Hill v. BBVA Bank, N.A.

• Court: District Court, S.D. California
• Decided: June 1, 2021
• Docket: 3:20-cv-01016
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 SARAH HILL, and TIMOTHY MILLS, Case No.: 20-CV-1016 JLS (WVG) on behalf of themselves and all others 12 similarly situated, ORDER (1) GRANTING MOTION 13 TO COMPEL ARBITRATION; Plaintiffs, (2) DENYING MOTION TO DISMISS 14 v. AND MOTION TO STRIKE; AND 15 (3) DISMISSING ACTION BBVA USA, an Alabama corporation,

16 Defendant. (ECF Nos. 17, 18, 19) 17

18 19 Presently before the Court is Defendant BBVA USA’s Motion to Compel 20 Arbitration (“Mot.,” ECF No. 18). Plaintiffs Sarah Hill and Timothy Mills filed an 21 Opposition to the Motion (“Opp’n,” ECF No. 22), and Defendant filed a Reply in Support 22 of the Motion (“Reply,” ECF No. 23). The Court took the matter under submission without 23 oral argument pursuant to Civil Local Rule 7.1(d)(1). See ECF No. 24. Having carefully 24 considered the Parties’ arguments and the law, the Court GRANTS the Motion. 25 BACKGROUND 26 Plaintiffs hold separate checking accounts with Defendant, which offers retail 27 banking services. First Amended Complaint (“FAC”) ¶¶ 11, 33, ECF No. 15. Plaintiffs 28 allege that Defendant assessed overdraft fees on transactions that did not overdraw 1 Plaintiffs’ bank accounts, and Defendant charged more than one nonsufficient funds fee on 2 a single transaction. Id. ¶ 1. Plaintiffs contend that these practices breach the terms of their 3 account contracts with Defendant and violate California’s Unfair Competition Law 4 (“UCL”), Cal. Bus. & Prof. Code §§ 17200, et seq. Id. ¶ 1. Plaintiffs, proceeding on behalf 5 of a putative class, seek declaratory relief, monetary damages, and an order on behalf of 6 the general public enjoining Defendant from “misrepresenting and/or omitting material 7 information as to its fee assessment practices.” Id. ¶¶ 86, 97. 8 When Plaintiffs opened their checking accounts with Defendant, they agreed to 9 Defendant’s Consumer Deposit Account Agreement (the “Agreement”). See id. ¶ 33 10 (noting that the Agreement governs Plaintiffs’ accounts). Section 3 of the Agreement, 11 entitled Dispute Resolution, Arbitration (the “Arbitration Agreement”), provides: 12 Any dispute that arises from or relates to this Agreement, your Account and any transaction involving the Account or any 13 service or product related to your Account will be settled by 14 arbitration . . . .

15 This means that disputes about the following are covered: 16 This Agreement, your Account or any transaction 17 involving the Account or any service or product related to 18 your Account . . . .

19 20 Ex. C at 5–6, ECF No. 18-2. 21 Additionally, the Arbitration Agreement includes the following clause regarding 22 class action, private attorney general, and representative actions: 23 You cannot join together in a dispute with anyone other than people who use your Account. Even if other people have 24 disputes similar to a dispute that you or we ask to arbitrate, those 25 people and their disputes cannot be part of any arbitration between you and us. You cannot arbitrate any dispute on a class 26 action, private attorney general or other representative basis. 27 Only a court, and not an arbitrator, may decide whether this provision prohibiting class disputes can be enforced. 28 1 Id. at 6. 2 Finally, the Agreement provides the following clause regarding the availability of 3 remedies: “Nothing in this arbitration provision will limit certain other rights you or we 4 may have. This means that you or we could, for example: Get an injunction . . . .” Id. at 5 7. 6 Defendant filed the present Motion alongside a Motion to Dismiss (ECF No. 17) and 7 Motion to Strike the Amended Complaint (ECF No. 19). The Parties filed a Joint Motion 8 requesting that the Court consider only Defendant’s Motion to Compel Arbitration and stay 9 consideration of Defendant’s Motion to Dismiss and Motion to Strike until after the Court 10 has ruled on the issue of arbitration (ECF No. 20). The Court granted the Joint Motion 11 (ECF No. 21). 12 LEGAL STANDARD 13 The Federal Arbitration Act (“FAA”) governs the enforceability of arbitration 14 agreements in contracts. See 9 U.S.C. § 1, et seq.; Gilmer v. Interstate/Johnson Lane Corp., 15 500 U.S. 20, 24–26 (1991). If a suit is proceeding in federal court, the party seeking 16 arbitration may move the district court to compel the resisting party to submit to arbitration 17 pursuant to their private agreement to arbitrate the dispute. 9 U.S.C. § 4. The FAA reflects 18 both a “liberal federal policy favoring arbitration agreements” and the “fundamental 19 principle that arbitration is a matter of contract.” AT&T Mobility LLC v. Concepcion, 563 20 U.S. 333, 339 (2011) (quotations and citations omitted); see also Kilgore v. Keybank, Nat’l 21 Ass’n, 718 F.3d 1052, 1057 (9th Cir. 2013) (en banc) (“The FAA was intended to 22 ‘overcome an anachronistic judicial hostility to agreements to arbitrate, which American 23 courts had borrowed from English common law.’” (quoting Mitsubishi Motors Corp. v. 24 Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 625 n.14 (1985))); Circuit City Stores, Inc. 25 v. Adams, 279 F.3d 889, 892 (9th Cir. 2002) (“The [FAA] not only placed arbitration 26 agreements on equal footing with other contracts, but established a federal policy in favor 27 of arbitration, and a federal common law of arbitrability which preempts state law 28 disfavoring arbitration.” (citations omitted)). 1 In determining whether to compel a party to arbitration, a district court may not 2 review the merits of the dispute; rather, a district court’s role under the FAA is limited to 3 two “gateway” issues: “(1) whether a valid agreement to arbitrate exists and, if it does, (2) 4 whether the agreement encompasses the dispute at issue.” Cox v. Ocean View Hotel Corp., 5 533 F.3d 1114, 1119 (9th Cir. 2008) (citing Chiron Corp. v. Ortho Diagnostic Sys., Inc., 6 207 F.3d 1126, 1130 (9th Cir. 2000)). If the Court finds that the answers to those questions 7 are yes, the Court must compel arbitration. See Dean Witter Reynolds, Inc. v. Byrd, 470 8 U.S. 213, 218 (1985). In determining the validity of an arbitration agreement, the Court 9 applies state law contract principles. Adams, 279 F.3d at 892; see also 9 U.S.C. § 2. To 10 be valid, an arbitration agreement must be in writing, but it need not be signed by the party 11 to whom it applies as acceptance may be implied in fact. Pinnacle Museum Tower Ass’n 12 v. Pinnacle Mkt. Dev. (US), LLC, 55 Cal. 4th 233, 236 (2012). Further, “[a]n arbitration 13 clause within a contract may be binding on a party even if the party never actually read the 14 clause.” Id. 15 ANALYSIS 16 Defendant advances two arguments in support of its Motion to compel individual 17 arbitration of Plaintiffs’ claims. See Mot. 5–6. First, Defendant argues that because the 18 Arbitration Agreement permits Plaintiffs to seek public injunctive relief in arbitration 19 proceedings, California law does not prohibit enforcement of the Agreement. See id. at 6. 20 Second, Defendant argues that Plaintiffs do not seek a public injunction, and therefore 21 California law does not provide a basis for avoiding arbitration. See id. 5–6. Because the 22 Court finds the Arbitration Agreement does not bar Plaintiffs from seeking public 23 injunctive relief, the Court need not address whether Plaintiffs seek a public injunction.1 24 /// 25

26 1 The Parties also disagree whether the Agreement contains a poison pill provision, which would invalidate 27 the entire Arbitration Agreement if the Court found the arbitration clause invalid. Compare Opp’n at 6 28 with Reply at 1. The Court also need not reach this question because the Court finds the Arbitration 1 Plaintiffs argue the California Supreme Court’s decision in McGill v. Citibank, N.A., 2 393 P.3d 85 (Cal. 2017), invalidates the Arbitration Agreement. See generally Opp’n at 3 5–13. The McGill court held that an arbitration provision is invalid and unenforceable if it 4 waives a plaintiff’s statutory right to seek public injunctive relief in any forum. McGill, 5 393 P.3d at 90; see Blair v. Rent-A-Ctr., Inc., 928 F.3d 819, 830–31 (9th Cir. 2019) (holding 6 that the FAA does not preempt the McGill rule). Public injunctive relief is a remedy that 7 “has the primary purpose and effect of prohibiting unlawful acts that threaten future injury 8 to the general public.” McGill, 393 P.3d at 86. Such relief “benefits the plaintiff, ‘if at 9 all,’ only ‘incidental[ly]’ and/or as ‘a member of the general public.’” Id. at 89 (quoting 10 Broughton v. Cigna Healthplans, 21 Cal. 4th 1066, 1080 n.5 (1999)) (alterations in 11 original). Under the McGill rule, any contract that bars public injunctive relief in both 12 court and arbitration violates California Civil Code § 3513, which provides that “a law 13 established for a public reason cannot be contravened by a private agreement.” Id. at 93. 14 However, the McGill court made clear that a litigant proceeding as a “private individual” 15 “on his or her own behalf” may “request[] public injunctive relief.” Id. at 92. Additionally, 16 the Ninth Circuit has held that McGill “shows no hostility to, and does not prohibit, the 17 arbitration of public injunctions.” Blair, 928 F.3d at 827. 18 Plaintiffs allege that Defendant breached the terms of the Agreement with account 19 holders and violated California’s UCL. See FAC ¶¶ 101–19. The UCL authorizes public 20 injunctive relief. Cal. Bus. & Prof. Code § 17203; Cruz v. PacifiCare Health Sys., Inc., 66 21 P.3d 1157, 1164 (Cal. 2003). Plaintiffs seek, among other things, “[a]n order on behalf of 22 the general public enjoining [Defendant] from continuing to employ unfair methods of 23 competition and commit unfair and deceptive acts and practices[.]” FAC at Prayer. More 24 specifically, Plaintiffs seek to enjoin Defendant “from misrepresenting and/or omitting 25 material information as to its fee assessment practices in the documents that it makes 26 available to the public.” Id. ¶ 100. Plaintiffs claim that the Arbitration Agreement 27 precludes them from seeking this relief, and therefore the Arbitration Agreement is invalid 28 under the McGill rule. See generally Opp’n. 1 Plaintiffs argue the Arbitration Agreement “improperly waive[s] Plaintiffs’ right to 2 seek public injunctive relief in any forum.” Opp’n at 6. Plaintiffs claim that the 3 Agreement’s bar on representative, class, and collective actions prohibits Plaintiffs from 4 seeking public injunctive relief for their UCL claim, and therefore the Agreement is invalid 5 under the McGill rule. Id. The Arbitration Agreement states that Plaintiffs “cannot join 6 together in a dispute with anyone other than people who use [their] Account” and that 7 Plaintiffs “cannot arbitrate any dispute on a class action, private attorney general or other 8 representative basis.” Ex. C. at 6. Plaintiffs argue that “actions for public injunctive relief 9 are brought on behalf of the general public,” and that because the Agreement prohibits 10 “representative proceedings,” Plaintiffs cannot seek public injunctive relief under the 11 Agreement if they are compelled to individual arbitration. See Opp’n at 8. 12 This argument was recently rejected by the Ninth Circuit in DiCarlo v. MoneyLion, 13 Inc., 988 F.3d 1148 (9th Cir. 2021). In DiCarlo, the plaintiff similarly argued that an 14 arbitration agreement was invalid under McGill because it did not allow the plaintiff to join 15 her claims with a class or to act as a private attorney general. The plaintiff argued that the 16 arbitration clause’s ban on representative actions “restrict[ed] an individual lawsuit to one 17 that has no substantial impact on others, including in the relief sought. This would mean 18 that a claim for public injunctive relief, which undoubtedly impacts others, would violate 19 the joinder clause and therefore fall outside an individual lawsuit.” DiCarlo, 988 F.3d at 20 1153. The Ninth Circuit disagreed. Id. The court held that the arbitration agreement’s 21 representative action waiver did not violate the McGill rule because the agreement 22 authorized an arbitrator to award all injunctive remedies available in an “individual 23 lawsuit” under California law. Id. at 1156. Therefore, the plaintiff could seek public 24 injunctive relief despite the arbitration agreement’s ban on representative actions because 25 such a clause does not restrict the availability of public injunctive relief. See id. The 26 Dicarlo court clarified that public injunction claims are distinct from class actions and 27 representative actions. Id. at 1153–54. As the McGill court held, a plaintiff proceeding 28 “on his or her own behalf” may “request[] public injunctive relief.” McGill, 393 P.3d at 1 92. The type of action and the type of relief sought are separate inquiries. Therefore, an 2 arbitration clause waiving representative actions does not, by itself, run afoul with the 3 McGill rule. 4 Plaintiffs’ argument is similarly unavailing. Although the Agreement prevents 5 Plaintiffs from joining their claims together, they may individually seek public injunctive 6 relief that benefits the general public. See Magana v. DoorDash, Inc., 343 F. Supp. 3d 7 891, 901 (N.D. Cal. 2018) (finding an arbitration agreement with an “all remedies” 8 provision and a representative action waiver compliant with McGill). The Arbitration 9 Agreement provides that “[n]othing in this arbitration provision will limit certain other 10 rights” the parties may have. Ex. C at 7. The Agreement specifically provides that 11 Plaintiffs could “[g]et an injunction . . . .” Id. 12 Plaintiffs attempt to analogize this case to Blair, in which the Ninth Circuit found an 13 arbitration agreement invalid and unenforceable under the McGill rule. Blair, 928 F.3d at 14 831. However, the language of the arbitration agreement in Blair is distinguishable from 15 that of the Arbitration Agreement here. In Blair, the agreement prohibited the arbitrator 16 from awarding “relief that would affect RAC account holders other than you.” Id. The 17 plain language of the agreement, therefore, limited the type of relief litigants could seek in 18 arbitration. By its definition, a public injunction benefits the general public, and therefore 19 the agreement in Blair could not stand under the McGill rule. Here, Plaintiffs argue that 20 the Arbitration Agreement provision stating that “[e]ach Arbitrator must: . . . Make 21 decisions and awards only with respect to claims made by or against you individually” 22 similarly limits the relief available to Plaintiffs. Opp’n at 5 (citing Ex. C at 7). However, 23 unlike in Blair, this clause only limits representative actions and does not restrict the 24 arbitrator’s ability to award public injunctive relief. The Arbitration Agreement explicitly 25 states that Plaintiffs can “[g]et an injunction . . . .” Ex C at 7. Additionally, the Arbitration 26 Agreement incorporates the AAA Rules, id. at 6, which permit arbitrators to award any 27 “remedy” or “relief” available to a litigant in court. AAA, Consumer Arbitration Rules, 28 /// 1 Rule 44(a). Because Plaintiffs are free to seek public injunctive relief in arbitration, there 2 is no conflict with McGill, and the Arbitration Agreement is valid and enforceable. 3 Accordingly, the Court GRANTS Defendant’s Motion to Compel Arbitration. 4 Because the Court finds all Plaintiffs’ claims subject to arbitration, the Court DENIES 5 WITHOUT PREJUDICE Defendant’s Motion to Dismiss (ECF No. 17) and Motion to 6 Strike (ECF No. 19). 7 When arbitration is mandatory, courts have discretion to stay the case under 9 U.S.C. 8 § 3 or dismiss the litigation entirely. Sparling v. Hoffman Constr. Co., 864 F.2d 635, 638 9 (9th Cir. 1988). Defendant requests the Court either enter an order compelling arbitration 10 and staying the litigation or dismiss the action. Mot. at 6. Plaintiffs request that the Court 11 dismiss the case, rather than stay it, so Plaintiffs may pursue an appeal. Opp’n at 20 (citing 12 Farrow v. Fujitsu Am., Inc., 37 F. Supp. 3d 1115, 1126 (N.D. Cal. 2014)). “[A]n order 13 compelling arbitration may be appealed if the district court dismisses all the underlying 14 claims, but may not be appealed if the court stays the action pending arbitration.” MediVas, 15 LLC v. Marubeni Corp., 741 F.3d 4, 7 (9th Cir. 2014). The Parties have not provided any 16 argument why the Court should retain jurisdiction over this matter; therefore, the Court 17 concludes dismissal is appropriate. Accordingly, the Court DISMISSES this action in its 18 entirety. 19 CONCLUSION 20 Based on the foregoing, the Court rules as follows: 21 1. Defendant’s Motion to Compel Arbitration (ECF No. 18) is GRANTED. 22 2. Defendant’s Motion to Dismiss for Failure to State a Claim and Motion to 23 Dismiss for Lack of Jurisdiction (ECF No. 17) is DENIED WITHOUT 24 PREJUDICE. 25 3. Defendant’s Motion to Strike (ECF No. 19) is DENIED WITHOUT 26 PREJUDICE. 27 /// 28 /// 1 4. This case is DISMISSED. The Clerk of Court SHALL CLOSE the file. 2 IT IS SO ORDERED. 3 ||Dated: June 1, 2021 . tt 4 pee Janis L. Sammartino 5 United States District Judge 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28