In Torres v. [Automobile Finance Company], No. 823CV00688DOCDFM, 2023 WL 5505887, at *5 (C.D. Cal. July 13, 2023), Judge Carter struck class action allegations in a data breach/CCPA case and ordered the Plaintiff’s individual matter to arbitration.

The facts were as follows:

The following facts are drawn from Defendant’s Notice of Removal (Dkt. 1), and the Declaration of XXX (“[]Decl.”) (Dkt. 7-3). Defendant is a loan provider specializing in “the acquisition and servicing of motor vehicle retail installment contracts.” Compl. ¶¶ 31, 35. In 2018, Plaintiff purchased a motor vehicle on credit from the dealership . . . by submitting a credit application to the dealer. Id. ¶¶ 36-37, 187. After the application was approved, Plaintiff entered into a Retail Installment Sale Contract (RISC) (“The Contract”) with the dealer to finance the purchase of the vehicle. Id. ¶ 18. The contract was then assigned to Defendant. []Decl., ¶ 2. After the completion of the application process, Defendant obtained some of Plaintiff’s PII, including Plaintiff’s “Social Security Number, driver’s license number or state identification number, financial account numbers or debit/credit card numbers (in combination with security code, password, or PIN from the account), passport number, usernames and passwords, and health insurance information.” Compl. ¶ 1. The contract entered into by the parties includes an arbitration provision requiring that all disputes be resolved by binding arbitration. The provision includes a class action waiver, a delegation clause delegating arbitrability issues to the arbitrator, a choice-of-law provision specifying that the FAA controls, and a severability clause. See []Decl., Ex. B. In December 2021, Defendant identified a ransomware attack on its digital network which caused Plaintiff’s PII to be compromised. See Compl. ¶¶ 1, 3-5, 19-20. Defendant issued a Notice of Data Breach to Plaintiff and other individuals roughly twelve months later. Id. ¶ 45.

Defendant argued that the data breach allegations fell squarely within scope of the Arbitration Clause in the standard form RISC.

Here, here is no doubt that the arbitration clause is broad enough to cover all of Torres’s claims against [Automobile Finance Company]. As stated above, the arbitration clause applies to any dispute “which arises out of or relates to your credit application, purchase or condition of this vehicle, this contract or any resulting transaction or relationship (including any such relationship with third parties who do not sign this contract) …” (See []Decl., Ex. B.)  The clause’s application to all disputes “aris[ing] out of or relat[ing] to” the credit application, the contract, vehicle purchase, or any resulting relationship evinces an intent to cover all disputes and must be broadly construed.  “[W]hen parties intend to include a broad arbitration provision, they provide for arbitration ‘arising out of or relating to’ the agreement.” In circumstances in which an arbitration clause is phrased in broad and general terms, “[a]n order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage.” When an arbitration clause is interpreted “broadly,” it “ ‘reaches every dispute between the parties having a significant relationship to the contract and all disputes having their origin or genesis in the contract.’ ” Stated differently, “[t]o require arbitration, [a party’s] factual allegations need only ‘touch matters’ covered by the contract containing the  arbitration clause and all doubts are to be resolved in favor of arbitrability.” Brinkley v. Monterey Financial Services, Inc., 242 Cal. App. 4th 314, 331-332 (2015); citations omitted; accord: Ramos v. Superior Court, 28 Cal. App. 5th 1042, 1051 (2018) (citing cases); Rice v. Downs, 248 Cal. App. 4th 175, 186-187 (2016); Chiron Corp. v. Ortho Diagnostic Systems, Inc., 207 F.3d 1126, 1131 (9th Cir. 2000); Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 719 (9th Cir. 1999). Torres’s claims plainly “touch matters” concerning the contract. Torres concedes as much. Compl., ¶ 184 (“Plaintiff and the Classes delivered their Private Information to Defendant as part of the process of obtaining automobile lending services provided by Defendant.”); Id. ¶ 186 (“In providing their Private Information, Plaintiff and Classes entered into an implied contract with Defendant whereby Defendant, in receiving such data, became obligated to reasonably safeguard Plaintiff’ and the other Classes’ Private Information.”). Torres’s Fourth Cause of Action for Breach of Implied Contract further concedes that the implied covenant of good faith and fair dealing forming the basis for Torres’ claim is implied from the RISC itself that contains the Arbitration provision. Id., ¶ 185 (“Plaintiff and Classes entered into implied contracts with Defendant under which Defendant agreed to safeguard and protect such information and to timely and accurately notify Plaintiff and Classes if and when their data had been breached and compromised.”). More broadly, Torres alleges that [Automobile Finance Company] failed to properly maintain and safeguard his personal identifying information obtained due to his credit application and contractual relationship with [Automobile Finance Company], resulting in a data breach. See Compl., ¶¶ 6-11, 64-66, 142-44, 160-163, 174-77, 204-206, 214-15. The assigning dealer and [Automobile Finance Company] obtained Torres’s PII identified in Paragraph 1 of the Complaint pursuant to the credit application he submitted, the sale of the vehicle, [Automobile Finance Company]’s subsequent acceptance of the assignment of Torres’s contract, and [Automobile Finance Company]’s servicing of the account. Torres’s claims thus have a significant relation to the credit application, the contract, and his resulting relationship with [Automobile Finance Company]. The claims therefore arise out of or relate to the contract and are arbitrable. In analogous disputes, courts have regularly held that similar claims challenging data breaches arise out of or relate to the underlying contract with the business and are therefore arbitrable. FritzCo LLC v. Verizon Commc’ns Inc., No. 21-CV-10432 (JPO), 2022 U.S. Dist. LEXIS 179452, at *10 (S.D.N.Y. Sep. 30, 2022) (holding plaintiff’s claims related to a data breach were arbitrable where plaintiff “provided the impacted data to it under the terms of the Major Account Agreement.”); Saunders v. Collabera, Inc., No. CV2015207MASDEA, 2021 WL 3291685, at *4 (D.N.J. July 31, 2021) (holding claims related to data breach were arbitrable “because Plaintiff provided Collabera the alleged exposed information with the specific purpose of attaining employment with Collabera”); Varela v. Lamps Plus, Inc., No. CV 16-577-DMG (KSx), 2016 WL 9110161, at *4 (N.D. Cal. July 7, 2016) (holding that arbitration provision in employment agreement covered claims against employer relating to data breach and theft of PII), aff’d, 701 F. App’x 670 (9th Cir. 2017), rev’d on other grounds, 139 S. Ct. 1407 (2019).

Judge Carter did not reach the scope argument both because the Plaintiff did not oppose it and because Judge Carter found the delegation provision in the Arbitration Clause enforceable.

Defendant argues that the delegation clause in the agreement presents such clear and unmistakable evidence of an intent to delegate. Plaintiff does not refute this, instead relying on the argument that the delegation clause is moot because the agreement as a whole is unenforceable. The Court addresses each issue in turn.

i. The Delegation Clause Provides “Clear and Unmistakable” Evidence of the Parties’ Intention to Delegate Issues of Arbitrability to the Arbitrator

In Ratajesak v. New Prime, Inc., we examined a delegation clause like the one in question here. There, the arbitration agreement provided that “ANY DISPUTES … INCLUDING THE ARBITRABILITY OF DISPUTES BETWEEN THE PARTIES, SHALL BE FULLY RESOLVED BY ARBITRATION.” 2019 WL 1771659 at *5 (emphasis added). We held that this language was clear and unmistakable evidence of the parties’ intent to delegate the issue of arbitrability to the arbitrator. Here, the arbitration agreement provides that “[any] claim or dispute, …including the interpretation and scope of this Arbitration Provision, and the arbitrability of the claim or dispute … shall be resolved by neutral, binding arbitration.” []Decl., Ex. B (emphasis added). The clause could not be more clear and unmistakable. Like the provision in Ratajesak, it specifically mentions interpretation and arbitrability as disputes subject to arbitration. The inquiry then turns on whether the clause is enforceable.

ii. The Delegation Clause is Enforceable

Plaintiff does not argue that the delegation clause itself is unenforceable, and instead argues that the agreement as a whole is unenforceable. Specifically, Plaintiff first argues that the class action waiver prevents them from seeking public injunctive relief in any forum, thus contravening McGill. Plaintiff next argues that the agreement as a whole is cost prohibitive to Plaintiff and is unconscionable. None of these arguments are persuasive. In Rent-A-Center, the Supreme Court examined an arbitration contract that contained “multiple written provision[s] to settle by arbitration a controversy.” 561 U.S. at 68 (internal quotation marks omitted). The Court focused on two provisions: an agreement to arbitrate all disputes arising out of plaintiff’s employment with Rent-A-Center, and an agreement to delegate to the arbitrator “any dispute relating to the enforceability … of the Arbitration Agreement.” Id. The Court concluded that this delegation clause was “simply an additional, antecedent agreement the party seeking arbitration asks the federal court to enforce, and the FAA operates on this additional arbitration agreement just as it does any other.” Id.  The Court then held that when considering a challenge to the arbitration agreement, courts must “require the basis of the challenge to be directed specifically to the agreement to arbitrate [at issue].” Id. The Court explained that a federal court must enforce “the specific ‘written provision’ … that the party seeks to enforce.” Id. So, unless a party “challenge[s] the delegation provision specifically, [the court] must treat it as valid … and must enforce it … leaving any challenge to the validity of the [arbitration] Agreement as a whole for the arbitrator.” Id. at 72. Although the plaintiff challenged the “entire arbitration agreement” as unconscionable, he made no arguments “specific to the delegation provision.” Id. at 74. Therefore, the Court declined to consider plaintiff’s unconscionability argument “because none of [plaintiff’s] … unconscionability challenges was specific to the delegation provision.” Id. at 73. The Ninth Circuit reaffirmed this decision in Brennan v. Opus Bank. There, “multiple severable arbitration agreements” existed, and the agreement at issue was the delegation clause “because that [was] the arbitration agreement [defendant sought] to enforce.” Brennan v. Opus Bank, 796 F.3d 1125, 1133 (9th Cir. 2015). Like in Rent-A-Center, the plaintiff in Brennan argued that the arbitration agreement “as a whole” was unconscionable but failed to make any arguments “specific to the delegation provision.” Id. Therefore, the Brennan court upheld the trial court’s decision to dismiss plaintiff’s claims in favor of arbitration. Id. Here, like in Rent-A-Center and Brennan, multiple severable arbitration agreements exist. The severability clause of the agreement provides:  “If any part of this Arbitration Provision, other than waivers of class action rights, is deemed or found to be unenforceable for any reason, the remainder shall remain enforceable. If a waiver of class action rights is deemed or found to be unenforceable for any reason in a case in which class action allegations have been made, the remainder of this Arbitration Provision shall be unenforceable.”  []Decl., Ex. B. It follows from the above language that the delegation clause would be rendered unenforceable only by a finding that the class action waiver is unenforceable. If any other part of the agreement were to be found unenforceable, the delegation clause would be properly severed and thus still enforceable. Because Defendant here seeks to enforce the delegation clause, it is the agreement “at issue” just as in Rent-A-Center and Brennan. Therefore, we consider only arguments aimed specifically at the delegation clause and the class action waiver, the only other provision inseverable from the delegation clause. Plaintiff raises three arguments against the enforcement of the agreement. Plaintiff first contends that the language of the class action waiver prevents Plaintiff from seeking public injunctive relief in any forum, thus violating the rule announced in McGill v. Citibank. Plaintiff next argues that the agreement as a whole is cost prohibitive to Plaintiff and is unconscionable. None of these arguments are directed specifically to the delegation clause. Plaintiff’s unconscionability argument rests almost solely on the fact that the agreement is an “adhesion contract,” not on the language of the delegation clause. Opp. at 20-21. Plaintiff’s cost argument is directed towards other language in the agreement, and Plaintiff’s McGill argument is directed at the class action waiver. Consistent with Rent-A-Center and Brennan, we decline to examine Plaintiff’s cost and unconscionability arguments. We consider only the argument directed at the class action waiver, as it is inseverable from the delegation clause.

Judge Carter found the class action waiver enforceable because the injunctive relief sought did not seek a “public” injunction under Hodges and, therefore, did not implicate the McGill rule.

Plaintiff argues that the class action waiver is unenforceable because it prevents Plaintiff from seeking public injunctive relief in any forum. Plaintiff argues that this violates the rule announced by the California Supreme Court in McGill v. Citibank. There, the court examined the validity of an arbitration provision which waived the parties’ right to seek public injunctive relief in any forum and held that such a provision is contrary to California public policy and thus unenforceable. See McGill v. Citibank, 2 Cal.5th 945, 952 (2017). The court also held that this rule was not preempted by the FAA. Id. In determining if the agreement here is compliant with McGill, the Court is faced with two questions: (1) does Plaintiff here seek public injunctive relief, and (2) does the class action waiver bar public injunctive relief in all fora? See Id. at 956-958, 961; Hodges v. Comcast Cable Communications, LLC, 21 F.4th 535, 540 (9th Cir. 2021). In Hodges v. Comcast Cable Communications, LLC, the Ninth Circuit clarified the scope of the McGill rule, concluding that because the plaintiff did “not seek public injunctive relief, the McGill rule [was] not implicated.” Hodges, 21 F.4th at 540. The Hodges court, looking to California law and the reasoning of McGill, held that public injunctive relief “is limited to forward-looking injunctions that seek to prevent future violations of law for the benefit of the general public as a whole, as opposed to a particular class of persons, and that do so without the need to consider the individual claims of any non-party.” Id. at 542. In McGill, plaintiff sought an injunction against the use of false advertising, the “paradigmatic example” of public injunctive relief. Id. False advertising is “aimed at the general public” rather than any class of persons and imposing an injunction against it “does not require effectively fashioning individualized relief for non-parties.” Id. Here, we conclude that Plaintiff does not seek public injunctive relief within the meaning of McGill. Plaintiff describes its relief sought as “essential to prevent future harm caused by Defendant’s … failure to safeguard sensitive PII, and to prevent another breach of Defendant’s systems that would expose the sensitive PII of Plaintiff, Class Members, and members of the public.” Opp. at 15. Plaintiff seems to argue that so long as the relief sought affects some “members of the public,” it qualifies as public injunctive relief. Not so. The relief sought by Plaintiff would benefit only “a particular class of persons,” namely the customers of Defendant. Hodges, 21 F.4th at 542. The relief sought by Plaintiff cannot constitute public injunctive relief under Hodges, and the McGill rule thus does not apply. Therefore, the class action waiver is enforceable. Seeing as Plaintiff’s challenge to the class action waiver was the only argument that could invalidate the delegation clause, we find that the clause is enforceable. Therefore, because the delegation clause provides clear and unmistakable evidence of the parties’ intent to delegate issues of arbitrability to the arbitrator and is enforceable, the Court’s inquiry ends here. The issue of arbitrability as to all claims is therefore delegated to the arbitrator. Plaintiffs can (and should) raise any challenges to arbitrability before the arbitrator.

As to the CCPA case, Defendant argued that the CCPA’s ‘no-arbitration’ rule was pre-empted by the FAA.  As the Plaintiff did not oppose that argument, Judge Carter did not have to address the issue in his ruling.  Defendant’s argument was as follows:

For example, the FAA preempts the Consumer Legal Remedies Act’s antiwaiver provisions, which provide that the right to bring a class action under the CLRA is unwaivable. Imburgia, 577 U.S. at 51-52; Sanchez, 61 Cal. 4th at 923-924. “When state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA.” Concepcion, 563 U.S. at 341. As the CLRA would otherwise prevent enforcement of an agreement to arbitrate on an individual, non-class basis, that state law is preempted by the FAA. Sanchez, 61 Cal. 4th at 923-924. That same “straightforward” analysis applies to any argument Torres may advance based on state law that seeks to invalidate the arbitration clause because it does not allow class arbitration. Of the 7 causes of action pleaded, the CCPA is the only claim that requires any mention. The CCPA, like the CLRA, expressly authorizes class actions, see Cal. Civ. Code, § 1798.150(b), and provides that any waiver of its provisions is unenforceable. Insofar as that provision under the CCPA can be read to invalidate the arbitration clause’s class waiver, it prohibits outright the arbitration of a particular claim, and is therefore preempted by the FAA for the same reasons as the CLRA’s antiwaiver provisions. Torres thus cannot avoid arbitration on the ground that the clause in his contract permits only bilateral arbitration.