On February 19, 2021, the Ninth Circuit upheld a district court’s grant of a motion to compel arbitration in a putative class action lawsuit alleging violations of various California consumer protection statutes. The court rejected the Plaintiff’s argument that the Agreement was invalid under California law because its class action waiver prohibited her from seeking injunctive relief.

• Defendant MoneyLion provides financial services to its customers, one of which is the “MoneyLion Plus program.” That program offers customers with little or poor credit history a small “credit-builder” loan to help create a positive credit history. Plaintiff Marggieh DiCarlo enrolled in the Plus program and took out a credit-builder loan. As part of her enrollment, she signed a Membership Agreement (the “Agreement”) that required her to pay monthly fees and gave each party the right to demand arbitration in the event of a dispute. After she fell behind on her monthly payments, MoneyLion refused to cancel the Plus membership until she paid the loan in full. She could not do that until she paid off the accumulating fees (which she could not afford), so she filed a putative class action against MoneyLion and its “high tech debt trap.” DiCarlo alleged claims under California’s Unfair Competition Law, Consumers Legal Remedies Act, and False Advertising Law. After MoneyLion moved to compel arbitration, the district court granted the motion and dismissed the action.
• On appeal, DiCarlo contended that the Agreement’s arbitration provision was invalid under the California Supreme Court’s decision in McGill v. Citibank, N.A., 393 P.3d 85 (Cal. 2017), which held that no one can contractually waive all rights to seek public injunctive relief. Namely, she argued that because the Agreement required arbitration, public injunctive relief had to be an available remedy in arbitration or else it was invalid under McGill. Yet, although the Agreement allowed arbitrators to award any injunctive relief available under California law in an “individual lawsuit,” it also prohibited class actions and joinder. DiCarlo used this class action/joinder ban to argue that the Agreement restricted “an individual lawsuit to one that has no substantial impact on others, including in the relief sought,” such that a claim for public injunctive relief would violate the class action/joinder ban. She further asserted that she could seek injunctive relief in an individual lawsuit only by acting as a “private attorney general,” which the Agreement also prohibited.
• The Ninth Circuit rejected both arguments. As for the first argument regarding the meaning of an “individual lawsuit,” the court held that the joinder/class action ban did not prohibit a claim simply because the claim might impact others. Instead, the ban prohibited a plaintiff only from asserting claims on behalf of others or consolidating a lawsuit with another plaintiff. Critically, that ban did not “hinge[] on the relief sought,” which meant that an individual plaintiff could still seek relief that might impact others, including injunctive relief, so long as it was not formally brought on others’ behalf.
• The court next addressed whether the Agreement’s ban on serving as a “private attorney general” prevented DiCarlo from seeking public injunctive relief in her individual lawsuit. The court determined that there were two types of private attorneys general: (1) a “standing-to-sue private attorney general,” which is a “non-government actor who represents the public’s rights or interests in court,” and (2) a prevailing plaintiff who serves as a “fee-shifting private attorney general.”
  • For the “standing-to-sue” private attorney general, the court held that the California consumer protection laws at issue allowed plaintiffs to obtain injunctive relief without serving as a private attorney general. As a result, DiCarlo could still seek public injunctive relief in the arbitration even though the Agreement prohibited her from serving as a private attorney general.
  • The court also held that the potential for fee-shifting had no impact on the Agreement, since DiCarlo had not stated whether she sought attorney’s fees. And in any event, there was “no reason to think that the availability of public injunctive relief could hinge” on the availability of fees.
• Essentially, because DiCarlo could seek public injunctive relief in an arbitration, the court held that the Agreement did not violate McGill. The court also emphasized how this result complied with the plain language of the Agreement: that the arbitrator “shall be authorized” to award “all remedies available in an individual lawsuit,” including any injunctive relief.
• The Ninth Circuit’s decision underscores the importance of carefully wording arbitration agreements to ensure that they do not run afoul of state law. Here, the plaintiff attempted to escape the Agreement’s ban on class actions by filing a putative class action lawsuit seeking broad injunctive relief. But the court upheld the Agreement because it allowed arbitrators to award injunctive relief in an “individual lawsuit.”
• The case is DiCarlo v. MoneyLion, No. 20-55058, and the opinion can be found here.