Maldonado v. Fast Auto Loans CA4/3

Filed 1/11/21 Maldonado v. Fast Auto Loans CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

JOE MALDONADO et al.,

Plaintiffs and Respondents, G058645

v. (Super. Ct. No. 30-2019-01073154)

FAST AUTO LOANS, INC., OPINION

Defendant and Appellant.

Appeal from an order of the Superior Court of Orange County, Glenda
Sanders, Judge. Affirmed. Request for judicial notice denied.
Ballard Spahr and Marcos D. Sasso for Defendant and Appellant.
Cohelan Khoury & Singer, Isam C. Khoury, Michael D. Singer, and
Kristina De La Rosa; Mesriani Law Group and Rodney Mesriani for Plaintiffs and
Respondents.
 In this putative class action, plaintiffs Joe Maldonado, Alfredo Mendez, J.
Peter Tuma, Jonabette Michelle Tuma, and Roberto Mateos Salmeron (collectively
referred to as “the Customers” unless otherwise indicated), assert Fast Auto Loans, Inc.,
(Lender) charged unconscionable interest rates on loans in violation of Financial Code
sections 22302 and 22303. Lender filed a motion to compel arbitration and stay the
action pursuant to an arbitration clause contained within the Customers’ loan agreements.
The court denied the motion on the grounds the provision was invalid and unenforceable
because it required consumers to waive their right to pursue public injunctive relief, a
rule described in McGill v. Citibank, N.A., (2017) 2 Cal.5th 945 (McGill). On appeal,
Lender asserts the “McGill Rule” does not apply, but even if it did, other claims were
subject to arbitration. Alternatively, Lender contends the McGill Rule is preempted by
the Federal Arbitration Act (FAA; 9 U.S.C. § 1 et seq.). We conclude Lender’s
contentions on appeal lack merit, and we affirm the court’s order.
FACTUAL BACKGROUND
In May 2019, the Customers filed a class action complaint. The operative
complaint is the first amended complaint (FAC) and alleges (1) violations of California’s
Unfair Competition Law (UCL; Bus. & Prof. Code, § 17200 et seq.), and (2) violations of
the Consumers Legal Remedies Act (CLRA; Civ. Code, § 1750 et seq.).
In the FAC, the Customers asserted Lender’s “business model is to charge
exorbitantly high, usurious, and unconscionable interest rates, in direct violation of
California law[.]” It alleged Lender was required “by the California Department of
Corporations to be licensed as a California Finance Lender” but its license has been
inactive. The Customers sought “disgorgement of ill-gotten profits, statutory damages,
punitive damages, public injunctive relief, and attorney’s fees and costs.”
In the general allegations section of the FAC, the Customers stated the
following: “[Lender offered loans] to California consumers, who are in immediate need
of cash, at times for emergencies or to make ends meet and have limited credit

2
opportunities. [Lender] provides funding to these consumers subject to loan terms that
most consumers are unable to repay in full or which impose such exorbitant interest rates
and penalties that it causes the consumer to pay late, re-borrow, and/or default on other
financial obligations. The result of this practice is that the vast majority of the loans
made by [Lender] are essentially ‘interest only’ loans and/or subject to default and
additional penalties.”
The Customers explained Lender’s “business model is to charge usurious
interest rates so that most consumers . . . are forced to default on their obligations . . . or
forced to roll over or re-borrow additional loans from [Lender] at dire and
unconscionable interest rates.” Consequently, “Consumers are locked in a vicious cycle
of repaying many times the face value of the loan without significantly reducing the
principal balance owed.” One of Lender’s business practices is to require their clients “to
secure the loans with their personal vehicles” but will offer a loan amount that “exceeds
[the] value of the car in order to induce the client to agree to the loan all the while
knowing that the client cannot afford to repay this amount.” In addition, Lender’s
practice is to misrepresent the nature of refinancing or modifying loans, falsely telling
clients they are receiving better terms and interest rates. The Customers alleged Lender’s
“ultimate goal” is to “keep clients locked in contracts in perpetuity.”
The FAC specifically described the terms of several loans offered to the
Customers. Maldonado entered into three unsecured loans. In September 2018,
Maldonado agreed to an unsecured loan of $2,819.65, having an annual percentage rate
(APR) of 159.09 percent. In November 2018, Maldonado entered into an unsecured loan
with an APR of 158.66 percent. In April 2019, Maldonado agreed to an unsecured loan
with an APR of 159.09 percent. “The total finance charge for the principal balance of
$3,044.60 amounted to $4,696.04, for a total of $7,739.64.”
Each of these contracts “imposed an additional $10-15 penalty for each late
payment.” Additionally, each contained an arbitration provision. Maldonado exercised

3
his right to opt out of the arbitration provision in the April 2019 loan agreement and
promissory note but not the other two contracts.
Mendez entered into two loan agreements with Lender. The first one in
April 2017 was for $2,595 and had an APR of 180.06 percent. Mendez used his car as
security for the loan. The following month, Mendez sought to refinance his prior loan
and entered into another agreement using his car as collateral. The second loan had an
APR of 174.70 percent and additional penalties for each late payment.
J. Peter Tuma and Jonabette Michelle Tuma were coborrowers on seven
different loans with Lender. Using his car as collateral, J. Peter Tuma agreed in August
2016 to borrow $4,015 and pay an APR of 98.52 percent. He later refinanced this loan
and agreed to an APR of 102.64 percent plus additional penalties for each late payment.
Michelle Tuma used her vehicle as security for a loan in June 2015 for $7,035.30 having
an APR or 84.23 percent. Two years later, in July 2017, she used her car as security for a
$12,115.53 loan with an APR of 84.48 percent. In August 2017, she borrowed
$14,998.53 (83.81 percent APR) using her car as collateral. In January 2018, she again
used her car as security for a $14,559.30 loan (83.49 percent APR). Finally, in April
2018, she borrowed $16,069.50 (85.67 percent APR) and used her car as collateral.
Salmeron entered into four loan agreements. In May 2016, he borrowed
$2,516 (122.08 percent APR) and used his car as collateral. In November 2016, he
refinanced the loan (now having a principal amount of $5,522.36) and obtained a slightly
lower APR of 118.57 percent. In May 2017, he borrowed $4,966 (119.85 percent APR)
and again used his car to secure the loan. The following year, January 2018, Salmeron
refinanced the May 2017 loan and agreed to an APR of 113.62 percent. His car was used
as collateral for the loan.
The complaint’s first cause of action, for UCL violations, alleged Lender’s
practices satisfied the “‘unlawful’” and “‘unfair’” prongs because it knowingly and
intentionally issued loans with interest rates “unconscionable and objectively

4
unreasonable and prohibited by statute[.]” The FAC further alleged Lender violated the
UCL by failing to maintain “active and lawful California [f]inancial [l]enders licenses as
required by law.” The Customers asserted they each suffered financial injury by paying
Lender’s unlawful interest rates.
The second cause of action was titled “injunctive relief and damages for
violations of the [CLRA].” (Capitalization omitted.) The complaint alleged the
Customers believed Lender’s misconduct was “systematic and continuous, and continues
to harm consumers who may be unaware that [Lender] subjects them to unconscionable
loan provisions, including unconscionable and usurious loan rates which are prohibited
by law.” The Customers asserted Lender caused them to suffer economic losses and they
believed the “harms are continuous and ongoing and are injurious to the public and
consumers . . . .” The complaint stated the Customers would “seek an order from the
[c]ourt requiring [Lender] to cease and desist its unlawful practices.”
In the prayer for relief, the Customers requested the court to certify the
lawsuit as a class action, determine Lender violated consumer protection statutory claims,
and issue “a temporary, preliminary and/or permanent order for injunctive relief requiring
[Lender] to: (i) cease charging an unlawful interest rate on its loans exceeding $2,500;
(ii) and institute corrective advertising and provide written notice to the public of the
unlawfully charged interest rate on prior loans[.]” The complaint sought a disgorgement
of Lenders “ill-gotten gains to pay restitution” to the class members, distribution of any
money recovered, payment of costs, interest, and actual damages permitted by Civil Code
section 1780(a)(1)-(5). They sought attorney fees and “[p]ublic injunctive relief through
the role as a [p]rivate [a]ttorneys [g]eneral prohibiting [Lender] from future violations of
the aforementioned unlawful and unfair practices.”
Lender filed a motion to compel arbitration, explaining each of the
Customers’ loan agreements included arbitration provisions. The last term of the
agreement (No. 14) was comprised of 16 subdivisions (labeled paragraphs (a) through

5
(p)). One paragraph stated a party could reject the arbitration provision if he or she
mailed a written rejection notice following specific instructions. Another one noted the
arbitration provision was governed by the FAA because the agreement involved interstate
commerce.
Relevant to this appeal, paragraph 14(d) stated the parties must arbitrate
any claim (with a few exceptions) “that in any way arises from or relates to this
Agreement or the Motor Vehicle securing this Agreement.” Paragraph 14(h), titled
“Class Action Waiver” provided the consumer had no right to participate in or join “a
class action, private attorney general action, or other representative action[.]” (Bold
omitted.) Paragraph 14(n), titled “Severability and Survival” provided: “If any part of
this Arbitration Provision, other than the Class Action Waiver, is deemed or found to be
unenforceable for any reason, the remainder shall be enforceable.” (Italics added.) In
short, the agreement required consumers to agree to individual, non-class arbitration.
Lender asserted the arbitration provision was broadly written to cover all of
the Customers’ claims. In addition, Lender urged the court to enforce the agreement’s
Class Action Waiver (Class Waiver), which required arbitration take place on an
individual basis and the arbitrator may only award relief on behalf of the named parties.
It argued the Customers’ claim for public injunctive relief under the UCL and CLRA was
“nothing more than a transparent attempt to rely upon the ‘McGill Rule’ to avoid their
contractual obligation to arbitrate what is actually an individual dispute relating to their
Agreements.” The Customers opposed the motion, arguing the McGill Rule applied, and
in addition, the agreement was procedurally and substantively unconscionable.
The trial court denied the motion. In its minute order, the court explained
the McGill Rule applied and the offending provision could not be severed under the terms
of the arbitration agreement’s paragraph stating severability did not apply to the Class
Waiver provision. It rejected Lender’s attempts to factually distinguish the McGill case.

6
 DISCUSSION
Lender argues the trial court erred by concluding the arbitration provision
was unenforceable under McGill, supra, 2 Cal.5th 945, because the Customers did not
seek a public injunction and, in any event, the FAA preempts McGill and requires
enforcement of the provision. “Because all the issues raised in this appeal involve only
questions of law, we review the trial court’s order de novo. [Citation.]” (Mejia v. DACM
Inc. (2020) 54 Cal.App.5th 691 (Mejia).) We conclude the contentions lack merit.
I. The McGill Rule
A different panel of this court recently published Mejia, supra,
54 Cal.App.5th 691, where we prepared a short primer on the McGill Rule that we repeat
and incorporate here. “In McGill, supra, 2 Cal.5th 945, a credit card account holder filed
a class action against the issuing bank alleging claims under the CLRA, UCL, and the
false advertising law (Bus. & Prof. Code, § 17500 et seq.) for deceptive practices in
offering a ‘“credit protector”’ insurance plan. The complaint sought money damages,
restitution, and an injunction prohibiting the bank ‘from continuing to engage in its
allegedly illegal and deceptive practices.’ [Citation.] The Supreme Court noted such
‘public injunctive relief, i.e., injunctive relief that has the primary purpose and effect of
prohibiting unlawful acts that threaten future injury to the general public,’ is among ‘the
statutory remedies available for a violation of’ the CLRA, the UCL, and the false
advertising law. [Citation.] [¶] The bank in McGill petitioned to compel the account
holder to arbitrate her claims on an individual basis based on an arbitration clause in the
customer account agreement. The arbitration clause required arbitration of ‘“All Claims
. . . ,”’ and stated, ‘“Claims and remedies sought as part of a class action, private attorney
general or other representative action are subject to arbitration on an individual (non-
class, non-representative) basis, and the arbitrator may award relief only on an individual
(non-class, non-representative) basis.” . . . “The arbitrator will not award relief for or
against anyone who is not a party. If you or we require arbitration of a Claim, neither

7
you, we, nor any other person may pursue the Claim in arbitration as a class action,
private attorney general action or other representative action, nor may such Claim be
pursued on your or our behalf in any litigation in any court.”’ [Citation.]” (Mejia, supra,
54 Cal.App.5th at p. 698, italics omitted.)
“The Supreme Court identified the issue in McGill as ‘whether the
arbitration provision is valid and enforceable insofar as it purports to waive McGill’s
right to seek public injunctive relief in any forum.’ [Citation.] The high court concluded
the arbitration clause had such a sweeping preclusive effect across all fora because the
clause barred McGill from pursuing ‘“Claims and remedies”’ on a class or representative
basis in both arbitration and ‘“in any litigation in any court.”’ [Citation.] Having
identified the issue, the court ruled the arbitration provision was ‘invalid and
unenforceable under California law’ precisely because ‘it purports to waive McGill’s
statutory right to seek [public injunctive] relief.’ [Citation.] [¶] In explaining that
conclusion, the Supreme Court cited Civil Code section 3513, which provides, in
pertinent part, that ‘“a law established for a public reason cannot be contravened by a
private agreement.”’ [Citation.] In other words, a statutory right created to serve a public
purpose is unwaivable. The court stated, ‘By definition, the public injunctive relief
available under the UCL, the CLRA, and the false advertising law . . . is primarily “for
the benefit of the general public.” [Citations.]’ [Citation.] Accordingly, the Supreme
Court concluded, ‘the waiver in a predispute arbitration agreement of the right to seek
public injunctive relief under these statutes would seriously compromise the public
purposes the statutes were intended to serve. Thus, insofar as the arbitration provision
here purports to waive McGill’s right to request in any forum such public injunctive
relief, it is invalid and unenforceable under California law.’ [Citation.]” (Mejia, supra,
54 Cal.App.5th at pp. 698-699.)
In the Mejia case, this court applied the McGill Rule. (Mejia, supra,
54 Cal.App.5th at pp. 702-703.) Plaintiff bought a used motorcycle from a dealership

8
(Del Amo) by paying $500 cash and financing the remainder with a WebBank-issued
Yamaha credit card he obtained through the dealership. (Id. at p. 694.) Plaintiff applied
for the credit card by signing a credit application “acknowledging he had received and
read WebBank’s Yamaha Credit Card Account Customer Agreement (the credit card
agreement), which contained an arbitration provision.” (Ibid.)
The arbitration terms in the Mejia case were remarkably like the ones we
are reviewing in this case. (Mejia, supra, 54 Cal.App.5th at p. 694.) Plaintiff in Mejia
agreed to a broadly written agreement to arbitrate any claims arising out of the credit
agreement. The agreement also contained a class action waiver, that “specifically barred
arbitration of all class, representative, or private attorney general claims[.]” (Ibid.) As in
the case before us, the class waiver paragraph contained a “‘poison pill’ provision”
specifying the following: “‘If any portion of this Arbitration Provision other than [the
Class Waiver provision] is deemed invalid or unenforceable, the remaining portions of
this Arbitration Provision shall nevertheless remain valid and in force. If an arbitration is
brought on a class, representative, or collective basis, and the limitations on such
proceedings in [the Class Waiver provision] are finally adjudicated . . . to be
unenforceable, then no arbitration shall be had.’ (Italics added.)” (Id. at p. 695.)
The motorcycle dealership moved to compel arbitration, arguing the
plaintiff was seeking private injunctive relief. (Mejia, supra, 54 Cal.App.5th
at pp. 694-695.) It maintained plaintiff was not seeking to prevent future harm to the
general public, but only to benefit members of his class of similarly situated individuals.
This court disagreed, concluding the dealership’s argument the public would not benefit
from an injunction made “little sense.” (Id. at p. 702.) “[Plaintiff’s] brief demonstrates
the illogic of Del Amo’s argument. [Plaintiff] points out his prayer seeks an injunction
forcing Del Amo to cease ‘selling motor vehicles in the state of California without first
providing the consumer with all disclosures mandated by Civil Code [section] 2982 in a
single document.’ [Plaintiff] asserts, ‘[T]he prayer is plainly one for a public injunction

9
given that Mejia “seeks to enjoin future violations of California’s consumer protection
statutes, relief oriented to and for the benefit of the general public.” [Citation.] [¶] . . .
[Plaintiff’s] prayer does not limit itself to relief only for class members or some other
small group of individuals; it encompasses “consumers” generally. [Citation.]’” (Id.
at p. 703.)
In the Mejia opinion, this court reviewed the distinctions made between
private and public injunctions. “The [Supreme Court’s McGill] opinion defined ‘private
injunctive relief’ as ‘relief that primarily “resolve[s] a private dispute” between the
parties [citation] and “rectif[ies] individual wrongs” [citation], and that benefits the
public, if at all, only incidentally[.]’ [Citation.] The opinion defined ‘public injunctive
relief’ as ‘relief that “by and large” benefits the general public [citation] and that benefits
the plaintiff, “if at all,” only “incidental[ly]” and/or as “a member of the general public”
[citation].’ [Citation.] The high court cited as an example of a public injunction ‘an
injunction under the CLRA against a defendant’s deceptive methods, acts, and practices
[which] “generally benefit[s]” the public “directly by the elimination of deceptive
practices” and “will . . . not benefit” the plaintiff “directly,” because the plaintiff has
“already been injured, allegedly, by such practices and [is] aware of them.” [Citation.]
“[E]ven if a CLRA plaintiff stands to benefit from an injunction against a deceptive
business practice, it appears likely that the benefit would be incidental to the general
public benefit of enjoining such a practice.” [Citation.]’ [Citation.]” (Mejia, supra,
54 Cal.App.5th at p. 703.) We concluded in Mejia that the “injunctive relief Mejia prays
for in the complaint fits the Supreme Court’s definition of ‘public injunctive relief’ in
McGill . . . [and there was] no merit to Del Amo’s argument McGill is inapplicable
because Mejia does not seek public injunctive relief.” (Id. at pp. 703-704.)
This case is distinguishable from those where a plaintiff seeks a private
injunction of similarly situated persons. A different panel of this court recently published
Clifford v. Quest Software (2019) 38 Cal.App.5th 745 (Clifford), where we held the

10
plaintiff praying for injunctive relief could not avoid arbitration of a UCL claim under the
McGill Rule. In the Clifford case, an employee brought various wage and hour claims
against his employer. (Id. at p. 747.) We pointed out how the private nature of the UCL
claim was “immediately evident” from the face of the complaint. “In describing [the
employer’s] alleged acts of unfair competition, [the employee’s] complaint repeatedly
refers to wage and hour violations directed at [the employee] only, such as [the
employer’s] ‘failures to pay [the employee] all earned overtime and premium-pay wages,’
[the employer’s] failure ‘to reimburse [the employee] for all necessary expenditures or
losses incurred by [the employee][.]’ . . . [the employee] does not allege [the employer’s]
directed similar conduct at other employees, much less the public at large. [¶] [The
employee’s] requests for injunctive relief under the UCL are similarly limited to him as
an individual. He alleges [the employer’s] ‘unfair business practices entitle [him] to seek
preliminary and permanent injunctive relief, including but not limited to orders that [the
employer] account for, disgorge, and restore to [him] all compensation unlawfully
withheld.’ (Italics added.) . . . The only express beneficiary of [the employee’s]
requested injunctive relief is [himself], and the only potential beneficiaries are [the
employer’s] current employees, not the public at large.” (Id. at p. 753.)
II. The McGill Rule Applies Here
Lender asserts the court erred by failing to consider whether the Customers
“were actually seeking public injunctive relief” as required by the McGill case and its
progeny. It asserts that although the Customers requested a public injunction in the
complaint, the relief sought “is private because it will, at best, benefit [the Customers]
and a discrete, narrowly-defined group of other . . . customers.” It elaborates the narrow
group is a class of similarly situated individuals who would borrow money from Lender
and agree to a similar arbitration provision. As was the case in Mejia, we conclude the
argument makes little sense if one looks at all of the allegations in the complaint.

11
 Lender’s assertion the Customers seek a private injunction is based on the
opening paragraph of the complaint, where the Customers introduced themselves as
“individually and on behalf of all other similarly situated, bring[ing] this class action
against [Lender] . . . to seek recompense for themselves and other similarly-situated
California consumers who take out personal loans from [Lender].” This is language
typically used in a class action lawsuit. The proposed class, described in paragraphs 50
through 55 of the complaint, are “persons who obtained loans . . . in an amount more than
$2,500.00 from [Lender].”
Lender ignores the operative allegations and specific requests for relief
located in sections VI (describing basis for causes of action) and VII (the prayer for
relief) of the complaint. In these sections, the Customers alleged Lender’s misconduct
was ongoing and “injurious to the public and consumers[.]” Because Lender was
continuing to provide high interest loans without proper licensing, the consumers alleged
the “unlawful conduct will continue” unless the court takes “action to enjoin said
practices.” They specifically listed in the complaint’s prayer “[p]ublic injunctive relief”
prohibiting “future violations of the aforementioned unlawful and unfair practices[.]”
The Customers clarified the injunctive relief should require Lender to stop charging
unlawful interest rates and adopt “corrective advertising.”
In short, the Customers’ complaint and prayer does not limit the requested
remedies for only some class members, but rather encompasses all consumers and
members of the public. Moreover, an injunction under the CLRA against Lender’s
unlawful practices will not directly benefit the Customers because they have already been
harmed and are already aware of the misconduct. As stated in McGill, any benefit to the
Customers is incidental to the “general public benefit of enjoining such a practice.’
[Citation.]” (McGill, supra, 2 Cal.5th at p. 955.)
Lender attempts to limit the reach of the McGill Rule by suggesting it only
applies to plaintiffs seeking to enjoin false or misleading advertising on behalf of the

12
general public. We are not persuaded. California’s consumer protection laws must be
liberally, not narrowly, applied. “The Legislature enacted the CLRA ‘to protect
consumers against unfair and deceptive business practices and to provide efficient and
economical procedures to secure such protection.’ [Citation.] ‘[T]o promote’ these
purposes, the Legislature directed that the CLRA ‘be liberally construed and applied.’
[Citation.]” (McGill, supra, 2 Cal.5th at p. 954.) The “CLRA authorizes any consumer
who has been damaged by an unlawful method, act, or practice to bring an action for
various forms of relief, including ‘[a]n order enjoining the methods, acts, or practices’
[citation].” (Ibid.) Similarly, the purpose of the UCL “‘is to protect both consumers and
competitors by promoting fair competition in commercial markets for goods and
services.’ [Citation.] . . . ‘[T]he primary form of relief available under the UCL to
protect consumers from unfair business practices is an injunction.’ [Citation.]” (Ibid.)
We found no case, and Lender cites to none, holding the remedy of public injunctions
under CLRA and UCL should be limited to false advertising claims.
We are also unpersuaded by Lender’s argument this lawsuit challenges only
the interest rates charged in the putative class members’ loans, and therefore, they
primarily seek private relief with the injunction. To accept this argument, we would have
to ignore the complaint’s unequivocal request to enjoin Lender from harming other
consumers in future contracts from outrageous interest rates. As stated above, the
consumers have nothing to personally gain from an injunction stopping Lender from
imposing high interest rates in future contracts with members of the public. We agree
with the Customers’ assertion that although “not all members of the public will become
customers of [Lender]” this “does not negate the fact that public injunctive relief will
nevertheless offer benefits to the general public.” The requested injunction cannot be
deemed private simply because Lender could not possibly advertise to, or enter into
agreements with, every person in California. Such a holding would allow Lender to
continue violating the UCL and CLRA because consumers harmed by the unlawful

13
practices would be unable to act as a private attorney general and seek redress on behalf
of the public. It is enough that the requested relief has the purpose and effect of
protecting the public from Lender’s ongoing harm.
Moreover, the Ninth Circuit in Blair v. Rent-A-Center, Inc. (9th Cir. 2019)
928 F.3d 819, 831, footnote 3 (Blair), summarily rejected an argument similar to
Lender’s contention. It held the McGill Rule applied where the plaintiff “s[ought] to
enjoin future violations of California’s consumer protection statutes, relief oriented to and
1
for the benefit of the general public.” (Ibid., italics added.) Additionally, we must
follow the McGill case, where our Supreme Court held a complaint sought public
injunctive relief where it “request[ed], among other things, an injunction prohibiting
Citibank from continuing to engage in its allegedly illegal and deceptive practices.”
2
(McGill, supra, 2 Cal.5th at p. 953, italics added.)
III. Class Waiver Not Severable
Lender asserts the trial court also erred by concluding the entire arbitration
provision was unenforceable simply because the Class Waiver clause was invalid. The
trial court relied on two sections of the agreement discussing the issue of severability.

1
Lender cites to several federal court cases that are not only outdated, but
also not binding on this court. We note the Ninth Circuit in Blair, and more recently in
Roberts v. AT&T Mobility LLC (9th Cir. 2020) 801 Fed.Appx. 492, 496, supported
application of the McGill Rule when a plaintiff seeks to enjoin future violations of the
CLRA and UCL.
2
At oral argument, Lender discussed an issue briefly mentioned in its reply
brief. It maintained the case should be remanded in light of the Legislatures’ recent
enactment of Financial Code section 22304.5, subdivision (a) [prohibiting finance lenders
from issuing loans between $2,500 and $10,000 with high interest rates]. This provision
took effect January 1, 2020, and Lender does not explain why this contention was not
included in its opening brief (filed at the end of May 2020), giving Customers a fair
opportunity to respond. We need not consider issues raised for the first time in a reply
brief, and in any event, this class action specifically alleged Lender executed a loan
greater than $10,000 to one of the named plaintiffs (Michelle Tuma). There is no
question a public injunction would still prevent a threat of future harm to others.

14
The agreement’s “Severability and Survival” provision (paragraph 14n) clearly stated, “If
any part of this Arbitration Provision, other than the Class Action Waiver, is deemed or
found to be unenforceable for any reason, the remainder shall be enforceable.” The Class
Waiver provision (paragraph 14h) contained a “poison pill” statement clarifying the issue
as follows: “The parties acknowledge that the Class Action Waiver is material and
essential to the arbitration of any disputes between them and is non-severable from this
Arbitration Provision. If the Class Action Waiver is limited, voided or found
unenforceable, then this Arbitration Provision (except for this sentence) shall be null and
void with respect to such proceedings, subject to the right to appeal the limitation or
invalidation of the Class Action Waiver. The parties acknowledge and agree that under
no circumstances will a class action be arbitrated.” (Italics added and bold omitted.)
Focusing on the “poison pill” provision, Lender argues the trial court
misinterpreted the contract. It proposes that the “subject to the right to appeal” language,
italicized above, means the arbitration agreement “does not become null and void unless
and until an appeal has been taken from an adverse ruling, and that appeal does not
succeed in overturning the trial court’s ruling.” (Italics and bold omitted.) Alternatively,
Lender suggests that if there is any ambiguity in the contractual language it must be
construed in favor of arbitration.
Thus, it is Lender’s theory that the trial court could not declare the entire
arbitration agreement void until after this appellate court reviews the viability of the
Class Waiver. Lender argues the trial court should have ordered the Customers to
arbitrate their claims for damages, disgorgement, and restitution while Lender’s appeal
about the Class Waiver ruling was pending. This argument raises obvious questions
about what should happen if Lender decided not to appeal. The Customers would not
have standing to appeal a favorable ruling. Indeed, we agree with the Customers’
assertion Lender’s argument is illogical because it requires the appellate court to initially
determine the agreement is invalid before the trial court.

15
 We conclude Lender’s interpretation of the agreement is incorrect, and in
any event, the argument is now moot. As predicted by the Customers, because we have
determined the Class Waiver was unenforceable, it follows that the entire arbitration
provision becomes void as clearly and unambiguously stated in paragraphs 14(h) [poison
pill provision] and 14(n) [severability and survival provision]. If for the sake of
argument, we were to accept Lender’s interpretation of the “subject to the right to appeal”
language, we could not say the trial court erred by denying the motion to arbitrate. After
all, we have reached the same conclusion as the trial court. It is no longer relevant the
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trial court’s order may have been premature.
In any event, we do not interpret the agreement as requiring an appellate
decision before the trial court could apply the poison pill or severability provisions of the
agreement. Both paragraphs 14(h) and 14(n) clearly and unambiguously state the
arbitration provisions cannot be saved if the Class Waiver is deemed invalid. The Class
Waiver was unequivocally deemed “non-severable.”
We interpret the “subject to” language, when read in context of the entire
paragraph, as simply acknowledging Lender’s right to appeal the decision and enforce the
Class Waiver limitations if successful on appeal. Looking first to the beginning of the
paragraph, it contained the parties’ unequivocal acknowledgment that “the Class Action
Waiver is material and essential to the arbitration of any disputes between them and is
non-severable from this Arbitration Provision.” The next sentences provided that if the
Class waiver provision was “found unenforceable, then this Arbitration Provision (except
for this sentence) shall be null and void with respect to such proceedings, subject to the

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What would be relevant and prejudicial is if the trial court had accepted
Lender’s interpretation and ordered the Customers to arbitrate their claims for damages
and restitution while this appeal was pending. Any award could not be confirmed after
this court issued an opinion concluding the claims were not arbitrable. To avoid this
predictable result, a trial court would be required to stay all arbitration pending the
outcome of the appeal. Lender’s interpretation leads to an absurd outcome.

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right to appeal the limitation or invalidation of the Class Action Waiver. (Italics added.)
The comma before the phrase “subject to the right to appeal” signifies separate
independent clauses. As written, the agreement does not make the “null and void” clause
conditional on the rendering of an appellate opinion. It merely confirms that Lender has
the right to appeal, and if successful, enforce the Class Waiver. If Lender intended to
qualify the timing of severability and survival of the agreement, the sentence should have
stated the arbitration provisions could not be deemed null and void until after Lender
completed its appeal of the ruling.
V. The FAA Preemption Question
Lender’s final argument is the FAA preempts McGill. It recognizes our
California Supreme Court in McGill held there is no preemption. (McGill, supra,
2 Cal.5th at p. 953.) In its briefing, Lender notes two telecommunication companies,
AT&T Mobility LLC and Comcast Corporation, have asked the United States Supreme
Court overturn the Ninth Circuit in two companion cases ruling the FAA does not
preempt the McGill Rule. It asserts we should stay this appeal until the high court
renders a decision. Encouraged by these pending petitions, Lender presents a lengthy
argument about why our Supreme Court incorrectly decided the McGill case.
As noted by the Customers in their briefing, on June 1, 2020, the Supreme
Court denied review of the Ninth Circuit rulings. (AT&T Mobility LLC v. McArdle (2020
___U.S.___) 140 S.Ct. 2827, 207 L. Ed. 2d 159; Comcast Corp. v. Tillage (2020
___U.S.___) 140 S.Ct. 2827, 207 L. Ed. 2d 158.) Insofar as Lender thinks McGill was
wrongly decided, the argument fails, as we are bound to follow the precedent of the
California Supreme Court. (Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d
450, 455.) Moreover, we find its analysis to be legally sounds and persuasive, as does the

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Ninth Circuit. (Blair, supra, 928 F.3d at p. 822 [FAA does not preempt the McGill
Rule]; Tillage v. Comcast Corp. (9th Cir., June 28, 2019) 772 Fed.Appx. 569; McArdle v.
AT&T Mobility LLC (9th Cir., 2019 June 28, 2019) 772 Fed.Appx. 575.) We conclude
Lender’s arguments the FAA preempts the McGill Rule lack merit, and there is no basis
to stay this appeal.
DISPOSITION
The order is affirmed. Appellant’s motion for judicial notice of documents
relating to Lender’s licensing is denied because the information was not before the trial
judge and not relevant to our analysis. Respondents shall recover their costs on appeal.

O’LEARY, P. J.

WE CONCUR:

ARONSON, J.

THOMPSON, J.

4
In Blair, the court explained in a footnote that “the panel received briefing
and heard argument in two additional cases raising this same question: McArdle v. AT&T
Mobility LLC (No. 17-17246), and Tillage v. Comcast Corp. (No. 18-15288). Those
cases are resolved in separate memorandum dispositions filed simultaneously with this
opinion.” (Blair, supra, 928 F.3d at p. 822, fn. 1.)

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