McGill v. Citibank N.A.

Compelled Arbitration

California Supreme Court

Associate Justice Ming W. Chin

Petitioner’s Lawyers: Glenn A. Danas, Ryan H. Wu, Liana C. Carter, Katherine W. Kehr, Capstone Law APC

Respondent’s Lawyers: Julia B. Strickland, Stephen J. Newman, David W. Moon, Marcos D. Sasso, Stroock & Stroock & Lavan LLP

California’s strong consumer and employee protection laws have long clashed with the Federal Arbitration Act because the U.S. Supreme Court has construed the law in favor of class action waivers in consumer and employment contracts, freezing plaintiffs out of court, and forcing them into business-friendly arbitration forums.

When Capstone Law’s Glenn A. Danas persuaded the state Supreme Court to reverse lower court rulings rejecting Sharon McGill’s complaint that Citibank’s “credit protector” plan was faulty and its terms wrongly forced her into arbitration, the result was two important legal pronouncements that aid California consumers and workers.

“One of the lawsuit’s aims was to establish that courts cannot force consumers or employees to give up a state statutory right or remedy by enforcing a waiver provision in an arbitration agreement,” Danas said. “Here the Supreme Court held unanimously that a statutory right to seek relief can’t be extinguished by a class action waiver.”

Danas faced an uphill fight to get past the U.S. Supreme Court’s 2011 Concepcion ruling affirming class action waivers in most contracts. “We sought to establish that while Concepcion bars class actions seeking damages or restitution, it does not prohibit consumers from seeking public injunctive relief as a class,” Danas said.

“The [state] Supreme Court drew a line in the sand: if waivers of state statutory rights or remedies are enforceable, then the entire edifice of worker and consumer protection laws would come crashing down. Consumers like Ms. McGill would be forced to forfeit their right to enjoin unlawful business practices,” he added. McGill v. Citibank N.A., 2 Cal.5th 945 (2017).

McGill’s second important outcome was a ruling of first impression: California consumers need not satisfy class certification requirements to enjoin unlawful business practices on behalf of the public, a question that had gone unanswered since state voters passed Proposition 64 in 2004.

“Consumer attorneys have waited 13 years to get that decided,” Danas said. “McGill made it crystal clear that consumers may bypass the high bar of class certification and directly enjoin the defendant’s unlawful conduct, breathing new life into California’s consumer protection statutes.”

To Danas’ amazement, defendant Citibank did not seek to overturn McGill at the U.S. Supreme Court. “The defense bar is certainly ambitious in challenging decisions it doesn’t like,” he said. “We were pleasantly surprised that Citibank did not file a cert petition.”

Instead, Danas and Citibank’s lawyers have been in mediation since the April 2017 ruling. “We will settle, or it’s back to the trial court, where Citibank will face aggregate liability of some type, with our claims for injunctive relief enforced by McGill,” he said.

Then will come the fees and costs Danas expects to obtain.

“This is a great example of why we have fee-shifting,” he said, referring to legal provisions that require the losing party to pay the winner in some civil cases. “It incentivizes firms like ours to put hundreds of hours into a case to benefit our robust pro-consumer laws.”

— John Roemer