California Supreme Court Limits Enforceability Of Arbitration Provisions

Arbitration provisions have become fairly commonplace for a variety of reasons, including to minimize litigation costs and to keep disputes out of the public spotlight that can accompany litigation. Arbitration provisions have also been used to limit the remedies available to the parties in the event arbitration is necessary. The Federal Arbitration Act ("FAA") has been construed to liberally promote the use of arbitration provisions. However, in recent years, a sort of tug-of-war has played out between federal courts and California as to the enforceability of arbitration provisions governed by the FAA.

The latest round of this tug-of-war occurred in the California Supreme Court's recent ruling in McGill v. Citibank NA ("McGill"). McGill involves an arbitration clause in a consumer credit card account agreement that purported to bar any claim for public injunctive relief in any forum. Public injunctive relief is a court order that prohibits unlawful acts that