McBurnie v. RAC Acceptance East, LLC, No. 22-16868 (9th Cir. 2024)
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The case at hand involves a putative class action brought against RAC Acceptance East, LLC, by Shannon McBurnie and April Spruell. The plaintiffs argue that two fees imposed by RAC, operators of retail stores that lease household and electronic items through rent-to-own contracts, violated California consumer protection laws. RAC sought to compel arbitration, citing an arbitration agreement with the plaintiffs. The district court denied RAC's motion, and RAC appealed the decision.
RAC argued that a recent Supreme Court decision, Viking River Cruises, Inc. v. Moriana, implicitly abrogated a prior Ninth Circuit decision, Blair v. Rent-A-Center, Inc., which held that RAC's arbitration agreement was unenforceable under California law. The Ninth Circuit disagreed, stating that Viking River was not irreconcilable with Blair, and that Viking River dealt with different claims from those at issue in this case. Therefore, Blair remained binding.
RAC also argued that the plaintiffs' claim for public injunctive relief was mooted by a Consent Decree it entered into with the California Attorney General. The court disagreed, stating that the Consent Decree did not address whether the $45 processing fee in this case violates the law, and therefore, the challenge to the fee was not moot.
However, RAC contended that the plaintiffs lacked standing to challenge a $1.99 expedited payment fee because Spruell did not actually pay the fee. The court remanded this issue to the district court for further consideration. As a result, the Ninth Circuit affirmed the district court's denial of RAC's motion to compel arbitration in part and remanded the case for further proceedings on the issue of the standing of the plaintiffs to challenge the $1.99 expedited payment fee.
Court Description: Public Injunctive Relief. The panel affirmed the district court’s denial of RAC Acceptance East, LLC’s motion to compel arbitration, and remanded for the district court to address named plaintiff April Spruell’s standing to challenge a $1.99 expedited payment fee.
The appeal arises from a putative class action alleging that two fees imposed by RAC, the owner and operator of retail stores that lease household and electronic items through rent-to-own contracts, violated California consumer protection laws. California’s McGill rule invalidates contractual agreements that waive the right to seek injunctive relief on behalf of the general public. See McGill v. Citibank, N.A., 2 Cal. 5th 945, 961-62 (2017). This court held in Blair v. Rent-A-Center, Inc., 928 F.3d 819 (9th Cir.
2019), that RAC’s arbitration agreement was unenforceable under California’s McGill rule, that the invalid provision was not severable from the rest of the arbitration provision, and that California law was not preempted by the Federal Arbitration Act.
The panel held that Blair was not abrogated by the Supreme Court’s subsequent decision in Viking River Cruises, Inc. v. Moriana, 596 U.S. 639 (2022). Viking River dealt with California Private Attorneys General Act claims, which are different from public injunction claims brought under the consumer protection statutes at issue in Blair and in this case. The panel therefore affirmed the district court’s denial of RAC’s motion to compel arbitration.
RAC argued that plaintiffs’ claim for public injunctive relief was mooted by a Consent Decree that RAC entered into with the California Attorney General. The Consent Decree prohibited RAC from charging or listing a fee that it could not establish as a reasonable actual cost incurred by RAC. RAC argued that plaintiffs’ requested injunction against the $45 processing fee that RAC assessed as part of every new rent-to-own agreement would merely duplicate this relief. The panel held that the public injunction that plaintiffs sought would provide relief that was not addressed by the Consent Decree, and therefore affirmed the district court’s finding that the challenge to the $45 fee was not moot.
RAC further argued that plaintiffs lacked standing to challenge the $1.99 expedited payment fee for every payment made via telephone because plaintiff Spruell conceded that she did not actually pay the $1.99 fee. Because the district court did not address the issue in its order denying RAC’s motion to compel arbitration, the panel remanded for the district court to do so.
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