A Ninth Circuit en banc panel recently heard oral argument in the much-watched Kilgore v. KeyBank Nat’l Assn., No. 09-16703 (audio recording available here), which concerns whether two California Court of Appeal decisions remain good law in light of the U.S. Supreme Court’s holding in AT&T Mobility v. Concepcion. The two California cases are Broughton v. Cigna Healthplans, 21 Cal. 4th 1066, 988 P.2d 67 (1999) (public injunctive relief claims not arbitrable as a matter of California public policy; California’s Consumer Legal Remedies Act (CLRA) injunctive actions), and Cruz v. PacifiCare Health Systems, Inc., 30 Cal. 4th 303 (2003) (same; UCL injunctive actions).
Specifically at issue in Kilgore is whether public injunctive relief claims under the CLRA and UCL are not arbitrable as a matter of California public policy, as established in Broughton and Cruz. A three-judge Ninth Circuit panel had previously ruled that Concepcion overruled Broughton and Cruz. Additionally, Kilgore was issued just days after the California Supreme Court granted a petition for review in Iskanian v. CLS Transp. Los Angeles, LLC, ___ Cal. App. 4th ___ (2012). In Iskanian, the California Supreme Court will decide whether Concepcion overruled the unconscionability jurisprudence of Gentry v. Superior Court, 42 Cal. 4th 443 (2007). Since both appeals concern the extent of FAA preemption, with an underlying issue of California substantive law, the Kilgore appeal will likely be stayed until there is a disposition of Iskanian (the discussion of which provided a moment of levity during the oral argument as the attorney for KeyBank indicated that he was not familiar with Iskanian). Similarly, some members of the Kilgore panel queried whether a disposition of Kilgore ought to be deferred until the U.S. Supreme Court issues a decision in American Express Co. v. Italian Colors Restaurant, as to which a certiorari petition was just granted, or whether, instead of awaiting the Iskanian ruling, the procedure whereby a question is “certified” to the California Supreme Court ought to be used, thereby obtaining a definitive interpretation as to issues of state substantive law.
The Kilgore appeal has attracted considerable amicus interest, and the oral argument got underway with Chief Judge Kozinski questioning the Chamber of Commerce’s amicus counsel, asking if Concepcion is distinguishable on the most apparent ground: that the public injunctions in Broughton and Cruz are remedies, not claims. Responding to that and other similar inquires, the amicus counsel gave emphasis to the fact that seeking a public injunction under the UCL requires class certification, and was ready with an adept citation to Supreme Court precedent in which punitive damages were preempted by the Federal Arbitration Act (FAA).
Considerable time was devoted to discussing the FAA’s “savings clause,” which Concepcion held did not prevent FAA preemption. But does Concepcion bar any state-created legislation that might limit arbitration, even in circumstances where, as in Broughton and Cruz, public health and safety are implicated? Assuming a judicial posture, amicus counsel reiterated that the FAA had preemptive effect in the case at hand, sidestepping the broader hypothetical.
Judge M. Margaret McKeown pressed as to whether there is an intersection between unconscionability and public policy, and invoked the U.S. Supreme Court’s recent Marmet Health Care Ctr., Inc. v. Brown decision (132 S. Ct. 1201 (2012)), which seemingly puts state-created unconscionability doctrine outside the ambit of FAA preemption, before the proceedings focused on Cruz and Broughton. When questioned whether overruling Broughton and Cruz would be applicable only in federal courts or in California state courts as well, the voluble Chamber of Commerce amicus counsel opted for the more aggressive interpretation, whereby the disposition would be applicable in state and federal courts alike. While the degree to which the amicus parties worked cooperatively with counsel for KeyBank is unknown, but it is often an indication of confidence that an appellate panel is a favorable one when counsel opts for a broader interpretation when a narrower, more risk-averse interpretation is available.
Judge Harry Pregerson, widely viewed as among the most “plaintiff friendly” in the Ninth Circuit, questioned counsel only sparingly, and as to relatively technical issues of standing under the UCL. However, Judge William Fletcher worked off Judge Pregerson’s reference to UCL standing to elicit from KeyBank’s counsel the concession that there would be no injunctive relief available in a private action (i.e., other than in an action brought by the California Attorney General) even if there were a general fraud. Later in the oral argument, and at a moment of abrupt candor, Judge Pregerson asked the plaintiff’s counsel (who Pregerson let it be known is a personal acquaintance): “What is the bottom line of your lawsuit?” Counsel responded in essence that the preservation of the right to bring private actions that seek public injunctions to combat broad wrongs is the “bottom line” in Kilgore.
In addition to the judges referenced above, the 12-member Kilgore en banc panel consisted of Judges Paul Jeffrey Watford, Mary Murguia, Consuelo Callahan, Richard C. Tallman, Milan D. Smith Jr., Morgan Christen, and Andrew Hurwitz.