CALIFORNIA CLASS ACTION LAW

Flight Academy 03 (Photo credit: bestarns)

Declining to issue a broad ruling vitiating the Broughton-Cruz rule, the Ninth Circuit filed its en banc opinion today in Kilgore v. Keybank, National Association, No. 09-16703, __ F.3d __ (9th Cir. Apr. 11, 2013) (en banc).  While the court reversed and remanded with instructions to compel arbitration, it took a narrow approach.  The appeal involved a putative class action by former students of a failed flight-training school who seek broad injunctive relief against the bank that originated their student loans among others.  The court held that the arbitration agreement was not unconscionable under California law and compelled arbitration.

The court concluded that the injunctive relief claim at issue fell outside Broughton-Cruz’s “narrow exception to the rule that the FAA requires state courts to honor arbitration agreements.”

The central premise of Broughton-Cruz is that “the judicial forum has significant institutional advantages over arbitration in administering a public injunctive remedy, which as a consequence will likely lead to the diminution or frustration of the public benefit if the remedy is entrusted to arbitrators.” Broughton, 988 P.2d at 78. That concern is absent here, where Defendants’ alleged statutory violations have, by Plaintiffs’ own admission, already ceased, where the class affected by the alleged practices is small, and where there is no real prospective benefit to the public at large from the relief sought.

You can read more about today’s ruling here.

By CHARLES H. JUNG