Broughton-Cruz Rule Preempted by Federal Arbitration Act

The Fourth Appellate District of the California Court of Appeals recently abandoned the Broughton-Cruz rule - the California public policy refusing to enforce mandatory arbitration provisions for Unfair Competition, False Advertising, or Consumer Legal Remedies Act claims.  Applying AT&T Mobility LLC v. Concepcion (131 S.Ct. 1740), any state law rule prohibiting arbitration of a particular type of claim is pre-empted by the Federal Arbitration Act (9 USC 1). In McGill v. Citibank N.A., Plaintiff Sharon McGill sued Citibank for unfair competition and false advertising related to a credit insurance plan she purchased.  The trial court granted Citibank’s petition to compel arbitration pursuant to the agreement, but denied the petition for the injunctive relief claims citing the Broughton-Cruz rule.  Citibank appealed.

The Court of Appeals joined in other federal courts, deciding that the FAA preempts the Broughton-Cruz rule.  The Court held that only the Supremacy Clause could save an exception such as the Broughton-Cruz rule, but no exception was present.  McGill argued that the recently decided Iskanian v. CLS Transportation Los Angeles, LLC (206 Cal.App.4th 949) reaffirmed the Broughton-Cruz rule.  The Court disagreed.  Iskanian held that an employee’s waiver of a right to bring a representative PAGA action against their employer unenforceable as against public policy.  Unlike McGill’s claims, the FAA did not preempt PAGA claims because the dispute is between the state and the employer, not a private action.

The Court held that PAGA claims are not comparable to UCL, FAL, or CLRA claims and the Broughton-Cruz rule is preempted.  The trial court order was reversed.