Bernal et al v. Cash America International, Inc. et al

Filing 29

ORDER GRANTING 7 MOTION to Compel Arbitration and Stay Action. The Clerk is directed to Administratively Close the case. Signed by Judge Jeffrey S. White on 9/23/13. (jjoS, COURT STAFF) (Filed on 9/23/2013)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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PAULA BERNAL, et al.,

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For the Northern District of California

United States District Court

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Plaintiffs,

No. C 12-05792 JSW

v.
CASH AMERICA INTERNATIONAL, INC.,
et al.,

ORDER GRANTING MOTION TO
COMPEL ARBITRATION

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Defendants.
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/

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Now before the Court is Defendants’ motion to compel arbitration.

With respect

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to all of Plaintiffs’ claim except their request for injunctive relief, the parties agree that

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Plaintiffs’ claims should be arbitrated.

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Plaintiffs contend, citing the rule established by Broughton v. Cigna Healthplans of

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California, 21 Cal. 4th 1066 (1999) and Cruz v. PacifiCare Health Sys., Inc., 30 Cal. 4th 303

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(2003) (the Broughton-Cruz rule), that claims for public injunctive relief are not arbitrable. In

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Kilgore v. Key Bank, 673 F.3d 947 (9th Cir. 2012) (“Kilgore I”), the Ninth Circuit held that the

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Broughton-Cruz rule is preempted by the Federal Arbitration Act (“FAA”) as construed by the

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Supreme Court in AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011). However, the

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Ninth Circuit reheard the decision issued in Kilgore en banc. In that opinion, the Ninth Circuit

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determined that it did not need to decide the preemption issue because the requested relief did

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not actually constitute a claim for public injunctive relief. Kilgore v. Keybank, 718 F.3d 1052,

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1060-61 (9th Cir. 2013) (“Kilgore II”).

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In Kilgore II, the Ninth Circuit held that “[a] claim for public injunctive relief … does

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not seek ‘to resolve a private dispute but to remedy a public wrong.’” Id. at 1060 (quoting

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Broughton, 988 P.2d at 76). In the claims at issue in that case, the court found that the plaintiffs

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were seeking relief which would only benefit the 120 purported class members and that the

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“relief sought … relates only to past harms suffered by the members of the limited putative

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class.” Id. at 1061 Moreover, the plaintiffs admitted that the alleged statutory violations had

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already ceased and thus there was “no real prospective benefit to the public at large from the

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relief sought.” Id.

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Defendants argue that Plaintiffs’ claims similarly fall outside the scope of the
Broughton-Cruz rule because Plaintiffs’ requested relief would not provide a prospective public

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For the Northern District of California

United States District Court

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benefit. However, unlike in Kilgore II, Plaintiffs have not conceded that the alleged unlawful

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practices have ceased. Plaintiffs allege that the loan agreements used by Defendants continue to

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use the Cash America Net name, even after the name change in 2011. Moreover, Plaintiffs

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allege that Defendants have not posted a copy of a valid license at their place of business.

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Because Plaintiffs allege ongoing violations that would affect the public, the Court must address

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the preemption issue the Broughton-Cruz rule.

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In AT & T Mobility LLC v. Concepcion, U.S. 131 S. Ct. 1740, 1746 (2011), the Supreme

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Court held that “[w]hen state law prohibits outright the arbitration of a particular type of claim,

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the analysis is straightforward: The conflicting rule is displaced by the FAA.” Most courts that

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have examined this issue have concluded that the Broughton-Cruz rule prohibits outright the

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arbitration of a particular type of claim – claims for public injunctive relief – and, thus, is

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clearly preempted by the FAA. See Meyer v. T–Mobile USA Inc., 836 F. Supp.2d 994, 1005-

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06 (N.D. Cal. 2011); Hendricks v. AT & T Mobility, LLC, 823 F. Supp. 2d 1015, 1024 (N.D.

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Cal. 2011); Kaltwasser v. AT & T Mobility LLC, 812 F. Supp. 2d 1042, 1050-51 (N.D. Cal.

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2011); Rosendahl v. Bridgepoint Educ., Inc., 2012 WL 667049, *12 (S.D. Cal. 2012); Nelson v.

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AT & T Mobility LLC, 2011 WL 3651153, *2 (N.D. Cal. Aug. 18, 2011); In re Apple and AT &

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T iPad Unlimited Data Plan Litig., 2011 WL 2886407, *4 (N.D. Cal. July 19, 2011); Arellano

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v. T-Mobile USA, Inc., 2011 WL 1842712, *1 (N.D. Cal. May 16, 2011). While there are strong
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policy arguments in favor of the Broughton-Cruz rule, as other courts have noted, state policy

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arguments were rejected by Concepcion, “perhaps regrettably.” See Arellano, 2011 WL

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1842712, at *2 (holding that “Concepcion … compels preemption” of the Broughton-Cruz rule,

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despite “public policy arguments thought to be persuasive in California.”); see also Nelson,

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2011 WL 3651153, at *2 (same).

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Although a couple of courts have concluded that the Broughton–Cruz rule is still viable

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after Concepcion, the Court finds that the reasoning of these cases is not persuasive. See

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Ferguson v. Corinthian Colleges, 823 F. Supp. 2d 1025, 1035 (C.D. Cal. 2011); In re DirecTV

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Early Cancellation Fee Marketing and Sales Practices Litig., 810 F. Supp. 2d 1060, 1073 (C.D.
Cal. 2011). The Court agrees with the majority that, however strong the state public policy

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For the Northern District of California

United States District Court

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reasons are in favor of having judicial review of public injunctive claims, Concepcion compels

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preemption of the Broughton-Cruz rule.

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Accordingly, the Court grants the motion to compel arbitration and to stay proceedings

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pending arbitration. The Clerk is directed to close the file for administrative purposes. The

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case may be reopened for such additional proceedings as may be appropriate and necessary

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upon conclusion of arbitration. If the matter is resolved by settlement, the parties shall

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promptly file a dismissal of this action.

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IT IS SO ORDERED.

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Dated: September 23, 2013
JEFFREY S. WHITE
UNITED STATES DISTRICT JUDGE

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