Federal Preemption Of California’s Broughton-Cruz Rule Exempting Claims For Public Injunctive Relief Is At Issue
On March 7, 2012, we posted about Kilgore v. KeyBank, 673 F.3d 947 (9th Cir. March 7, 2012) (authored by Judge Trott). Kilgore held that California’s Broughton-Cruz rule, which provides claims for public injunctive relief cannot be arbitrated, is preempted by the Federal Arbitration Act (FAA). The case was heard en banc on December 11, 2012, and the video of the hearing is available online.
Kilgore involved students of a private helicopter vocational school alleging the school had a preferred lender who knew the school was “a slowly unfolding disaster”, yet continued to make loans to the hapless students. The students sought to have the loans declared unenforceable and to prevent the lender from reporting defaults to credit reporting agencies. Because the students had to first get over the hurdle of an arbitration provision, the case presented the issue of whether the Broughton-Cruz rule provides a carve-out exception to arbitration on the facts here, and whether the rule is now preempted by the FAA. In the opinion authored by Judge Trott earlier this year, the court found preemption.
The estimable Kimberly A. Kralowec has posted two reports of last week’s hearing on The UCL Practitioner, the first by Eric Kingsley of Kingsley & Kingsley in Encino, the second by Edie Mermelstein of the Offices of F. Edie Mermelstein in Huntington Beach.
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