Court Grants Center’s Request to Publish Case Upholding Californians’ Right to Seek Public Injunctions

September 22, 2020

On September 15, 2020, the California Court of Appeal (Fourth District, Division 3) granted the Center’s request to publish Mejia v. DACM, a decision holding that the arbitration clause in a consumer credit contract was unenforceable.

 

The opinion in Mejia v. DACM is significant, and its publication makes new law on two timely consumer contract issues: waiver of public injunction rights and choice of law. The Court of Appeal held in favor of consumers on both.

 

The case involved another chapter in the saga involving California vehicle dealers and the requirement that all financing terms for motor vehicle purchases be contained in a single document. Mr. Mejia bought a used motorcycle from a dealer using a credit card whose contract terms included an arbitration clause that barred purchasers from pursuing representative claims in any forum. The contract also stated that Utah law would apply to any disputes. When Mr. Mejia sued under the Rees-Levering Automobile Sales Finance Act (Civil Code sec. 2981) as well as other consumer protection statutes because the finance terms were not contained in one document, the dealer moved to compel arbitration. But the trial court held and the court of appeal affirmed that the arbitration provision could not be enforced because it prevented consumers from seeking a public injunction in any forum, and that California’s public policy preserving the right to public injunctions meant that its law rather than Utah’s should apply to the dispute.

 

The court of appeal found that the outcome was dictated by McGill v. Citibank (2017) 2 Cal. 5th 945, which held that consumers cannot waive their rights to pursue public injunctions. Mejia is unique in applying this principle to the Rees-Levering Act.

 

The Court also concluded that, although the credit card agreement had a choice-of-law provision designating Utah law, California had a greater interest in the case and the Golden State’s law should therefore apply. Applying the reasoning of Nedlloyd Lines B.V. v. Superior Court (1992) 3 Cal.4th 459, the Court held that Utah law, which is less protective of consumers, was contrary to California’s fundamental policy interest in protecting its constituents by preserving the right to seek a public injunction. The choice-of-law decision was bolstered by the fact that the motorcycle dealer is a California corporation.

 

Mejia illustrates California’s interest in preserving consumers’ ability to seek public injunctions when companies engage in unfair business practices. Arbitration clauses are ubiquitous in consumer contracts, but this case demonstrates the strength and significance of the state’s consumer protection statutes. Mejia will help future courts and litigants handle consumer arbitration clauses that implicate the availability of public injunctions under those laws.

 

The Center’s request was joined by the National Consumer Law Center, Consumers for Auto Reliability and Safety (CARS), Housing and Economic Rights Advocates, and the UC Irvine Consumer Law Clinic. The case was brought, and the original publication request was made by, plaintiffs’ consumer law firm Kemnitzer Barron & Krieg.

 

Read the opinion here.