Recent decisions by the Northern District of California and the Ninth Circuit may reflect a new era of McGill case law. In McGill v. Citibank, NA, 2 Cal. 5th 945 (2017), the California Supreme Court held, on public policy grounds, that an arbitration provision prohibiting the plaintiff from seeking a public injunction in any forum was unenforceable.
In Hodges vs. Comcast, no. 18-cv-01829-HSG, 2019 US Dist. LEXIS 120205, at *1 (ND Cal. July 18, 2019), putative group representative Brandon Hodges filed a lawsuit alleging that Comcast violated privacy laws by collecting data about TV viewing activity. cable television subscribers and personally identifiable demographic information. The action challenged Comcast’s privacy and data collection practices, seeking a variety of pecuniary and equitable remedies under federal and California statutory laws, including the Cable Communications Policy Act of 1984 (“Cable Act”) and the California Invasion of Privacy Act (“CIPA”). Comcast requested compulsory arbitration pursuant to plaintiff’s subscriber agreement. In denying the petition, District Judge Haywood S. Gilliam Jr. held that the arbitration clause was unenforceable because the complaint sought a public injunction under California’s Unfair Competition Law (“UCL”), Cal . Bus. & Code Prof. §§ 17200, et seq. and under California McGill rule, an arbitration provision that waives the right to seek a public injunction in any forum is unenforceable.
A Ninth Circuit panel vacated, finding the arbitration agreement binding because Hodges’ complaint did not seek a public injunction and did not involve the McGill to reign. Writing for the majority in a 2-1 split decision, Circuit Judge Daniel P. Collins held that the public injunction is limited to prospective injunctions that seek to prevent future violations of the law for the benefit of the general public, as opposed to to a particular category of people. By that standard, Hodges’ complaint was not seeking a public injunction. Hodges’ desired injunction — requiring Comcast to notify future customers of the demographic and video activity data it collects and allow users to opt out — would only affect Comcast subscribers rather than the general public. Accordingly, the panel backtracked and concluded that the McGill rule was not in issue and the arbitration agreement should have been enforced.
In the fall of 2021, the group’s putative representative requested a rehearing and a rehearing bench, asking the committee to reconsider whether its request to block targeted ads amounts to a public injunction. On December 23, 2021, motions for a hearing panel and a rehearing bench were refused.
The Ninth Circuit’s order refusing to overturn the committee’s decision may signal a change in the application of the McGill to reign. At a minimum, this decision indicated that in the Ninth Circuit, a plaintiff must clearly seek a prospective injunction on behalf of the general public for the McGill rule to apply. The warning that “courts should reach out to invalidate contracts based on hypothetical issues not actually presented in the parties’ dispute” echoes other Ninth Circuit decisions dismissing speculative damages, including we realized. here and here. Ninth Circuit courts already rely on the decision to compel arbitration when the injunction sought is not truly in the interest of the general public. However, it remains unclear how these developments will influence the California Supreme Court’s approach or the application of McGill in other contexts. Until the courts issue new guidelines on McGillwe expect fierce litigation over these issues and will continue to monitor and report on future developments.