Can you DIG it, California Supreme Court?

MOSKOVITZ ON APPEALS

Not long ago, the California Supreme Court came down with a rather strange decision. What was strange was not the holding, but how the court got to it.

In McGill v. Citibank, 2 Cal. 5th 945 (2017), Sharon McGill opened a credit card account with Citibank, then fell for the bank’s ads for a “credit protector” plan that supposedly allowed her to defer payments if she became unemployed. She paid the premiums, but when she lost her job, the bank failed to deliver.

She filed a class action against the bank, seeking damages and a “public injunction” under California’s unfair competition law. While a “private injunction” protects only the named plaintiffs, a “public injunction” protects the public at large.

Citibank then pointed to the agreement McGill signed. As you’d expect, it appeared to send everything under then sun to arbitration. So the bank moved to send the whole case to arbitration. The trial court granted most of the bank’s motion, but denied it as to the claim for a public injunction. A couple of California Supreme Court cases decided in 1999 and 2003 had held that agreements that send public injunction claims to arbitration are against public policy and unenforceable in California. Based on those cases, the trial court refused to send that claim to arbitration.

The Court of Appeal reversed, holding that those 1999 and 2003 decisions had been impliedly overruled by subsequent U.S. Supreme Court holdings that the Federal Arbitration Act preempted most of California’s restrictions on arbitration.

The California Supreme Court granted review to consider the Court of Appeal’s McGill opinion.

The Supreme Court recently issued its opinion. The first word in that opinion should have been: “Oops!” Oops as in “Oops, we granted review on the wrong issue, but we’re now deciding the right issue.”

It seems that, while reviewing the record, some sharp Supreme Court research assistant examined what Citibank’s arbitration provision actually said. It did not say — as the lower courts had assumed — that “claims for public injunctions shall go to arbitration.” Instead, it said that (1) all of plaintiff’s claims must go to arbitration, plus (2) the arbitrator may not grant relief “for or against anyone who is not a party.” A public injunction is, in effect, relief for someone who is not a party. So putting these two parts together added up to: Plaintiff may not obtain a public injunction in any forum — arbitration or court!

So the issue was not whether a provision sending a claims for public injunction to arbitration was valid. The issue had become the validity of a waiver of the right to sue for a public injunction in any forum!

Thus, this case had nothing to do with arbitration clauses. And both the trial court and the Court of Appeal had spent a lot of time and intellectual energy resolving a non-issue. The Federal Arbitration Act might preempt some state rules about arbitration, but this case was not about arbitration. It was about a total waiver of a claim that just happened to appear in an arbitration clause.

After spending six pages explaining how it got to this point, the Supreme Court then devoted another 13 pages to deciding that a blanket waiver of the right to seek a public injunction is unenforceable as a matter of public policy.

If this situation had arisen in the U.S. Supreme Court, it’s pretty clear what that court would have done. It would “DIG” the case. “DIG” stands for “[Certiorari] Dismissed, Improvidently Granted.” This is a well-established vehicle for saying: “Oops. Turns out that the issue we planned to resolve isn’t properly raised by this case. So we’ve changed our minds about our grant of certiorari.” A DIG is an important vehicle to conserve the court’s very limited resources and its ability to control its calendar.

That would seem to fit McGill pretty well. As soon as our state Supreme Court discovered that this really wasn’t an arbitration case, it might have given it the old DIG and freed up its calendar for another case. Once the court uncovered the true issue, it might have simply returned the case to the Court of Appeal with directions to resolve that issue.

Keep in mind that our high court grants review in only about 3 percent of the civil case petitions for review, so a DIG might have made room for another case — thereby undisappointing an otherwise disappointed litigant.

Our Rules of Court seem to allow a DIG. Rule of Court 8.528(b) provides that “the Supreme Court may dismiss review.” It doesn’t say when, and apparently this is used mainly when the court “grants [review] and holds” a case pending its resolution of an issue in another pending case, and then refers them back to a court of appeal after the other case is decided. See Eisenberg, Horvitz, & Wiener, “Civil Appeals & Writs,” ¶13.190.1 (Rutter Group). In my salad days, when I clerked for a Supreme Court justice, I saw grants and holds, but I never saw the court DIG a case. And since then, I’ve never heard of it happening. But maybe it has, probably quietly, without a lot of fanfare.

McGill was a prime candidate for a DIG — unless the newly found issue itself qualified for review. Once the court found that the issue had changed, it should have considered whether the new issue qualified for review. Rule of Court 8.500(b)(1) says review may be granted “When necessary to secure uniformity of decision or to settle an important question of law.” “To secure uniformity” means to resolve a conflict among court of appeal opinions. The Supreme Court’s McGill opinion does not mention any such conflict regarding waivers of the right to seek a public injunction. “Important question of law” usually means some issue that has been arising frequently in the real world. The McGill opinion gives no indication that such waivers commonly appear in consumer contracts. So if that had been the issue presented in the petition for review, it seems unlikely that the Supreme Court would have granted review.

In the future, maybe our Supreme Court should unearth the DIG — a tool the U.S. Supreme Court has found quite useful.

You dig me, baby?