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(Reuters) – McGill’s rule has struck again.

US District Judge Haywood Gilliam of Oakland Monday refuse to force arbitration of claims under California state law by a class of consumers who allege StubHub Inc improperly changed its cash refund policies when COVID-19 forced large-scale event cancellations . StubHub’s terms of service include a provision requiring individual arbitration of consumer claims, but Gilliam ruled the company could not enforce the claims provision under California law due to the Supreme Court’s precedent. ‘Status of 2017 McGill v. Citibank NA.

California judges have ruled at McGill that the Federal Arbitration Act does not prejudge state laws that allow plaintiffs to seek a public injunction to “prohibit unlawful acts that threaten to cause future harm to the general public.” The 9th U.S. Circuit Court of Appeals subsequently approved the so-called McGill rule in 2019 Blair v. Rent-A-Center Inc. Together, the two decisions mean that if companies attempt to impose arbitration provisions that effectively prohibit a public injunction, the courts will declare them invalid.

The StubHub case is a good example of how McGill gave plaintiffs the power to pursue class actions. It also shows why the California precedent is so bitterly despised by corporate defendants who are now hoping for help from the US Supreme Court.

Group lawyers in the StubHub litigation, Ahdoot & Wolfson and Wittels McInturff Palikovic, alleged, among other things, that StubHub continued to tout their FanProtect full cash refund guarantee for canceled events even after they stopped paying cash refunds to all customers. The collective complaint sought a public injunction to compel StubHub to adhere to the full cash refund policy or run an advertising campaign to inform consumers that it does not actually promise full refunds to all customers.

StubHub attorneys at McDermott Will & Emery said the alleged injunction request was not at all what it seemed. The plaintiffs weren’t really looking for an injunction to protect the general public from future injuries, the company argued in its motion to demand arbitration. The lawyers for the group simply added these words to their complaint, in “a thinly veiled maneuver to try to avoid arbitration.”

The company argued that this case is, in fact, a series of private contract disputes between StubHub and dissatisfied customers. These disputes, according to the motion, are governed by the arbitration provision in StubHub’s user agreements – and the judge should not allow class lawyers to get away with artfully drafting their complaint to invoke the rule of law. McGill as a tactic to escape individual arbitration. StubHub cited a 2020 decision by U.S. District Judge Dale Fischer of Los Angeles, who granted the company’s motion to seek arbitration in a class action claim for reimbursement brought by people who purchased tickets for Major League Baseball games canceled because the plaintiffs’ public injunction would not have actually conferred any public benefit.

“McGill does not apply to people seeking monetary relief disguised as a public injunction,” StubHub said.

StubHub’s arguments to Gilliam have echoed the claims of many other corporate defendants in recent years. In 2020, I told you about the U.S. Supreme Court motions of Comcast Corp and AT&T Mobility LLC that called the McGill rule an error that allowed consumers to evade arbitration. The United States Chamber of Commerce has called the rule a “road map of an easy path” in amicus briefs urging the Supreme Court to come to the aid of the accused.

The Supreme Court dismissed both motions last year, but the matter is again before the judges, this time in a petition by Fast Auto Loans Inc. (Another lawsuit challenging the McGill rule was filed by HRB Tax Group Inc, but the company since demand Supreme Court to delay action pending developments in the underlying California litigation.) Fast Auto told justices that following McGill, California courts have adopted such a vague definition of an “injunction public “that hundreds of companies are now faced with non-arbitrable claims, overturning the value of their binding arbitration agreements with consumers.

The decline of companies has not escaped the attention of the 9th Circuit. Generally speaking, the court stuck to its Rent-A-Center ruling that the Federal Arbitration Act does not prejudge the McGill rule, as stated by consumer advocates at Gupta Wessler. to the Supreme Court in a brief contrary opinion in the case of Fast Auto. But the circuit court tightened the definition of a public injunction. More recently, a panel divided into Hodges v. Comcast Cable Communications LLC ruled that the McGill rule applies only “to forward-looking injunctions which seek to prevent future violations of the law for the benefit of the general public at large.”

Class lawyers in the MDL StubHub said in their brief arbitration opposing that their injunction request is exactly that: a necessary means to prevent StubHub from continuing to mislead the public about its refund policy.

Gilliam agreed in Monday’s decision. The California Supreme Court’s decision at McGill, he said, was on a public injunction claim quite similar to the claim against StubHub, calling for a ban on allegedly misleading advertising. Preventing StubHub from allegedly “misrepresenting the protections offered by its FanProtect warranty to the general public,” said Gilliam, is “a paradigmatic example of a public injunction.”

Even though StubHub is correct and the plaintiffs argued the injunction request specifically to evade arbitration through the McGill rule, the judge said “their motivation for doing so is simply not relevant to the investigation “.

StubHub attorneys William Donovan and Daniel Campbell of McDermott did not answer my question about Gilliam’s decision. Class lawyers also don’t have Tina Wolfson from Ahdoot Wolfson and Tiasha Palikovic from Wittels.

The United States Supreme Court has not set a conference date for Fast Auto petition for certiorari, even if the briefing in the case is complete. I told you last week that the court is also delaying without explanation a conference on a petition to revise the California precedent allowing plaintiffs to evade arbitration of claims under the state’s Private Attorney General Act.

California seems, for the moment, to confuse the high court.

Read more:

U.S. Supreme Court allows California consumers to evade arbitration over injunction claims

SCOTUS suddenly very interested in the California Attorney General Act

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