In an October 28, 2013 opinion, Ferguson v. Corinthian Colleges, the US Court of Appeals for the Ninth Circuit preempted a California rule that prohibited the arbitration of claims involving public injunctive relief. The court held that state rules prohibiting the arbitration of a particular type of claim were displaced by the FAA, reversed the district court's decision and remanded the matter.

The plaintiffs in Ferguson were students from for-profit colleges unable to find meaningful employment after finishing certificate programs. They brought putative class actions against the defendants that were consolidated in a California district court. The plaintiffs alleged violations of California's Consumer Legal Remedies Act (CLRA), Unfair Competition Law (UCL) and False Advertising Law (FAL), among other allegations, and sought both monetary damages and injunctive relief. The defendants moved to compel arbitration on all issues, showing that the plaintiffs had signed documents in which they agreed to settle all disputes through arbitration. The district court granted the motion in part, but declined to compel arbitration on the plaintiffs' CLRA, UCL and FAL claims, citing existing Ninth Circuit precedent affirming California's Broughton-Cruz rule, which exempts claims for public injunctive relief from arbitration. The defendants appealed the decision to exempt these three claims from arbitration.

The Ninth Circuit found that the Broughton-Cruz rule is preempted by the FAA, and that all claims should be arbitrated. Although the court recognized that previous case law allowed states to limit the types of claims that were arbitrated in certain circumstances, the circuit found that two recent Supreme Court opinions, AT&T Mobility v. Concepcion and Marmet Health Care Center, Inc. v. Brown, negated this precedent. These opinions stated that the FAA preempts any state law prohibiting the arbitration of a particular type of claim. The circuit court therefore reversed the district court's decision, and remanded the matter, directing the district court to grant the defendants' motion to compel arbitration for all claims.

Practitioners should note the Supreme Court has held that state law limits on the types of claims that can be arbitrated are preempted by the FAA. Additionally, the Ninth Circuit has held that claims for public injunctive relief brought under the CLRA, UCL and FCL in California may be arbitrated.