Last week, we published a Legal Alert discussing the petitions for rehearing filed in the Blair v. Rent-A-Center appeals which ask the Ninth Circuit en banc to overturn a panel decision holding that the Federal Arbitration Act (FAA) does not preempt California’s “McGill Rule.” The McGill Rule derives from the California Supreme Court’s ruling in McGill v. Citibank, N.A. that an arbitration agreement requiring individual arbitration and precluding a consumer from pursuing claims for “public” injunctive relief in court or in arbitration is unenforceable under California law.
To update, on August 19, amicus briefs in support of the rehearing petitions were filed by a number of industry groups, including the U.S. Chamber of Commerce, the National Association of Manufacturers, the Washington Legal Foundation, CTIA-The Wireless Association and the California Employment Law Council. The amicus briefs argue that the FAA preempts the McGill Rule because it interferes with the fundamental attributes of individualized arbitration in that it greatly magnifies the risks to the defendants while depriving them of meaningful appellate review. Moreover, the amicus briefs assert that Section 2 of the FAA independently preempts the McGill Rule and is outside the scope of the FAA’s savings clause because it is does not constitute a contract “revocation” defense, but rather is a defense related to validity or enforceability.
We will continue to keep you advised of developments in these appeals since Blair may become the next “blockbuster” arbitration decision by the U.S. Supreme Court.