94 | 2023 Cal-Peculiarities ©2023 Seyfarth Shaw LLP www.seyfarth.com not an individual action at all, but is instead an indivisible claim belonging solely to the state. The employer thus could not require the plaintiff to submit any part of his PAGA action to arbitration.119 California’s invalidation of agreements to arbitrate claims for public injunctive relief. Another example of hostility to arbitration is California’s “Broughton-Cruz Rule,”120 which makes arbitration provisions unenforceable as against public policy if they require arbitration of injunctive claims brought for the public’s benefit. Thus, a plaintiff, alleging that Citibank’s “Credit Protector” insurance plan violated the UCL and other statutes, invoked the Broughton-Cruz Rule in an effort to disregard an arbitration agreement and seek judicial injunctive relief against deceptive practices. The Court of Appeal rebuffed this effort, holding that the plaintiff must arbitrate because the Broughton-Cruz Rule conflicts with the FAA.121 The Court of Appeal declined to extend Iskanian’s reasoning to create a PAGA-like exception for the Broughton-Cruz Rule. The Court of Appeal reasoned that in a PAGA action, unlike a UCL action, the state retains “primacy over private enforcement efforts,” with the PAGA plaintiff being required to give advance notice to the state and to await state action before suing.122 In a UCL action, by contrast, the state is not the “real party in interest,” and so the PAGA exception set forth in Iskanian was not a precedent for saving the Broughton-Cruz Rule from FAA preemption. The Court of Appeal explained: the FAA “preempts all state-law rules that prohibit arbitration of a particular type of claim because an outright ban, no matter how laudable the purpose, interferes with the FAA’s objective of enforcing arbitration agreements according to their terms.”123 But the California Supreme Court took review of the case124 and, in 2017, reversed the Court of Appeal. The high court ruled that an arbitration agreement’s waiver of injunctive relief is contrary to California public policy where that relief would be to prohibit unlawful acts that threaten future injury to the general public. Moreover, the high court concluded, a state rule forbidding such a waiver is not preempted by the FAA, because the Broughton-Cruz Rule applies to all contracts and is not limited to arbitration agreements.125 The Broughton-Cruz Rule encouraged employment plaintiffs to evade arbitration agreements by using the UCL to seek “public injunctions” against Labor Code violations. But a 2019 Court of Appeal decision, Clifford v. Quest Software, Inc., rebuffed this tactic: “We need not decide whether the FAA applies or whether it preempts Broughton-Cruz because, even if Broughton-Cruz is still viable, it would not bar the arbitration of any portion of Clifford’s UCL claim … Clifford’s requests for injunctive relief under the UCL are … limited to him as an individual. … The only express beneficiary of Clifford’s requested injunctive relief is Clifford, and the only potential beneficiaries would be Quest’s current employees, not the public at large.” The injunction sought was thus private and not public and so the parties’ arbitration agreement still applied to that claim for relief.126 California’s refusal to apply CBA arbitration clauses to statutory claims. The California Supreme Court has rejected an employer’s argument that security guards must arbitrate, under their collective bargaining agreement, a claim for penalties owed because of untimely final pay. The high court reasoned that because this claim invoked a right arising under state law, not the CBA, the security guards could proceed in court even though the CBA was relevant to their claim and would be “consulted” in determining it.127 The employer argued that the claim was preempted by Section 301 of the Labor Management Relations Act, because the claim required “interpretation and application” of the CBA. The high court concluded that not every claim requiring resort to CBA language is necessarily preempted, particularly when the meaning of the CBA is not in dispute. “It is up to state courts, not an arbitrator, to interpret state labor law standards applicable to all workers.”128 5.2.7 Peculiar standards for judicial review of arbitration awards Hostility to federal “manifest disregard of law” standard. Although the FAA authorizes judicial review of arbitral awards in only very limited situations—generally involving a misbehaving arbitrator129— federal courts have vacated awards where the arbitrator has exhibited a “manifest disregard” for controlling law. They have done
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