Ninth Circuit Snuffs Out 'Broughton-Cruz' Doctrine

, The Litigation Daily

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Scott Graham writes for The Recorder, an American Lawyer sibling publication.

SAN FRANCISCO — Over the last year, the U.S. Court of Appeals for the Ninth Circuit first killed and then revived a California state law that provides an escape hatch from compulsory arbitration.

On Monday the Ninth Circuit declared the law dead—again.

A three-judge panel ruled that California's Broughton-Cruz doctrine, which forbids the compulsory arbitration of claims for public injunctive relief, can't be reconciled with the U.S. Supreme Court's landmark 2011 decision AT&T Mobility v. Concepcion.

Though a different panel of the court reached the same conclusion 18 months ago, an en banc panel withdrew that decision earlier this year, saying the case could be decided without reaching the issue. All that did was delay the inevitable, as a new three-judge panel, this time led by Judge Richard Clifton, again plunged the dagger on Monday.

"A rule that precludes an arbitrator from fashioning injunctive relief is similar to the Supreme Court's illustrative list of preempted state rules in Concepcion," Clifton wrote in Ferguson v. Corinthian Colleges. Language in Concepcion "strongly suggests even where a specific remedy has implications for the public at large, it must be arbitrated under the [Federal Arbitration Act] if the parties have agreed to arbitrate it."

But the news wasn't all bad for plaintiffs Monday. The same panel that decided Ferguson also ruled that a compulsory arbitration agreement between Ralphs Grocery Co. and its employees "shocked the conscience" and was therefore unenforceable. That decision bolstered a ruling from the California Supreme Court last week which said that the doctrine of unconscionability remains viable in the wake of Concepcion.

"Federal law favoring arbitration is not a license to tilt the arbitration process in favor of the party with more bargaining power," Clifton wrote in Chavarria v. Ralphs Grocery Co.

'Clearly irreconcilable'

The California Supreme Court established in Broughton v. Cigna Health Plans and Cruz v. Pacificare Health Systems that claims for injunctive relief on behalf of the general public cannot be forced into arbitration. The Ninth Circuit recognized the Broughton/Cruz rule for California cases in 2007, in Davis v. O'Melveny & Myers.

Last year a Ninth Circuit panel led by Judge Stephen Trott ruled the Broughton-Cruz doctrine had been overruled by Concepcion. But in rehearing the case en banc, Judge Andrew Hurwitz wrote that it wasn't necessary to reach the issue because the plaintiffs in that case, students at a failed school for helicopter pilots, were seeking only to enjoin a bank from collecting on their debts.

The Ferguson case decided Monday has similar facts. Students at vocational schools owned by Corinthian Colleges brought class actions alleging that the school misled them about future employment opportunities. Corinthian allegedly targeted veterans and military personnel so that they could obtain tuition through federal financial aid programs.

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