McArdle v. AT&T Mobility LLC et al

Filing 257

ORDER by Judge Claudia Wilken GRANTING DEFENDANTS 222 RENEWED MOTION TO COMPEL ARBITRATION AND STAY ACTION. (ndr, COURT STAFF) (Filed on 9/25/2013)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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United States District Court
For the Northern District of California

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STEVEN MCARDLE, an individual, on behalf
of himself, the general public and those
similarly situated,
Plaintiff,
v.

No. C 09-1117 CW
ORDER GRANTING
DEFENDANTS’
RENEWED MOTION TO
COMPEL ARBITRATION
AND STAY ACTION

AT&T MOBILITY LLC; NEW CINGULAR WIRELESS
PCS LLC; and NEW CINGULAR WIRELESS
SERVICES, INC.,
Defendants.
_____________

___________________/

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Defendants AT&T Mobility LLC, New Cingular Wireless PCS LLC,
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and New Cingular Wireless Services, Inc. (collectively, ATTM) have
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filed a renewed motion to compel arbitration of Plaintiff Steven
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McArdle’s claims.1

Plaintiff opposes the motion.

Having

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considered the parties’ papers and oral argument on the matter,
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the Court GRANTS Defendants’ motion.
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BACKGROUND
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ATTM is a cellular telephone service provider.

It owns New

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Cingular Wireless PCS LLC and New Cingular Wireless Services, Inc.
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McArdle is a customer of ATTM who asserts claims, on behalf of
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himself and all others similarly situated, under California law
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In a separately filed order, the Court granted Defendants’
unopposed motion to compel arbitration of Kenneth Thelian’s claims
in the related case, Thelian v. AT&T Mobility LLC, No. 10-3440.

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for false advertising, unfair business practices, fraud and

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violation of the Consumers Legal Remedies Act.

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McArdle’s service agreement with ATTM contains a provision

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that requires the parties to the agreement to arbitrate “all

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disputes and claims” between them.

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customers from pursuing claims in arbitration on behalf of a class

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of individuals.

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on class arbitration is not severable from the rest of the

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arbitration provision.

United States District Court
For the Northern District of California

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The provision prohibits ATTM’s

According to its express terms, the prohibition

Relying upon Discover Bank v. Superior Court, 36 Cal. 4th 148

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(2005), and Shroyer v. New Cingular Wireless Services, Inc., 498

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F.3d 976 (9th Cir. 2007), the Court entered an order dated

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September 14, 2009, finding that the class arbitration waiver was

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unconscionable.

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was expressly not severable from the other portions of the

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arbitration provision, the Court found that the arbitration

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provision as a whole was not enforceable.

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Moreover, because the class arbitration provision

ATTM filed an interlocutory appeal of the Court’s order and,

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when the United States Supreme Court granted certiorari in AT&T

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Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), this Court

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stayed the case pending the Supreme Court’s decision in that case.

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Following the April 27, 2011 decision in Concepcion, in which

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the Supreme Court held that the Discover Bank rule was preempted

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by the Federal Arbitration Act, the Ninth Circuit reversed and

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remanded.

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18517 (9th Cir.).

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“to consider in the first instance McArdle’s arguments based on

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generally applicable contract defenses.”

See McArdle v. AT&T Mobility, 2012 U.S. App. LEXIS
The purpose of the remand was for this Court

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Id. at *2.

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On April 11, 2013, ATTM filed a renewed motion to compel
arbitration and stay the action.

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LEGAL STANDARD

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Under the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1, et

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seq., written agreements that controversies between the parties

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shall be settled by arbitration are valid, irrevocable and

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enforceable.

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another to arbitrate under a written arbitration agreement may

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petition the district court which would, save for the arbitration

9 U.S.C. § 2.

A party aggrieved by the refusal of

United States District Court
For the Northern District of California

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agreement, have jurisdiction over that action, for an order

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directing that arbitration proceed as provided for in the

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agreement.

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Franchise Corp., 622 F.3d 996, 1005 (9th Cir. 2010) (noting that

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the party seeking to compel arbitration bears the burden of

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proving the existence of a valid arbitration agreement by a

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preponderance of the evidence).

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Id. § 4.

See Bridge Fund Capital Corp. v. Fastbucks

The FAA further provides:

If any suit or proceeding be brought in any of the
courts of the United States upon any issue referable to
arbitration under an agreement in writing for such
arbitration, the court in which such suit is pending,
upon being satisfied that the issue involved in such
suit or proceeding is referable to arbitration under
such an agreement, shall on application of one of the
parties stay the trial of the action until such
arbitration has been had in accordance with the terms of
the agreement . . . .

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9 U.S.C. § 3.

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arbitration agreement or the failure to comply with the agreement

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is not in issue, the court shall make an order directing the

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parties to proceed to arbitration in accordance with the terms of

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the agreement.”

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unmistakably provide otherwise, the question of whether the

If the court is satisfied “that the making of the

Id. § 4.

“Unless the parties clearly and

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parties agreed to arbitrate is to be decided by the court, not the

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arbitrator.”

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America, 475 U.S. 643, 649 (1986) (citations omitted).

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AT&T Technologies, Inc. v. Communications Workers of

The FAA reflects a “liberal federal policy favoring

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arbitration agreements.”

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(citations and internal quotation marks omitted).

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court must compel arbitration under the FAA if it determines that:

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(1) there is a valid agreement to arbitrate; and (2) the dispute

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falls within its terms.

Concepcion, 131 S. Ct. at 1745
A district

Stern v. Cingular Wireless Corp., 453 F.

United States District Court
For the Northern District of California

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Supp. 2d 1138, 1143 (C.D. Cal. 2006) (citing Chiron Corp. v. Ortho

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Diagnostic Sys., 207 F.3d 1126, 1130 (9th Cir. 2000)).

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The FAA “permits agreements to arbitrate to be invalidated by

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‘generally applicable contract defenses, such as fraud, duress, or

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unconscionability,’ but not by defenses that apply only to

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arbitration or that derive their meaning from the fact that an

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agreement to arbitrate is at issue.”

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1746.

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that the arbitration provision is unconscionable.

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Romero v. Superior Court, 184 Cal. App. 4th 825, 836 (2010).

The party opposing arbitration bears the burden of proving

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Concepcion, 131 S. Ct. at

Arguelles-

DISCUSSION
I.

Broughton-Cruz Doctrine
McArdle first argues that arbitration is foreclosed by

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California’s Broughton-Cruz rule which prohibits arbitration of

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public injunctive relief claims under the Consumer Legal Remedies

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Act (CLRA), Cal. Civ. Code § 1750 et seq., and the Unfair

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Competition Law (UCL), Cal. Bus. and Prof. Code § 17200 et seq.,

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because such claims are “designed to prevent further harm to the

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public at large rather than to redress or prevent injury to a
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plaintiff.”

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303, 316 (2003); see also Broughton v. Cigna Healthplans of

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California, 21 Cal. 4th 1066 (1999).

Cruz v. PacifiCare Health Systems, Inc., 30 Cal. 4th

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ATTM argues that the Broughton-Cruz doctrine is not a

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generally applicable contract defense because it applies only to

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certain types of cases and only to arbitration.

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argues, the Court lacks authority to consider McArdle’s Broughton-

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Cruz argument because that argument exceeds the scope of the Ninth

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Circuit’s mandate.

Accordingly, ATTM

See Mendez-Guttierrez v. Gonzalez, 444 F.3d

United States District Court
For the Northern District of California

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1168, 1172 (9th Cir. 2006) (“[A] district court is limited by this

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court’s remand in situations where the scope of the remand is

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clear.”).

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McArdle responds that the Court could find that the

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arbitration provision is unenforceable because it violates the

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public policy set out in the Broughton-Cruz doctrine.

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of this argument, McArdle cites Fisher v. DCH Temecula Imports

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LLC, 187 Cal. App. 4th 601, 617 (2010), which holds that there is

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a “generally available contract defense” in California that

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“private contracts that violate public policy are unenforceable.”

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The Broughton court relied on the United States Supreme

In support

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Court’s holding that “not . . . all controversies implicating

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statutory rights are suitable for arbitration.”

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1075 (quoting Mitsubishi Motors v. Soler Chrysler-Plymouth, 473

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U.S. 614, 627 (1985).2

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21 Cal. 4th at

The Broughton court held that the issue of

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As discussed more fully below, both the majority and the
dissent in American Express Co. v. Italian Colors Restaurant, 133
S. Ct. 2304 (2013), made clear that Mitsubishi Motors applies only
to federal statutory claims. This further calls into question the
continuing viability of the Broughton-Cruz rule.
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suitability “turns on congressional intent, which can be

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discovered in the text of the statute in question, its legislative

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history or in an inherent conflict between arbitration and the

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statute’s underlying purposes.”

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Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991))

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(internal quotation marks omitted).

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to hold that “two factors taken in combination” evidenced an

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inherent conflict “between arbitration and the underlying purpose

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of the CLRA’s injunctive relief remedy.”

21 Cal. 4th at 1075 (citing

The Broughton court went on

21 Cal. 4th at 1082.

United States District Court
For the Northern District of California

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The two factors were that the relief sought was “for the benefit

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of the general public rather than the party bringing the action”

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and that “the judicial forum [had] significant institutional

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advantages over arbitration in administering a public injunctive

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remedy.”

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Broughton remained good law in the wake of intervening United

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States Supreme Court decisions and extended its holding to public

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injunctive relief claims under the UCL.

Id.

In Cruz, the California Supreme Court held that

30 Cal. 4th at 311-16.

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The Broughton-Cruz doctrine applies only to arbitration

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agreements and only to certain claims brought pursuant to the CLRA

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and UCL.

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policy concerns, it is not a generally applicable contract defense

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as contemplated by the FAA.

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(holding that, even though the Discover Bank rule finds “its

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origins in California’s unconscionability doctrine and

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California’s policy against exculpation,” it is not a generally

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applicable contract defense).

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not a generally applicable contract defense, it does not survive

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Concepcion.

Although the Broughton-Cruz doctrine is based on public

See Concepcion, 131 S. Ct. at 1746-47

Because the Broughton-Cruz rule is

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McArdle argues that the Ninth Circuit’s en banc opinion in
Kilgore v. Key Bank, 718 F.3d 1052 (9th Cir. 2013) (Kilgore II),

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“preserved the viability of” the Broughton-Cruz doctrine.

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Opposition at 8.

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panel opinion in Kilgore v. Key Bank, 673 F.3d 947 (9th Cir. 2010)

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(Kilgore I), held that the Broughton-Cruz doctrine was preempted

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by the FAA in light of Concepcion.

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decision did not reach the preemption issue and contends that this

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indicates that the Broughton-Cruz rule survives Concepcion.

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United States District Court
For the Northern District of California

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fact, the en banc court held, “Even assuming the continued

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viability of the Broughton-Cruz rule, Plaintiffs’ claims do not

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fall within its purview.”

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II expressly did not decide the continued viability of the

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Broughton-Cruz rule.

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finds that the Broughton-Cruz rule is preempted by the FAA in

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light of Concepcion.

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II.

This argument is based on the fact that the

McArdle notes that the en banc

Kilgore II, 718 F.3d at 1060.

In

Kilgore

For the reasons stated above, the Court

Bar to Public Injunctive Relief

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McArdle next argues that the arbitration agreement is

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unenforceable because it “purports to bar customers from seeking

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public injunctive relief in any forum.”

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arbitration agreement provides, “The arbitrator may award

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declaratory or injunctive relief only in favor of the individual

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party seeking relief and only to the extent necessary to provide

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relief warranted by that party’s individual claim.”

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Dec., Ex. 2, ¶ 2.2(6).

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right to seek public injunctive relief under the CLRA and UCL is

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unconscionable because it undermines the purposes of the statutes,

Opposition at 15.

The

Figueroa

McArdle argues that this waiver of the

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which provide that individuals may seek public injunctive relief.

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See Cal. Bus. & Prof. Code § 17203; Cal. Civ. Code § 1780(a)(2).

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In other words, McArdle argues, even if Concepcion permits
ATTM to compel arbitration of his CLRA and UCL claims, ATTM cannot

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preclude the arbitrator from awarding public injunctive relief.

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However, this argument relies on the United States Supreme Court’s

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decision in Mitsubishi Motors for the proposition that “by

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agreeing to arbitrate a statutory claim, a party does not forego

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the substantive rights afforded by statute; it only submits to

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United States District Court
For the Northern District of California

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their resolution in an arbitral, rather than a judicial forum.”

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473 U.S. at 628.

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vindication” rule, applying it only to federal statutory rights,

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while others extended the rule to state statutory rights, such as

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the rights McArdle asserts in this case.

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Supreme Court case, American Express Co. v. Italian Colors

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Restaurant, the majority strongly suggested that the effective

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vindication rule applies only to federal statutory rights,

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repeatedly referring to federal rights or the pursuit of federal

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remedies.

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“potential deprivation of a claimant’s right to pursue federal

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remedies”); id. at 2311 (discussing “‘effective vindication’ of a

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federal right”).

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stated the point even more clearly in their effort to distinguish

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the case they were considering from Concepcion.

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Some courts have limited this “effective

However, in a recent

See, e.g., 133 S. Ct. at 2310 n.2 (discussing

The dissenting justices in American Express

And if that is not enough, [Concepcion] involved a state
law, and therefore could not possibly implicate the
effective-vindication rule. When a state rule allegedly
conflicts with the FAA, we apply standard preemption
principles, asking whether the state law frustrates the
FAA’s purposes and objectives. If the state rule does
so—as the Court found in [Concepcion]—the Supremacy
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Clause requires its invalidation. We have no earthly
interest (quite the contrary) in vindicating that law.
Our effective-vindication rule comes into play only when
the FAA is alleged to conflict with another federal law,
like the Sherman Act here.
American Express, 133 S. Ct. at 2320 (Kagan, J. dissenting).
Moreover, the other cases McArdle cites are distinguishable.

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McArdle relies on Bridge Fund Capital Corp. v. Fastbucks Franchise

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Corp., 622 F.3d 996 (9th Cir. 2010), for the proposition that a

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waiver of a statutory right to injunctive relief is substantively

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unconscionable and accordingly unenforceable.

In Bridge Fund, the

United States District Court
For the Northern District of California

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Ninth Circuit affirmed the district court’s finding that class

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action and injunctive relief waivers in the arbitration provision

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of a franchise contract were unconscionable and unenforceable.

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However, Bridge Fund relied in large part on a California Court of

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Appeal case which held that such waivers were unenforceable by

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applying the California Supreme Court’s decision in Discover Bank

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to the California Franchise Investment Law.

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at 1004 (citing Independent Ass’n of Mailbox Center Owners, Inc.

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v. Superior Court, 133 Cal. App. 4th 396 (2005)).

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above, the Discover Bank rule is preempted by the FAA.

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Bridge Fund, 622 F.3d

As discussed

McArdle also relies on a line of cases in which courts have

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found that representative action waivers cannot apply to

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California Private Attorney General Act (PAGA) claims.

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McArdle fails to address a key difference between, on the one

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hand, the CLRA and UCL, which permit an individual to seek public

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injunctive relief and, on the other, PAGA, which allows an

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individual to seek penalties under the Labor Code in an action

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brought “on behalf of himself or herself and other current or

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former employees.”

Cal. Lab. Code § 2699.
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However,

The courts that have

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found representative action waivers unconscionable in PAGA cases

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have specifically noted this limitation.

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Orkin Servs. of Cal, 882 F. Supp. 2d 1152, 1167 (C.D. Cal. 2011)

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(noting that a court that found such waivers enforceable under

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Concepcion “failed to take into account that there are no separate

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individual claims in a PAGA action”), rev’d on other grounds, 2013

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U.S. App. LEXIS 16718 (9th Cir.); Brown v. Ralph’s Grocery Co.,

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197 Cal. App. 4th 489, 503 (2011).

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cases are not applicable here.

United States District Court
For the Northern District of California

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See, e.g., Urbino v.

The Court finds that these

CONCLUSION
For the reasons stated above, the Court GRANTS ATTM’s motion

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to compel arbitration and stay the action.

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case is stayed pending arbitration, which must be diligently

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pursued.3

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dismissal or disposition of this action, and, should further

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proceedings become necessary or desirable, any party may move to

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restore the case to the Court’s calendar.

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(Docket No. 222)

The

Nothing contained in this order shall be considered a

IT IS SO ORDERED.

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Dated: 9/25/2013
CLAUDIA WILKEN
United States District Judge

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There appears to be no further reason at this time to
maintain the file as open for statistical purposes, and the Clerk
is instructed to submit a JS-6 Form to the Administrative Office.
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