Court Opinion

ID: 4540168
Source: CourtListenerOpinion
Date Created: 2020-06-09 20:01:34.817412+00
Date Added: 2024-06-11T12:45:51.798547
License: Public Domain

NOT FOR PUBLICATION                           FILED
                    UNITED STATES COURT OF APPEALS                        JUN 9 2020
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

CINDY DELISLE; ROBERT                           No.    19-55794
DOUGHERTY, Individually and On Behalf
of All Others Similarly Situated,               D.C. No.
                                                3:18-cv-02042-GPC-RBB
                Plaintiffs-Appellees,

 v.                                             MEMORANDUM*

SPEEDY CASH,

                Defendant-Appellant.

                   Appeal from the United States District Court
                     for the Southern District of California
                   Gonzalo P. Curiel, District Judge, Presiding

                             Submitted June 5, 2020**
                               Anchorage, Alaska

Before: CHRISTEN, WATFORD, and BADE, Circuit Judges.

      Defendant-Appellant Speedy Cash appeals the district court’s order denying

its motion to compel arbitration pursuant to 9 U.S.C. § 4 and to stay proceedings

pursuant to 9 U.S.C. § 3. We have jurisdiction under 9 U.S.C. § 16(a)(1) and 28

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
U.S.C. § 1291. We review de novo the district court’s decisions on preemption and

the motion to compel arbitration, Blair v. Rent-A-Center, Inc., 928 F.3d 819, 824-25

(9th Cir. 2019), as well as its choice of law analysis, Cassirer v. Thyssen-Bornemisza

Collection Found., 862 F.3d 951, 959 (9th Cir. 2017).

      1.     Speedy Cash argues that the district court erred in refusing to enforce

an arbitration provision in loan agreements that included a waiver of the

borrower’s right to seek public injunctive relief in all forums. The district court

concluded that the Plaintiffs-Appellees requested public injunctive relief that the

California Supreme Court deemed non-waivable in McGill v. Citibank, N.A., 393

P.3d 85 (Cal. 2017). Pursuant to California’s Unfair Competition Law (“UCL”)

and Consumers Legal Remedies Act (“CLRA”), Plaintiffs requested an injunction

barring Speedy Cash from issuing loans greater than $2,500 with an annual

percentage rate of interest (“APR”) over 90% and requiring Speedy Cash to issue

“corrective advertising” about prior loans. The district court held that the

requested injunction would benefit the general public because it would prevent

Speedy Cash from continuing to engage in unlawful conduct that threatens future

harm. Based on the record and law as it stood at the time of the district court’s

order, we agree.

      In McGill, the California Supreme Court held that a contractual waiver of a

statutory right to seek public injunctive relief in all forums is contrary to California

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policy and unenforceable under California Civil Code § 3513. 393 P.3d at 93-94.

Public injunctive relief “has the primary purpose and effect of prohibiting unlawful

acts that threaten future injury to the general public.” Id. at 87. Speedy Cash

contends that a public injunction under the UCL and CLRA is cabined to

preventing deceptive advertising and marketing. But McGill explained that public

injunctive relief under the UCL and CLRA aims to restrain any “unlawful act,”

e.g., an unfair, deceptive, or fraudulent business practice, “that threaten[s] future

injury to the general public.” Id. at 87, 89. If charging an APR above 90% on

loans greater than $2,500 is unlawful, then enjoining Speedy Cash from issuing

such loans would benefit the general public by preventing the threat of future

injury. See Blair, 928 F.3d at 830-31 & n.3 (holding that the plaintiffs sought

public injunction by seeking to enjoin the defendant from offering contracts with

unlawful terms). With the facts and law before it, the district court correctly held

that McGill voids the arbitration provision’s public injunction waiver.

      During this appeal, however, a California statute took effect that prohibits

finance lenders from issuing loans between $2,500 and $10,000 with charges over

36% calculated as an annual simple interest rate (plus the prior month’s Federal

Funds Rate). See Cal. Fin. Code § 22304.5(a) (effective January 1, 2020). As

pleaded, Plaintiffs seek to enjoin Speedy Cash from issuing loans above $10,000,

but neither of the named Plaintiffs executed loans greater than $10,000, and the

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operative complaint does not specifically allege that Speedy Cash issued or

continues to issue loans greater than $10,000. Whether the injunction would

prevent a threat of future harm is therefore questionable. Cf. Kilgore v. KeyBank,

Nat’l Ass’n, 718 F.3d 1052, 1062 (9th Cir. 2013) (en banc) (concluding that “[t]he

injunctive relief sought . . . for all practical purposes, relates only to past harms

suffered by the members of the limited putative class” when the plaintiff alleged

that the defendant no longer engaged in the unlawful conduct). Because this

intervening law possibly impacts the analysis, we remand to the district court.1 See

White Mountain Apache Tribe v. Ariz., Dep’t of Game & Fish, 649 F.2d 1274,

1285-86 (9th Cir. 1981).

      2.     Although we remand for the limited purpose discussed above, we

address the other issues presented in this appeal. See United States v. Mancuso, 718

F.3d 780, 796 (9th Cir. 2013). Speedy Cash maintains that, even if Plaintiffs seek

public injunctive relief, the Federal Arbitration Act (“FAA”) preempts McGill. But

in Blair, this court held that “the FAA does not preempt the McGill rule” because it

is a generally applicable defense under the FAA’s savings clause, 9 U.S.C. § 2. 928

F.3d at 830-31. We are bound by Blair, see United States v. Baldon, 956 F.3d 1115,

      1
        To be clear, we agree with the district court’s analysis on this issue but
remand for it to consider what effect, if any, California Financial Code
§ 22304.5(a) has on its analysis. If it has no such effect, then as the district court
held, McGill voids the loan agreement’s waiver clause, which, in turn, invalidates
the arbitration provision in full.

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1121 (9th Cir. 2020), and therefore agree with the district court on this issue.

       3.     Speedy Cash also contends that the district court erred in applying

California law to determine the enforceability of the arbitration provision because

the loan agreement designates Kansas law as controlling. Under California’s

choice of law rules, we must first determine whether the selected state “has a

substantial relationship to the parties or their transaction, or . . . whether there is

any other reasonable basis for the parties’ choice of law.” Ruiz v. Affinity Logistics

Corp., 667 F.3d 1318, 1323 (9th Cir. 2012) (alteration in original) (quoting

Nedlloyd Lines B.V. v. Superior Court, 834 P.2d 1148, 1152 (Cal. 1992)). Even if

the designated state has a substantial relationship to the parties or their transaction,

we may not enforce the choice of law provision if (1) the substantive law of

Kansas is “contrary to a fundamental policy of California” and (2) California has a

“materially greater interest” than Kansas in resolving the issue. Wash. Mut. Bank,

FA v. Superior Court, 15 P.3d 1071, 1079 (Cal. 2001).

       Kansas has the requisite substantial relationship because Speedy Cash

maintains its corporate headquarters in Kansas. See Peleg v. Neiman Marcus Grp.,

Inc., 140 Cal. Rptr. 3d 38, 53 (Ct. App. 2012). We conclude, however, that Kansas

law is contrary to California policy and that California holds a materially greater

interest in this litigation. The parties negotiated and executed the contracts in

California, Plaintiffs reside in California, Speedy Cash has over thirty stores in

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California, and California law invalidates contractual waivers of the right to seek

public injunctive relief in all forums. See Ruiz, 667 F.3d at 1324 (listing factors).

Accordingly, the district court correctly applied California law.

      The parties shall bear their own costs on appeal.2

      VACATED AND REMANDED.

      2
        Plaintiffs request that the court take judicial notice of three documents:
(1) an exhibit to the complaint in Blair, (2) a proof of claim filed by Speedy Cash,
and (3) the American Arbitration Association’s Consumer Arbitration Rules. See
Dkt. 18. Because these documents are unnecessary to resolve this appeal, we deny
the request. See Santa Monica Food Not Bombs v. City of Santa Monica, 450 F.3d
1022, 1025 n.2 (9th Cir. 2006).

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