Earlier this month the Ninth Circuit Court of Appeals reversed a district court order denying Comcast Cable Communications, LLC’s (“Comcast”) motion to compel arbitration under the Federal Arbitration Act (“FAA”) claims brought against it by a former cable subscriber. The Plaintiff had brought a putative class action challenging Comcast’s privacy and data-collection practices for subscribers and demanded monetary and equitable remedies. Hodges v. Comcast Cable Communs., LLC, 2021 U.S. App. LEXIS 27268 (9th Cir. Sep. 10, 2021). This case is notable in that the Ninth Circuit adopted a narrow reading of the “public injunctive relief” exception to arbitration provisions under California law, with the anticipated result that more privacy class actions will be forced into binding arbitration going forward. Read on to learn more.
First, let’s take a look at the (alleged) facts. Plaintiff was a Comcast cable subscriber from October 2015-January 2018. In February 2018, Plaintiff filed a complaint in California state court on behalf of a putative class of California residential Comcast subscribers. Plaintiff alleged that “Comcast violated class members’ statutory privacy rights in collecting ‘data about subscribers’ cable television viewing activity’ as well as ‘personally identifiable demographic data about its subscribers.’” He asserted claims under: (1) the Cable Communications Policy Act of 1984; (2) the California Invasion of Privacy Act (“CIPA”); and (3) California’s unfair competition law (“UCL”), among others. Plaintiff demanded liquated, statutory, and punitive damages; seven forms of “statewide public injunctive relief”; and attorney’s fees. Comcast removed the action to federal court and then sought to compel arbitration based on a provision in Plaintiff’s subscriber agreement with Comcast.
Plaintiff opposed Comcast’s motion to compel arbitration, arguing that the arbitration provision was unenforceable pursuant to California’s McGill Rule, under which an arbitration provision that waives the right to seek “public injunctive relief” in all forums is unenforceable. In response, Comcast argued that the McGill Rule was inapplicable because Plaintiff was not seeking public injunctive relief. After the district court sided with Plaintiff and denied Comcast’s motion to arbitrate, Comcast filed an appeal with the Ninth Circuit.
In McGill the California Supreme Court held that insofar as a contractual provision “purports to waive [a party’s] right to request in any forum . . . public injunctive relief, it is invalid and unenforceable under California law” (the “McGill Rule”). 2 Cal. 5th 945 (Cal. 2017). Additionally, in 2019 the Ninth Circuit had previously ruled that “the FAA does not preempt” the McGill Rule. Blair, 928 F.3d 819, 822 (9th Cir. 2019).
Assessing this case law and other California precedent, the Ninth Circuit ruled that “public injunctive relief within the meaning of McGill is limited to forward-looking injunctions that seek to prevent future violations of law for the benefit of the general public as a whole, as opposed to a particular class of persons, and that do so without the need to consider the individual claims of any non-party.” (emphasis supplied). By contrast, the Court ruled, “when the injunctive relief being sought is for the benefit of a discrete class of persons, or would require consideration of the private rights and obligations of individual non-parties,” it is private injunctive relief outside the narrow scope of McGill.
The Ninth Circuit found that this interpretation was necessary under its holding in Blair as “any broader conception of public injunctive relief, beyond what we have set forth above, would have required a different conclusion as to the preemption issue.” This was because, the Court explained, “[i]f California’s McGill rule had sought to preserve, as non-waivable, the right to formally represent the claims of others, to seek retrospective relief for a particular class of persons, or to request relief that requires consideration of the individualized claims of non-parties, then such a rule would plainly ‘interfere with the informal, bilateral nature of traditional consumer arbitration.’” Such a result was to be avoided. In reaching this result, the Ninth Circuit declined to adopt recent California Court of Appeal decisions broadening the McGill Rule as the Court found that these decisions were incorrect and would not be followed by the California Supreme Court.
Applying these principles to Plaintiff’s claims and Comcast’s motion to compel arbitration, the Ninth Circuit held that Plaintiff’s requested injunctive relief on its face “stand[s] to benefit only Comcast ‘cable subscribers’—i.e., by definition they will only benefit a ‘group of individuals similarly situated to the plaintiff.’” Accordingly, “[t]here is simply no sense in which this relief could be said to primarily benefit the general public as a more diffuse whole.” (emphasis in original).
As a result of this ruling, it is anticipated going forward only a limited number of data privacy litigations will be able to escape compelled arbitration when plaintiff previously agreed to submit claims to arbitration as part of a services or subscription agreement, particularly when relief is asserted on behalf of a putative class. For more developments on this, stay tuned. CPW will be there to keep you in the loop.