De Leon v. Solar Mosaic LLC

Background

The plaintiffs alleged that Solar Mosaic falsely advertised the terms of its loan agreements through door-to-door salespeople and its website. They sought damages and two types of injunctions: a public injunction barring deceptive marketing and advertising of loan options, and a private injunction concerning misleading statements on proposed class members’ loan statements. The court noted that the plaintiffs acknowledged the second request was a private injunction.

Solar Mosaic moved to compel arbitration and stay the court proceedings. The plaintiffs alleged that they wanted to do business with Solar Mosaic again, including by seeking financing for future projects, but needed to be able to trust Solar Mosaic’s marketing, advertising, and loan proposals. The court held that these allegations adequately established standing to seek injunctive relief at the pleading stage, while noting that the plaintiffs might ultimately be unable to prove the allegations.

Public injunction

The court determined that the requested injunction against Solar Mosaic’s continuing deceptive practices was a public injunction because it would primarily benefit the general public, not only the plaintiffs or people who had previously received financing from Solar Mosaic. The court distinguished a Ninth Circuit decision involving relief limited to a discrete group of similarly situated people.

The court also noted unresolved questions about whether a federal court would ultimately have authority to issue an injunction reaching beyond the plaintiffs and the proposed class. It left the appropriate scope of any injunction for a later stage, holding only that the public-injunction claim was not implausible, completely lacking in merit, or otherwise outside the court’s jurisdiction at this preliminary stage.

Arbitration agreement

Under California law, a contractual provision requiring plaintiffs to give up the right to seek public injunctive relief in any forum is unenforceable. The arbitration agreement required arbitration of all claims, including claims for injunctive or declaratory relief. It also contained a Class Action Waiver providing that an arbitrator could not issue relief applying to anyone other than the parties individually.

The court interpreted that language as barring the arbitrator from issuing a public injunction. Because the Class Action Waiver required the plaintiffs to give up their public-injunction claim in every forum, the court held that the waiver was unenforceable under California law.

The agreement stated that the Class Action Waiver was material, essential, and nonseverable. It further provided that if the waiver were void or found unenforceable, the agreement would be null and void for the proceeding in which that occurred. Based on those provisions, the court held that the arbitration agreement was void as it pertained to this proceeding.

Disposition

The court denied Solar Mosaic’s Motion to Compel Arbitration and Stay Proceedings.