Generally, parties to a contract can negotiate available remedies in the event one of the parties breaches the agreement. However, the California Supreme Court in McGill v. Citibank N.A. S224086, Filed April 6, 2017, concluded the statutory remedy of public injunctive relief – relief with the primary purpose and effect of prohibiting unlawful acts that threaten future injury to the general public – permitted by the Consumers Legal Remedies Act (CLRA) cannot be waived and is not pre-empted by the Federal Arbitration Act.

In McGill the plaintiff opened a credit card with Citibank and purchased a “credit protector” plan that permitted McGill to defer or credit amounts on the card when a qualifying event occurred, such as long-term disability, divorce, unemployment, military service or hospitalization.

Through a series of subsequent unilateral amendments of the plan documents, McGill claimed Citibank inserted a binding arbitration provision into the credit protector plan and changed the terms of the credit card and the plan to purport to preclude the remedy of a public injunctive relief. When McGill made a claim after she lost her job and Citibank rejected her claim, Citibank attempted to have her arbitrate the matter. McGill filed suit claiming the arbitration provision was invalid because it purported to prevent her from pursuing public injunctive relief as one of her remedies.

The California Supreme Court agreed with McGill. It found the arbitration provision to be invalid and unenforceable because it waived her right to seek public injunctive relief in any forum.

If you limit consumer remedies in your contracts, or your consumer contracts contain arbitration provisions, it is now essential that you bring them to your legal counsel for reconsideration to make sure they can achieve the cost savings and protection for which they were inserted in the agreements.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.