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Wednesday, December 11, 2013

Ferguson v. Corinthian Colleges: Ninth Circuit Rejects Broughton-Cruz Rule

California's Broughton-Cruz rule prohibits arbitration of "public injunction" cases that are brought for the benefit of the general public rather than just the party bringing the action. Back in April, in Kilgore v. Keybank, N.A., ___ F.3d ___ (4/11/13) (discussed here), we thought that an en banc panel of the Ninth Circuit was going to give us its view of the continued viability of the rule in the wake of Concepcion. The Ninth Circuit did not address the issue in Kilgore, but addressed it directly in Ferguson v. Corinthian Colleges, Inc., ___ F.3d ___ (10/28/13), holding that the Federal Arbitration Act (FAA) preempts Broughton-Cruz

The Court started with the rule, stated in Concepcion, that “[w]hen state law prohibits outright the arbitration of a particular type of claim ... [the] conflicting rule is displaced by the FAA.” Slip op. at 11-12. The Court continued: 

That rule resolves this case. By exempting from arbitration claims for public injunctive relief under the [Consumer Legal Remedies Act], [Unfair Competition Law], and [False Advertising Law], the Broughton-Cruz rule similarly prohibits outright arbitration of a particular type of claim.
Slip op. at 12. 

The decision appears to leave a number of open questions: 
We decline to resolve in advance the question of what, if any, court remedy Plaintiffs might be entitled to should the arbitrator determine that it lacks the authority to issue the requested injunction. That is beyond the scope of this appeal. If the arbitrator comes to that conclusion, Plaintiffs may return to the district court to seek their public injunctive relief. We express no opinion on any question that might arise at that time. Similarly, we decline to resolve now questions that could arise if a motion is brought in court to confirm an arbitration award that includes injunctive relief, or whether it might be necessary for a court to enforce a public injunction awarded by an arbitrator. Those questions can be better addressed in the context of an actual case, with arguments directed more specifically to the questions raised in that case. 
Slip op. at 17. 

Ferguson v. Corinthian Colleges is available here

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