Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Consumer and business interests alike claimed victory Thursday when the California Supreme Court declared that claims for injunctive relief under unfair competition and false advertising statutes aren’t subject to arbitration, but demands for monetary relief in such cases are. “I’m pleased in one sense and disappointed in another,” said San Francisco attorney Michael Lehmann, who represented a man who sued his health care company for allegedly lying about quality of service. The justices’ 4-3 ruling in Cruz v. Pacificare Health Systems Inc., 03 C.D.O.S. 3428, was as about as divided as it could get. The dissenters, led by Justice Ming Chin in a concurring and dissenting opinion, agreed with the portion of the majority ruling that held monetary relief, such as restitution and disgorgement, arbitrable. But they wanted nothing to do with the rest. “Under the majority’s holding, in every case where the parties have signed an arbitration agreement, the plaintiff can frustrate the defendant’s contractual right to the benefits of an arbitral, rather than a judicial, forum — which both the high court and this court have recognized — simply by alleging a claim under the [unfair competition law] and requesting injunctive relief,” Chin wrote. “Thus,” he continued, “the majority’s statutory construction guts the strong public policy favoring enforcement of arbitration agreements that both the California Legislature and the United States Congress have established by statute.” Justices Janice Rogers Brown and Marvin Baxter concurred. The case had attracted much attention, with amici curiae ranging from Attorney General Bill Lockyer and the National Association of Consumer Advocates on the plaintiff’s side, and the American Association of Health Plans and the California Bankers Association among those on the defense side. Jose Cruz sued Pacificare Health Systems Inc. and Pacificare of California in 1999, claiming the companies falsely advertised quality health care while actively working behind the scenes to limit actual coverage. He brought suit as a private attorney general under the state’s Business and Professions Code � 17200, regarding unfair competition, and Section 17500, which enjoins misleading advertising. He also sought disgorgement and restitution of any ill-gotten gains. Cruz relied on Broughton v. Cigna Healthplans, 21 Cal.4th 1066, the state Supreme Court’s 1999 ruling that said claims for injunctive relief under the Consumer Legal Remedies Act — aimed at protecting the public from deceptive business practices — are not subject to arbitration. In demanding arbitration, though, the healthcare companies argued that the Federal Arbitration Act pre-empts any state statute rejecting arbitration, and said Broughton had been voided by two newer U.S. Supreme Court rulings — 2000′s Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, and 2001′s Circuit City Stores Inc. v. Adams, 532 U.S. 105. San Francisco Superior Court Judge David Garcia rejected the companies’ claims, and the First District Court of Appeal affirmed, extending the holding in Broughton to encompass unfair competition and false advertising claims. Thursday’s Supreme Court ruling, written by Justice Carlos Moreno — and joined by Chief Justice Ronald George, Justice Joyce Kennard and First District Justice Timothy Reardon, sitting by assignment — dismissed FAA pre-emption and said the two U.S. Supreme Court cases cited by Chin “have little if any bearing.” “Cruz’s action to enjoin Pacificare’s alleged deceptive business practices is undertaken for the public benefit, whether designated as a claim under the CLRA, Business and Professions Code � 17200 or Code � 17500,” Moreno wrote. “It is designed to prevent further harm to the public at large rather than redress or prevent injury to a plaintiff.” As such, he held, there is an inherent conflict between arbitration and the intent of injunctive relief. However, Moreno’s ruling reversed the lower court rulings that held no right to arbitration for monetary relief. While agreeing with that part of Moreno’s ruling, the dissenters lamented that extending the rationale of Broughton to UCL injunctive relief requests would, as Baxter put it in a separate concurring and dissenting opinion, “surely frustrate the legitimate contract expectations of a great many who seek to secure the benefits of a non-judicial forum for resolving their disputes.” “Indeed,” he added, “virtually every lawsuit involving a business entity will be subject to compounded costs and delayed resolution of claims when bifurcated litigation of the suit proceeds one part after the other in dual [forums].” William Grauer, a partner in Cooley Godward’s San Diego office who represented the Pacificare companies, expressed satisfaction at the high court’s ruling on the issues of monetary relief. “The California Supreme Court unanimously reversed the court of appeals on that critically important point,” he said, “and ruled that all monetary claims should go to arbitration, which was exactly what Pacificare had been seeking.” Cruz’s lawyer, Lehmann, a partner in The Furth Firm, said that while pleased by the court’s holding that UCL claims aren’t arbitrable, he wished they had held the same on monetary claims. “Although, as the court noted,” he said, “once this case is remanded back down, there are other arguments based on unconscionability and on the effect of the McCarran-Ferguson Act that Cruz can raise below.” In another case Thursday, the high court unanimously affirmed the death sentence of Robert Edward Maury, 45, for the murders of Averill Weeden, Dawn Berryhill and Belinda Jo Stark from 1985-87 in Shasta County. Maury had raised the novel argument that his Fifth Amendment rights had been violated when information he provided about his own murders to Secret Witness — a crime witness program promising rewards and anonymity — had been used against him. The court, in a 121-page ruling authored by Chin, dismissed that easily. “When the stated purpose of anonymity (protection of fearful witnesses) and the intended purpose for the information (arrest and conviction of perpetrators) are considered together,” Chin wrote, “the [program's] flier cannot reasonably be understood to assure readers that a criminal, by providing information on a crime, would be shielded from prosecution and conviction for that same crime.” The case is People v. Maury, 02 C.D.O.S. 3439.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]

Reprints & Licensing
Mentioned in a Law.com story?

License our industry-leading legal content to extend your thought leadership and build your brand.


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.