9th Cir. Says FAA Doesn’t Pre-empt California S.Ct.’s Decision in McGill

In Blair v. Rent-A-Center, Inc., No. 17-17221, 2019 U.S. App. LEXIS 19476 (9th Cir. June 28, 2019), the Court of Appeals for the 9th Circuit held that the F.A.A. does not pre-empt the California Supreme Court’s McGill decision.  The Court of Appeals summarized its decision as follows:

The panel affirmed the district court’s denial of Rent-A-Center’s motion to compel arbitration and motion for a mandatory stay in a putative class action alleging Rent-A-Center charged excessive prices; and dismissed for lack of jurisdiction Rent-A-Center’s appeals of the district court’s denial of a discretionary stay and deferral on the motion to strike class claims. In McGill v. Citibank, N.A., 2 Cal. 5th 945, 216 Cal. Rptr. 3d 627, 393 P.3d 85 (Cal. 2017), the California Supreme Court held that a contractual agreement purporting to waive a party’s right to seek public injunctive relief in any forum was unenforceable under California law. The panel held that the Federal Arbitration Act does not preempt California’s McGill rule. Turning to the parties’ 2015 rent-to-own agreement for an air conditioner, the panel held that its severance clause, which severs plaintiff’s California’s Karnette Rental-Purchase Act, Unfair Competition Law, and Consumer Legal Remedies Act claims from the scope of arbitration, was triggered by the McGill rule. The panel further held that the severance clause permitted such claims to be brought in court. The panel affirmed the district court’s refusal to impose either a mandatory or discretionary stay on the non-arbitrable claims pending arbitration of plaintiff’s usury claim. The panel held that it lacked jurisdiction to review the district court’s denial of a discretionary stay because appellate jurisdiction under the Federal Arbitration Act over interlocutory appeals is limited to the orders listed in 9 U.S.C. § 16(a)(1). The panel held that a discretionary stay that was based on the district court’s inherent authority to manage its docket was not a stay under section 3 of the Federal Arbitration Act, and the exceptions that might justify extension of appellate jurisdiction did not apply to the denial of a stay. The panel also held that it lacked jurisdiction to review the district court’s decision to defer ruling on Rent-A-Center’s motion to strike because it was a non-final appealable order not covered by one of the categories set forth in 9 U.S.C. § 16(a)(1)(A).