overinclusive because . . . punitive damages . . . serve an obvious public function
in deterring future violations. [Citations.] Punitive damages may often have a
greater impact on the behavior of other employers than the threat of an injunction,
yet the EEOC is precluded from seeking this form of relief under the Court of
Appeals’ compromise scheme. And, it is underinclusive because injunctive relief,
although seemingly not ‘victim-specific,’ can be seen as more closely tied to the
employees’ injury than to any public interest.” (Id. at pp. 294-295.) “ ‘While
injunctive relief may appear more “broad based,” it nonetheless is redress for
individuals.’ ” (Id. at p. 295.) Thus, the court held, “if the [FAA’s] policy
favoring arbitration trumps the plain language of Title VII and the contract, the
EEOC should be barred from pursuing any claim outside the arbitral forum. If
not, then the statutory language is clear; the EEOC has the authority to pursue
victim-specific relief regardless of the forum that the employer and employee have
chosen to resolve their disputes.” (Ibid.) The high court ultimately held that
because the EEOC was not a party to the arbitration agreement, it could pursue an
action in court for both injunctive relief and victim-specific, monetary relief. (Id.
at p. 296.)
The high court’s post-Broughton decision in Waffle House requires that we
overrule Broughton as being inconsistent with binding high court precedent. As I
have explained, Broughton held that CLRA requests for injunctive relief are not
arbitrable because the “purpose” of such relief is “to remedy a public wrong” and
to protect “the general public,” not to “compensat[e]” the plaintiff who pursues the
CLRA claim. (Broughton, supra, 21 Cal.4th at p. 1080.) In Waffle House, the
high court rejected this analysis, explaining that even large-scale requests for
public “injunctive relief . . . can be seen as more closely tied to the [victim’s]
18
injury than to any public interest” and “ ‘is redress for individuals.’ ” (Waffle
House, supra, 534 U.S. at p. 295.) The high court also explained that in terms of
public protection, “[p]unitive damages may often have a greater impact on” a
defendant’s “behavior . . . than the threat of an injunction . . . .” (Ibid.) This
statement, in light of Mastrobuono’s holding that the FAA requires enforcement of
agreements to arbitrate requests for punitive damages notwithstanding a state law
precluding such arbitration (Mastrobuono, supra, 514 U.S. at pp. 53-58),
contradicts Broughton’s conclusion that we may base an FAA exception for
CLRA injunctive relief on the public nature of such relief. As I have also
explained, Broughton held that although the FAA requires enforcement of
agreements to arbitrate requests for monetary relief, it does not require
enforcement of agreements to arbitrate requests for injunctive relief designed to
protect the public. The high court in Waffle House rejected this approach as well,
holding that the precise distinction Broughton drew—between large-scale requests
for injunctive relief to protect the public and requests for victim-specific, monetary
relief—is invalid under the FAA, and that as a matter of federal law, the FAA
requires courts to enforce an agreement to arbitrate requests for injunctive relief,
even if that relief is designed principally to protect the public. (Waffle House,
supra, 534 U.S. at pp. 294-296.) Thus, Waffle House requires that we overrule
Broughton and hold that federal law requires enforcement of agreements to
arbitrate CLRA requests for injunctive relief.
The majority’s discussion of Waffle House completely misses the point of
that decision. In Waffle House, the high court did not, as the majority suggests,
base its decision on the extent to which the EEOC “act[s] . . . on behalf of the
public.” (Maj. opn., ante, at p. 20, fn. 6.) In fact, the high court found that the
lower federal court had erred in focusing on precisely this factor. (Waffle House,
supra, 534 U.S. at pp. 290-296.) Instead, the high court held that because the
FAA “ ‘does not require parties to arbitrate when they have not agreed to do so,’ ”
19
the determinative issue is simply whether the EEOC “is a party to the contract”
containing the arbitration provision. (Waffle House, supra, 534 U.S. at pp. 293-
294.) If not, then the EEOC has statutory authority to seek in court both large-
scale injunctive relief to protect the public and damages. (Id. at p. 294.) However,
if the EEOC has agreed to arbitration, then it must arbitrate all of its claims—
including any request for large-scale, public injunctive relief—and is “barred from
pursuing any claim outside the arbitral forum.” (Id. at p. 295, italics added.) In
the latter situation, in terms of arbitrability, no “line [may be] drawn . . . between
injunctive and victim-specific relief.” (Id. at p. 294.) Thus, Waffle House
establishes that contrary to Broughton, consumers, like Cruz, who have agreed to
arbitration must arbitrate all of their claims, including requests for so-called public
injunctions.
While the high court’s post-Broughton decisions in Circuit City and Waffle
House undermine one of Broughton’s fundamental premises—that states may
decide that injunctive relief is somehow different from monetary damages for
purposes of applying the FAA—the high court’s third relevant post-Broughton
decision in Green Tree undermines Broughton’s other fundamental premise: its
assumption that “private arbitration” has several “institutional shortcomings” that
render it inherently unsuitable for resolving requests for “public injunctions.”
(Broughton, supra, 21 Cal.4th at p. 1081.) In Green Tree, the plaintiff argued that
the arbitration agreement she signed left her “unable to vindicate her statutory
rights in arbitration”— and was therefore unenforceable—because its “silence
with respect to [payment of] costs and fees create[d] a ‘risk’ that she [would] be
required to bear prohibitive arbitration costs if she pursue[d] her claims in an
arbitral forum.” (Green Tree, supra, 531 U.S. at p. 90.) The high court disagreed,
finding that the agreement’s mere “silence on the subject” of fees was “alone . . .
insufficient to render it unenforceable.” (Id. at p. 91.) Instead, the court held, “a
party seek[ing] to invalidate an arbitration agreement on the ground that
20
arbitration would be prohibitively expensive . . . bears the burden of showing the
likelihood of incurring such costs.” (Id. at p. 92.) In reaching this conclusion, the
court acknowledged that “the existence of large arbitration costs could preclude a
litigant . . . from effectively vindicating her federal statutory rights in the arbitral
forum.” (Id. at p. 90.) However, the court held, absent evidence in “[t]he record”
on this question, “[t]he ‘risk’ that [a plaintiff] will be saddled with prohibitive
costs is too speculative to justify the invalidation of an arbitration agreement.”
(Id. at p. 91.) “To invalidate the agreement on that [speculative] basis,” the court
explained, “would undermine the ‘liberal federal policy favoring arbitration
agreements,’ [citation]” and would “conflict with” the court’s “prior holdings that
the party resisting arbitration bears the burden of proving that the claims at issue
are unsuitable for arbitration.” (Ibid.) Thus, the court held, courts may not justify
invalidating arbitration agreements with “generalized attacks on arbitration that
rest,” not on evidence in the record, but “on ‘suspicion of arbitration as a method
of weakening the protections afforded in the substantive law to would-be
complainants.’ [Citation.]” (Id. at pp. 89-90.)
Broughton’s analysis is fundamentally inconsistent with the high court’s
subsequent decision in Green Tree. As I have explained, in invalidating
agreements to arbitrate CLRA requests for injunctive relief, Broughton asserted
that several “institutional shortcomings” of arbitration render it inherently
unsuitable for resolving requests for “public injunctions.” (Broughton, supra, 21
Cal.4th at p. 1081.) However, Broughton cited no evidence—in the record or
otherwise—or judicially noticeable facts to establish, or even support, this
assertion. Nor does the majority here cite any such evidence. Nor did the plaintiff
in Broughton or Cruz in this case offer any evidence on this question; under Green
Tree, it was their burden, as the parties seeking to invalidate the arbitration
agreements, to offer such evidence. Thus, “[t]he ‘risk’ ” that arbitration’s so-
called institutional shortcomings render it less effective than court proceedings for
21
dealing with public injunctions is completely “speculative” and insufficient “to
justify the invalidation of an arbitration agreement” requiring arbitration of CLRA
requests for injunctive relief. (Green Tree, supra, 531 U.S. at p. 91.) Indeed, the
very existence of those shortcomings is completely speculative. In short,
Broughton’s holding regarding arbitration of CLRA injunction requests rests on
the very “generalized” and unproven “ ‘suspicion of arbitration’ ” that Green Tree
holds may not be a basis for invalidating an arbitration agreement. (Green Tree,
supra, 531 U.S. at p. 89.) As the high court stated in Green Tree, “[t]o invalidate
[arbitration] agreement[s] on [such a speculative] basis . . . undermine[s] the
‘liberal federal policy favoring arbitration agreements.’ [Citation.]” (Green Tree,
supra, 531 U.S. at p. 91.) Thus, Green Tree and the high court’s other relevant
post-Broughton decisions require that we overrule Broughton insofar as it
invalidates agreements to arbitrate CLRA injunction requests, and that we hold
that all of Cruz’s claims are arbitrable.
III. EXTENDING BROUGHTON TO UCL CLAIMS EVISCERATES THE STRONG
PUBLIC POLICY FAVORING ENFORCEMENT OF ARBITRATION AGREEMENTS.
As
Broughton recognized, the FAA is a “federal statutory mandate” that
establishes a “strong public policy in favor of enforcing arbitration agreements.”
(Broughton, supra, 21 Cal.4th at p. 1073.) “Section 2 [of the FAA] is a
congressional declaration of a liberal federal policy favoring arbitration
agreements . . . .” (Moses H. Cone Hospital v. Mercury Constr. Corp. (1983) 460
U.S. 1, 24.) It “create[s] a body of federal substantive law of arbitrability,
applicable to any arbitration agreement within the coverage of the [FAA].” (Ibid.)
“[Q]uestions of arbitrability must be addressed with a healthy regard for [this]
federal policy favoring arbitration. . . . The [FAA] establishes that, as a matter of
federal law, any doubts concerning the scope of arbitrable issues should be
resolved in favor of arbitration,” whatever the question at hand. (Id. at pp. 24-25.)
22
As
Broughton also recognized, “California has a similar statute [citation]
and a similar policy in favor of arbitration. [Citation.]” (Broughton, supra, 21
Cal.4th at p. 1074.) Code of Civil Procedure section 1281 provides that written
arbitration agreements are “valid, enforceable and irrevocable, save upon such
grounds as exist for the revocation of any contract.” This section establishes the
“fundamental policy” of California’s arbitration scheme: “that arbitration
agreements will be enforced in accordance with their terms.” (Vandenberg v.
Superior Court (1999) 21 Cal.4th 815, 836, fn. 10.) Through the statute’s
enactment, “the Legislature . . . expressed a ‘strong public policy in favor of
arbitration as a speedy and relatively inexpensive means of dispute resolution.’
[Citations.]” (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9.) As we
explained more than 85 years ago, “[t]he policy of the law in recognizing
arbitration agreements and in providing by statute for their enforcement is to
encourage persons who wish to avoid delays incident to a civil action to obtain an
adjustment of their differences by a tribunal of their own choosing.” (Utah Const.
Co. v. Western Pac. Ry. Co. (1916) 174 Cal. 156, 159.) Thus, California law, like
federal law, establishes “a presumption in favor of arbitrability.” (Engalla v.
Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 971.)
In
extending
Broughton to hold that UCL claims for injunctive relief are
not arbitrable, the majority guts the strong federal and state public policy favoring
enforcement of arbitration agreements. As we have explained, the UCL’s “scope
is broad” and “[i]ts coverage is ‘sweeping, embracing “ ‘anything that can
properly be called a business practice and that at the same time is forbidden by
law.’ ” ’ [Citations.]” (Cel-Tech Communications, Inc. v. Los Angeles Cellular
Telephone Co. (1999) 20 Cal.4th 163, 180.) In proscribing “any unlawful . . .
business act or practice,” Business and Professions Code section 17200
“ ‘ “borrows” violations of other laws and treats these violations, when committed
pursuant to a business activity, as unlawful practices independently actionable
23
under [the UCL] and subject to the distinct remedies provided thereunder.’ ”
(Farmers Ins. Exchange v. Superior Court (1992) 2 Cal.4th 377, 383, italics
added.) In other words, “[a]n unlawful act in the business context is, by definition,
an action of unfair competition” that may support a UCL action. (Stop Youth
Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal.4th 553, 579 (conc. opn. of
Baxter, J.), italics added.) Of course, because arbitration clauses are contractual,
every arbitrable dispute will, by definition, involve business activity and acts in the
business context. Thus, under the majority’s holding, in every case where the
parties have signed an arbitration agreement, the plaintiff can frustrate the
defendant’s contractual right to the benefits of an arbitral, rather than a judicial,
forum—which both the high court and this court have recognized—simply by
alleging a claim under the UCL and requesting injunctive relief. Thus, the
majority’s statutory construction guts the strong public policy favoring
enforcement of arbitration agreements that both the California Legislature and the
United States Congress have established by statute. It also does precisely what the
high court has held states may not do: “wholly eviscerate Congressional intent [in
passing the FAA] to place arbitration agreements ‘upon the same footing as other
contracts’ [citation], simply by passing statutes” that make certain arbitration
agreements void as a matter of state public policy. (Southland, supra, 465 U.S. at
p. 16, fn. 11.)
More specifically, because a UCL action may be based on a violation of
other laws, the majority’s holding will enable plaintiffs—through artful
pleading—to obtain judicial determination of claims that they agreed to arbitrate
and that the United States Supreme Court has expressly held to be arbitrable. In
Southland, the high court held that where the FAA applies, claims under the
California Franchise Investment Law are arbitrable notwithstanding a California
statute prohibiting arbitration of such claims. (Southland, supra, 465 U.S. at p.
16.) Similarly, in Perry, the high court held that where the FAA applies, claims
24
under California law for unpaid wages are arbitrable notwithstanding a California
statute prohibiting arbitration of such claims. (Perry, supra, 482 U.S. at pp. 489-
491.) Of course, a plaintiff may easily plead a violation of either our Franchise
Investment Law or our wage payment statutes as a violation of the UCL. Under
the majority’s conclusion, by doing so, a plaintiff can frustrate the defendant’s
contractual right to an arbitral, rather than judicial, forum for claims under the
Franchise Investment Law and our wage payment statutes, despite the high court’s
binding and express holdings in Southland and Perry that the FAA requires
enforcement of agreements to arbitrate these claims.4 Indeed, the majority’s
conclusion vitiates numerous other high court holdings in precisely the same
manner. The high court has held that the FAA requires enforcement of
agreements to arbitrate claims under the federal Age Discrimination in
Employment Act of 1967, the Sherman Act, the Securities Exchange Act of 1934,
4
In reaching its conclusion in Southland, the high court expressly rejected
the argument that the FAA allows states, in addition to Congress, to enact “public
policy” limits on enforcing arbitration agreements subject to the FAA and to
override agreements to arbitrate state-law disputes that “a state legislature . . . has
decided should be left to judicial enforcement.’ ” (Southland, supra, 465 U.S. at
p. 21 (dis. opn. of Stevens, J.).) Similarly, in reaching its conclusion in Perry, the
high court expressly rejected the argument that the FAA allows “state
legislatures,” like Congress, “to limit or preclude waiver of a judicial forum” for
reasons of “ ‘public policy.’ ” (Perry, supra, 482 U.S. at p. 495 (dis. opn. of
O’Connor, J.).) In rejecting these arguments, the high court in both cases held that
there are “only two limitations on the enforceability of arbitration provisions
governed by the [FAA]: they must be part of a written maritime contract or a
contract ‘evidencing a transaction involving commerce’ and such clauses may be
revoked upon ‘grounds as exist at law or in equity for the revocation of any
contract.’ ” (Southland, supra, 465 U.S. at pp. 10-11, fn. omitted, italics added;
see also Perry, supra, 482 U.S. at p. 489.) According to the court, “ ‘nothing in
the [FAA] indicat[es] that the broad principle of enforceability is subject to any
additional limitations under state law.’ ” (Id. at pp. 489-490, italics added; see
also Southland, supra, 465 U.S. at p 11.)
25
the Racketeer Influenced and Corrupt Organizations Act, and the Securities Act of
1933. (Gilmer, supra, 500 U.S. at pp. 27-28.) However, contrary to these binding
holdings, because a violation of any of these federal statutes is also a violation of
the UCL, the majority’s conclusion enables a plaintiff to frustrate the defendant’s
contractual right to the benefits of an arbitral, rather than judicial, forum for these
arbitrable federal claims simply by alleging them as violations of the UCL and
requesting injunctive relief.5
Finally, given the extremely broad standing provisions applicable to claims
under the UCL and Business and Professions Code section 17500, the majority
vitiates these binding high court precedents and sacrifices the strong public policy
favoring enforcement of arbitration agreements without justification. As the
majority acknowledges (maj. opn., ante, at p. 13), Business and Professions Code
section 17204 provides in part that UCL actions for injunctive relief “shall be
prosecuted” by the Attorney General of California, “any district attorney,”
specified “county counsel,” “city prosecutor[s]” and “city attorney[s],” “or . . .
any person acting for the interests of . . . the general public.” (Bus. & Prof. Code,
§ 17204, italics added.) Under our prior construction of this provision, “members
of the public” other than a specific victim “also have standing to pursue unfair
competition claims,” so “the policy underlying the unfair competition statute can
be vindicated [in court] by multiple parties” even if the specific victim has signed
an arbitration agreement and is required to honor that agreement. (Rubin v. Green
(1993) 4 Cal.4th 1187, 1204.) A similar standing provision applies to actions for
5
The majority’s statement that “a stay is generally in order” when a plaintiff
pleads both arbitrable and inarbitrable claims (maj. opn., ante, at p. 21) offers little
solace. Instead, it simply highlights the fact that the majority’s holding deprives
defendants of their contractual right to the benefits of an arbitral, rather than a
judicial, forum. Under the majority’s holding, defendants may have to proceed in
both fora.
26
injunctive relief under Business and Professions Code section 17500. (Bus. &
Prof. Code, § 17535.) Given these broad standing provisions, and given that a
violation of the CLRA also constitutes a violation of the UCL, we need not
eviscerate the public policy strongly favoring enforcement of arbitration
agreements in order to protect the public or to vindicate the public interest in
enforcement of these statutes. Here, we need not let Cruz out of his arbitration
agreement so he can proceed in court as a private attorney general, when the
Attorney General himself, and any member of the general public who has not
signed an arbitration agreement, can play that role. Accordingly, I dissent from
the majority’s conclusion that Cruz’s requests for injunctive relief are not
arbitrable.
CHIN, J.
WE CONCUR:
BAXTER, J.
BROWN, J.
27
See next page for addresses and telephone numbers for counsel who argued in Supreme Court.
Name of Opinion Cruz v. PacifiCare Health Systems, Inc.
__________________________________________________________________________________
Unpublished Opinion
Original Appeal
Original Proceeding
Review Granted XXX 91 Cal.App.4th 1179
Rehearing Granted
__________________________________________________________________________________
Opinion No. S101003
Date Filed: April 24, 2003
__________________________________________________________________________________
Court: Superior
County: San Francisco
Judge: David A. Garcia
__________________________________________________________________________________
Attorneys for Appellant:
Cooley Godward, Martin S. Schenker, William E. Grauer, Christopher R. J. Pace and James V. Fazio III for
Defendants and Appellants.
Fred Main; Wiggin & Dana, Mark R. Kravitz and Jonathan Freiman for California Chamber of Commerce
as Amicus Curiae on behalf of Defendants and Appellants.
Epstein Becker & Green, William A. Helvestine and Michael Horan for American Association of Health
Plans and California Association of Health Plans as Amici Curiae on behalf of Defendants and Appellants.
McDermott, Will & Emery, Elizabeth D. Mann, Michael L. Meeks and Sarah A. Sommer for American
Specialty Health Plans of California, Inc., and American Specialty Health Networks, Inc., as Amici Curiae
on behalf of Defendants and Appellants.
Severson & Werson and William L. Stern for California Bankers Association, Securities Industry
Association, California Financial Services Association and American Financial Services Association as
Amici Curiae on behalf of Defendants and Appellants.
Gibson, Dunn & Crutcher, Gail E. Lees and Mark A. Perry for Aetna Health, AT&T Wireless Services,
Cingular Wireless, Sprint and Verizon Wireless as Amici Curiae on behalf of Defendants and Appellants.
__________________________________________________________________________________
Attorneys for Respondent:
The Furth Firm, Frederick P. Furth, Michael P. Lehmann and Ben Furth for Plaintiffs and Respondents.
Bill Lockyer, Attorney General, Richard M. Frank, Chief Assistant Attorney General, Herschel T. Elkins,
Assistant Attorney General, Ronald A. Reiter and Michele R. Van Gelderen, Deputy Attorneys General, as
Amici Curiae on behalf of Plaintiffs and Respondents.
1
Robinson, Calcagnie & Robinson, Sharon J. Arkin; The Sturdevant Law Firm, James C. Sturdevant; Paul
Bland; Deborah M. Zuckerman and Stacy J. Canan for Trial Lawyers for Public Justice, AARP, National
Association of Consumer Advocates and Consumer Attorneys of California as Amici Curiae on behalf of
Plaintiffs and Respondents.
2
Counsel who argued in Supreme Court (not intended for publication with opinion):
William E. Grauer
Cooley Godward
4401 Eastgate Mall
San Diego, CA 92121-1909
(858) 550-6000
Michael P. Lehmann
The Furth Firm
201 Sansome Street. Suite 1000
San Francisco, CA 94104
(415) 433-2070
3
Opinion Information
| Date: | Docket Number: |
| Thu, 04/24/2003 | S101003 |
Parties
| 1 | Pacificare Health Systems Inc. (Defendant and Appellant) Represented by William E. Grauer COOLEY GODWARD LLP 4401 Eastgate Mall San Diego, CA |
| 2 | Pacificare Health Systems Inc. (Defendant and Appellant) Represented by Christophe Rebel Jude Pace Cooley Godward LLP 4401 Eastgate Mall San Diego, CA |
| 3 | Pacificare Health Systems Inc. (Defendant and Appellant) Represented by Martin Stuart Schenker COOLEY GODWARD LLP One Maritime Plaza, 20th Floor San Francisco, CA |
| 4 | Cruz, Jose E. (Plaintiff and Respondent) Represented by Ben Stearman Furth The Furth Firm 201 Sansome Street, Suite 1000 San Francisco, CA |
| 5 | Cruz, Jose E. (Plaintiff and Respondent) Represented by Frederick P. Furth The Furth Firm 201 Sansome Street, Suite 1000 San Francisco, CA |
| 6 | Cruz, Jose E. (Plaintiff and Respondent) Represented by Michael Paul Lehmann Furth,Fahrner,Bluemle,Et Al 201 Sansome Street, Suite 1000 San Francisco, CA |
| 7 | California Chamber Of Commerce (Amicus curiae) Wiggin & Dana, LLP One Century Tower, P.O. Box 1832 New Haven, CT 06508 Represented by William L. Stern Severson & Werson One Embarcadero, 26Th Floor San Francisco, CA |
| 8 | Aetna Health Of California (Amicus curiae) Represented by Gail E. Lees Gibson, Dunn & Crutcher LLP 333 South Grand Avenue Los Angeles, CA |
| 9 | Aetna Health Of California (Amicus curiae) Represented by Mark A. Perry GIBSON DUNN & CRUTCHER LLP One Montgomery Street San Francisco, CA |
| 10 | At&T Wireless Services, Inc. (Amicus curiae) Represented by Gail E. Lees Gibson, Dunn & Crutcher LLP 333 South Grand Avenue Los Angeles, CA |
| 11 | At&T Wireless Services, Inc. (Amicus curiae) Represented by Mark A. Perry GIBSON DUNN & CRUTCHER LLP One Montgomery Street San Francisco, CA |
| 12 | Cingular Wireless (Amicus curiae) Represented by Gail E. Lees Gibson, Dunn & Crutcher LLP 333 South Grand Avenue Los Angeles, CA |
| 13 | Trial Lawyers For Public Justice (Amicus curiae) Represented by James C. Sturdevant The Sturdevant Law Firm 475 Sansome Street, Suite 1750 San Francisco, CA |
| 14 | American Association Of Retired Persons (Amicus curiae) attn: Deborah M. Zuckerman 601 "E" Street, N.W. Washington, DC 20049 Represented by Sharon J. Arkin ROBINSON, CALCAGNIE & ROBINSON 620 Newport Center Drive, 7th Floor Newport Beach, CA |
| 15 | Lockyer, Bill (Amicus curiae) Represented by Michele Robin Vangelderen Office of the Attorney General 300 South Spring Street Los Angeles, CA |
| 16 | Horvitz & Levy (Opinion Modification Requestor) Represented by Lisa Perrochet Horvitz & Levy 15760 Ventura Blvd #1800 Encino, CA |
| Disposition | |
| Apr 24 2003 | Opinion: Affirmed in part/reversed in part |
| Dockets | |
| Sep 28 2001 | Petition for review filed Appellants Pacificare Health Systems, Inc. et al |
| Sep 28 2001 | Record requested |
| Oct 3 2001 | Received Court of Appeal record file jacket/loose briefs/accordian file |
| Oct 3 2001 | Answer to petition for review filed by counsel for respondent Jose E. Cruz |
| Oct 4 2001 | Received: From Cooley Godward LLP additional proof of service on the Office of the District Attorney of S.F. of the petition for review. |
| Oct 16 2001 | Request for Depublication (petition/rev. pending) Zuetel & Torigan as counsel for CIGNA HealthCare of California, Inc. |
| Oct 17 2001 | Opposition filed by The Furth Firm on behalf of respondent Jose Cruz to the depub request of CIGNA Health Care of California, Inc. (See letter dated 10/16/2001) |
| Oct 19 2001 | Received letter from: The Further Firm [respondent Cruz] dated 10/18/2001 in answer to the 14(b) letters. |
| Oct 26 2001 | Opposition filed by the Attorney General to depub request of CIGNA Health Care of California, Inc. |
| Oct 26 2001 | Filed letter from: Respondent in response to the letter brief of american Specialty Health Plans of California, Inc. and American Specialty Health Networks. |
| Oct 31 2001 | Letter sent to: counsel enclosing Grant order and the "Certification of Interested Entities or Persons" form. |
| Oct 31 2001 | Petition for Review Granted (civil case) Votes: George, C. J., Kennard, Baxter, Werdegar, Chin, Brown, JJS. |
| Nov 6 2001 | Certification of interested entities or persons filed by The Furth Firm |
| Nov 14 2001 | Certification of interested entities or persons filed by Cooley Godward LLP on behalf of Appellants Pacificare Health Systems, Inc. et al. |
| Nov 30 2001 | Opening brief on the merits filed Appellants Pacificare Health Systems, Inc. and Pacificare of California, Inc. (filed in San Diego) |
| Dec 26 2001 | Answer brief on the merits filed by Respondent Jose E. Cruz |
| Jan 9 2002 | Received letter from: William E. Grauer, Cooley, Godward LLP , [ Appellant Pacificare ], dated 1/4/2002, advising of longstandng, pre-paid, non-refundable trip to Europe with family from June 6, 2002 to June 18, 2002, and requesting that argument not be set during that time. |
| Jan 15 2002 | Reply brief filed (case fully briefed) by appellants Pacificare Health Systems, Inc. et al. |
| Jan 22 2002 | Received letter from: Michael P. Lehmann [respondent Cruz] dated 1/18/2002 re pre-paid, non-refundable trip to Italy with family from 3/28/2002 to 4/8/2002. Counsel requests that argument not be set during that time. |
| Feb 8 2002 | Received application to file amicus curiae brief; with brief California Chamber of Commerce, et al. in support of appellants. |
| Feb 8 2002 | Application to appear as counsel pro hac vice (granted case) Application to appear as counsel pro hac vice on behalf of amicus curiae application of Caifornia Chamber of Commerce. |
| Feb 13 2002 | Application to appear as counsel pro hac vice granted Mark R. Kravitz of the State of Connecticut to appear as counsel pro hac vice on behalf of amicus curiae California Chamber of Commerce (see CRC, rule 983). |
| Feb 13 2002 | Permission to file amicus curiae brief granted California Chamber of Commerce, California Bankers Association, et al., in support of appellants. Answer by any party due within twenty (20) days of filing of the brief. |
| Feb 13 2002 | Amicus Curiae Brief filed by: California Chamber of Commerce, California Bankers Association et al. in support of appellants. |
| Feb 14 2002 | Received application to file amicus curiae brief; with brief by Aetna Health, AT&T Wireless Services, Cingular Wireless, Sprint and Verizon Wireless in support of appellants. |
| Feb 14 2002 | Received application to file amicus curiae brief; with brief by Trial Lawyers for Public Justice, AARP, National Association of Consumer Advocates, and Consumer Attorneys of California in support of respondent |
| Feb 14 2002 | Received application to file amicus curiae brief; with brief Atty. Gen'l. in support of resp., Jose Cruz |
| Feb 14 2002 | Amicus Curiae Brief filed by: Attorney General in support of respondent |
| Feb 22 2002 | Permission to file amicus curiae brief granted Aetna Health, AT&T Wireless Services, Cingular Wireless, Sprint and Verizon Wireless in support of appellants. Answer by any party due within 20 days of the filing of the brief. |
| Feb 22 2002 | Amicus Curiae Brief filed by: Aetna Health, AT&T Wireless Services, Cingular Wireless, Spring and Verizon Wireless in support of appellants. |
| Feb 22 2002 | Permission to file amicus curiae brief granted Trial Lawyers for Public Justice, AARP, National Association of Consumer Advocates, Consumer Attorneys of California in support of respondent. Answer by any party due within 20 days of the filing of the brief. |
| Feb 22 2002 | Amicus Curiae Brief filed by: Trial Lawyers for Public Justice, AARP, National Association of Consumer Advocates, Consumer Attorneys of California in support of respondent. |
| Feb 28 2002 | Response to amicus curiae brief filed Respondent's Joint Reply to Amici Curiae Briefs of Trade Associations and of Aetna Health, AT&T Wireless Services, Cingular Wireles, Sprint, and Verizon Wireless. |
| Mar 4 2002 | Response to amicus curiae brief filed by appellants to amicus brief of Trial Lawyers for Public Justice, et al. |
| Mar 6 2002 | Response to amicus curiae brief filed Petitioners' Answer to the Amicus Curiae Brief of the Attorney General of California |
| Mar 18 2002 | Request for judicial notice filed (in non-AA proceeding) by attorneys for respondent [Cruz] with supporting memorandum, declaration and proposed order (O+8) |
| Mar 28 2002 | Opposition filed Appellants' [Pacificare] to Motion to Take Judicial Notice |
| Apr 12 2002 | Received: Appellants' Notice of Erratum to Answer to Brief of the Attorney General of California |
| May 1 2002 | Received document entitled: Petitoiners' Unopposed Motion for Enlargement of Oral Argument Time to Allow Amici Curiae to Present Oral Argument |
| Sep 27 2002 | Received letter from: William E. Grauer, Cooley Godward LLP, lead counsel for Appellant Pacificare Health, dated 9/24/2002, has two prepaid, non-refundable trips with family: (1) January 25, 2003 to February 4, 2003; and (2) from June 13, 2003 to June 23, 2003. |
| Dec 9 2002 | Received letter from: William Grauer requesting oral argument be scheduled 2 weeks after arguments in the United States Supreme Court, or sometime after mid-March, 2003. |
| Dec 11 2002 | Letter sent to: William Grauer and parties re Court will take no action at this time re oral arguments schedule. Request should be resubmitted after this case is set for arguments. |
| Jan 7 2003 | Case ordered on calendar 2-4-03, 9am, Sacramento |
| Jan 9 2003 | Filed letter from: counsel for aplt Pacificare equesting continuance of oral argument. |
| Jan 13 2003 | Received letter from: Cooley Godward LLP dated 1-10-2003 re new authority from U.S.S.C. Howsam v. Dean Witter Reynolds, 537 U.S._____ (2002), No. 01-800, decided 12/10/2002. |
| Jan 15 2003 | Received letter from: The Furth Firm LLP, counsel for respondent, dated 1/14/2003, submitting attached copy of webpage printed from the AAA's website for consideration in connection with oral argument. |
| Jan 16 2003 | Received letter from: The Furth Firm dated January 15, 2003, re one more authority (attached), and was not cited by the parties in their briefs, |
| Jan 27 2003 | Received letter from: counsel for aplt PacifiCare, responding to the Jan. 14 letter of counsel for resp. Cruz |
| Jan 30 2003 | Request for judicial notice denied Respondent's request for judicial notice, filed March 18, 2002, is denied. Werdegar, J., was recused and did not participate. |
| Feb 4 2003 | Cause argued and submitted |
| Apr 24 2003 | Opinion filed: Affirmed in part, reversed in part and remanded. Majority Opinion by Moreno, J. -- joined by George, C. J., Kennard, J., *Reardon, J (Timothy A., Associate Justice, First Appellate District, Division Four, Assigned) Concurring and Dissenting Opinion by Baxter, J. Concurring and Dissenting Opinion by Chin, J. -- joined by Baxter and Brown, JJ. |
| May 7 2003 | Request for modification of opinion filed by law firm of Horvitz & Levy |
| May 8 2003 | Received letter from: firm of Milberg Weiss et al, dated May 7. |
| May 15 2003 | Received letter from: Cooley Godward LLP in response to the Milberg Weiss letter |
| May 21 2003 | Request for modification denied Werdegar, J., was recused and did not participate. |
| May 27 2003 | Remittitur issued (civil case) |
| May 27 2003 | Note: Two certified copies of the remittitur and the opinion were placed in the interdepartmental box of the First District Court of Appeal located on the front counter of the Su[reme Court Clerk's Office. |
| Jun 6 2003 | Received: Receipt for remittitur from CA1/Div. Two, signed for by Susan Graham, Deputy Clerk |
| Briefs | |
| Nov 30 2001 | Opening brief on the merits filed |
| Dec 26 2001 | Answer brief on the merits filed |
| Jan 15 2002 | Reply brief filed (case fully briefed) |
| Feb 13 2002 | Amicus Curiae Brief filed by: |
| Feb 14 2002 | Amicus Curiae Brief filed by: |
| Feb 22 2002 | Amicus Curiae Brief filed by: |
| Feb 22 2002 | Amicus Curiae Brief filed by: |
| Feb 28 2002 | Response to amicus curiae brief filed |
| Mar 4 2002 | Response to amicus curiae brief filed |
| Mar 6 2002 | Response to amicus curiae brief filed |
