Scally v. PetSmart LLC

Background

BreAnn Scally brought state-law claims against PetSmart LLC. PetSmart moved to require individual arbitration. On May 25, 2023, the court granted that motion, stayed the case, and ordered the fee-sharing provision in the arbitration agreement removed before arbitration. The court had concluded that the fee-sharing provision made the agreement’s delegation clause—that is, the provision assigning certain disputes to the arbitrator—unfair, but that the provision could be removed without invalidating the entire agreement.

The earlier arbitration order also rejected Scally’s argument that the agreement’s representative-action waiver unlawfully waived public injunctive relief under McGill v. Citibank, N.A. The court reasoned that the main beneficiaries of the requested injunction would be a limited group of current PetSmart employees eligible for pet-grooming jobs, rather than the general public.

Motion for Interlocutory Appeal

Scally asked the court to certify two questions for an immediate, nonfinal appeal under 28 U.S.C. § 1292(b):

1. What qualifies as “public injunctive relief” under California law, including California’s False Advertising Law? 2. Whether, and how, a party’s alleged bad-faith inclusion of unfair contract terms affects a court’s discretion to remove those terms or invalidate the entire contract under California law.

For certification, the requesting party had to show that the order involved a controlling legal question, that there was substantial disagreement about the question, and that an immediate appeal could materially advance the end of the litigation.

Public Injunctive Relief

The court focused on whether there was substantial disagreement about applying California’s public-injunction rules to this case. It reconsidered its earlier analysis and remained convinced that the requested relief primarily benefited a specific group of current PetSmart employees, not the general public. The court found no conflict among the key authorities cited by the parties—McGill, Maldonado, Mejia, and Hodges—as applied to this case.

The court rejected Scally’s arguments that PetSmart’s broader advertising, the nature of her California statutory claims, or disagreement in other cases required certification. It also explained that advertisements might reach nonemployees, but those people could not directly apply for the Grooming Academy before becoming PetSmart employees and meeting other requirements. The court therefore denied certification of the first question.

Alleged Bad Faith

The court said the earlier arbitration order criticized PetSmart’s fee-sharing provision but did not find that PetSmart included it in bad faith. The earlier order had not decided whether bad faith existed and, according to the court, suggested that it did not. Because the second proposed question was outside the scope of the earlier order, the court declined to certify it.

Scally also suggested in a reply footnote that the court should certify a question about what constitutes bad faith in drafting an arbitration agreement. The court declined to consider that request because Scally had not identified the claimed ambiguity or properly moved for certification on that question. The court also stated that certifying the issue would effectively ask the Court of Appeals for an advisory opinion.

Disposition

Judge Yvonne Gonzalez Rogers declined to certify either question for appeal to the Ninth Circuit and denied Scally’s motion. The order terminated Docket No. 35.