Cruz v. PacifiCare Health Systems, Inc. , 133 Cal. Rptr. 2d 58 ( 2003 )

Opinion

MORENO J.

In Broughton v. Cigna Healthplans (1999) 21 Cal.4th 1066 [90 Cal.Rptr.2d 334, 988 P.2d 67] (Broughton), we held that claims for injunctive relief under the Consumers Legal Remedies Act (CLRA) designed to protect the public from deceptive business practices were not subject to arbitration. In this case, we consider whether Broughton is good law in light of two recent United States Supreme Court cases pertaining to arbitration, Green Tree Fin. Corp.-Ala. v. Randolph (2000) 531 U.S. 79 [121 S.Ct. 513, 148 L.Ed.2d 373] (Green Tree) and Circuit City Stores, Inc. v. Adams (2001) 532 U.S. 105 [121 S.Ct. 1302, 149 L.Ed.2d 234] (Circuit City). We conclude that it is.

We also consider whether Broughton’s holding on the inarbitrability of CLRA public injunctions should be extended to include claims to enjoin unfair competition under Business and Professions Code section 17200 et seq. and to enjoin misleading advertising under Business and Professions Code section 17500 et seq. We conclude that Broughton should be extended to such claims, at least under the circumstances of the present case.

We further consider whether Broughton should be extended to statutory and common law claims for equitable monetary relief—for restitution, disgorgement, and unjust enrichment. We conclude that Broughton should not be thus extended.

I. Statement of Facts

In November 1999, plaintiff Jose E. Cruz filed an action against defendants PacifiCare Health Systems, Inc., and PacifiCare of California, Inc. (collectively PacifiCare), alleging claims for unfair competition and false advertising in connection with PacifiCare’s sale, marketing, and rendering of medical services. In his first amended complaint, Cruz alleged that he was an enrollee in one of the various health plans PacifiCare offers and operates in California. He also alleged that “through its misleading and deceptive material representations and omissions,” PacifiCare has employed a “fraudulent, unlawful, and/or unfair scheme designed to induce” persons to enroll in its health plans by “misrepresenting . . . that its primary commitment . . . is to maintain and improve the quality of healthcare provided.” In fact, Cruz alleged, PacifiCare “has been aggressively engaged in implementing undisclosed systemic internal policies that are designed, inter alia, to discourage PacifiCare’s primary care physicians from delivering medical services and to interfere with the medical judgment of PacifiCare healthcare providers.” The result of these policies, he alleged, is a “reduction in the quality of [provided] healthcare” that “is directly contrary to PacifiCare’s representations.”

Cruz emphasized in his first amended complaint that he “does not challenge the denial of medical benefits to any enrollee or subscriber,” but “challenges the manner in which PacifiCare . . . induced persons to subscribe to its Health Plans ... by misrepresenting or failing to disclose internal policies that lower the quality of services provided.” Cruz alleged that he was filing the action “in his individual capacity and on behalf of the general public,” and he sought to represent a class of “approximately 1.6 million PacifiCare Health Plan enrollees in California.”

Based on these general allegations, Cruz alleged four causes of action. In the first, he alleged that PacifiCare had violated Business and Professions Code section 17500 by “engaging in false advertising” that “reduce [d] the quality of medical services available to . . . enrollees” and “decrease[d] the value of the [health coverage] for which [they] paid.” To remedy this alleged violation, Cruz requested “an order enjoining [PacifiCare] from violating [Business and Professions Code section] 17500 and requiring [it] to disgorge ... all of [its] ill-gotten gains and monies wrongfully acquired.” The second cause of action alleged that in violating various state statutes, PacifiCare had committed an unfair, unlawful, or fraudulent business act or practice under Business and Professions Code section 17200 that “reduce[d] the quality of medical services available to” enrollees and “decrease[d] the value of their respective [h]ealth [p]lans.” To remedy this alleged violation, Cruz requested “an order enjoining [PacifiCare] from violating [Business and Professions Code section] 17200 and requiring [it] to disgorge ... all of [its] ill-gotten gains and monies wrongfully acquired.” The third cause of action alleged that PacifiCare’s misrepresentations violated the CLRA (Civ. Code, § 1770). To remedy this alleged violation, Cruz requested “an order enjoining [PacifiCare’s] wrongful acts and practices” and requiring that PacifiCare “make restitution ... of all monies paid to” it. Cruz also stated his intent to add a request for actual damages if PacifiCare failed to remedy the damage from its violation. The fourth cause of action was for unjust enrichment, and alleged that as a result of PacifiCare’s conduct, enrollees had “receiv[ed] a lower quality of care than advertised and represented by” PacifiCare. As to remedy, Cruz requested “restitution, refund, or reimbursement of’ certain monies paid by or on behalf of enrollees, and “disgorgement of the excessive and ill-gotten monies obtained by [PacifiCare] as a result of the unlawful, fraudulent, or unfair business acts and practices and untrue and misleading advertisements.”

PacifiCare moved for an order compelling Cruz to arbitrate his claims and staying the action pending completion of arbitration. PacifiCare argued that Cruz, who obtained health coverage through his employer, was required to arbitrate his claims under several provisions of the subscriber agreement between his employer and PacifiCare. PacifiCare relied primarily on paragraph 15.02 of the subscriber agreement, which provides in part: “ARBITRATION. PACIFICARE USES BINDING ARBITRATION TO RESOLVE ANY AND ALL DISPUTES BETWEEN PACIFICARE AND GROUP OR MEMBER, INCLUDING . . . DISPUTES RELATING TO THE DELIVERY OF SERVICES UNDER THE PACIFICARE HEALTH PLAN. PACIFICARE, GROUP AND MEMBER EACH UNDERSTAND AND EXPRESSLY AGREE THAT BY ENTERING INTO THE PACIFICARE SUBSCRIBER AGREEMENT, PACIFICARE, GROUP AND MEMBER ARE EACH VOLUNTARILY GIVING UP THEIR CONSTITUTIONAL RIGHT TO HAVE ALL SUCH DISPUTES DECIDED IN A COURT OF LAW BEFORE A JURY, AND INSTEAD ARE ACCEPTING THE USE OF BINDING ARBITRATION.” PacifiCare also relied on paragraph 7.01.01 of the subscriber agreement, which establishes a procedure for “Member Appeals not related to quality of care” and provides that a member who is not satisfied with the outcome of PacifiCare’s internal appeals process “may . . . submit or request that PacifiCare submit the Appeal to binding arbitration before the American Arbitration Association” (AAA). Paragraph 7.01.01 also provides: “Upon submission of a dispute to the [AAA], Member and PacifiCare agree to be bound by the rules of procedure and decision of the [AAA].” Paragraph 7.01.01 concludes by stating: “PACIFICARE AND MEMBER UNDERSTAND THAT BY ENTERING INTO THIS AGREEMENT, THEY ARE GIVING UP THEIR CONSTITUTIONAL RIGHT TO HAVE ANY DISPUTE DECIDED IN A COURT OF LAW BEFORE A JURY AND INSTEAD ARE ACCEPTING THE USE OF ARBITRATION.” PacifiCare also relied on Cruz’s signed enrollment form, which stated that he “agree[d] to and underst[ood]” several terms and conditions, including: (1) “To be bound by the PacifiCare . . . Subscriber Agreement”; and (2) that “[ajny differences between myself . . . and PacifiCare . . . relating to PacifiCare ... or its performance are subject to binding arbitration.” Finally, PacifiCare relied on the member handbook it sent to Cruz, which describes PacifiCare’s internal appeals process and, for members unsatisfied with the result of that process, the option of arbitration before the AAA. The member handbook also states: “MEMBERS UNDERSTAND THAT BY ENROLLING IN PACIFICARE, THEY AGREE TO GIVE UP THEIR CONSTITUTIONAL RIGHT TO HAVE ANY DISPUTE DECIDED IN A COURT OF LAW BEFORE A JURY AND INSTEAD ARE ACCEPTING THE USE OF ARBITRATION FOR RESOLVING DISPUTES WITH PACIFICARE.”

Cruz opposed PacifiCare’s motion on several grounds. He first argued that the applicable arbitration provision does not encompass this dispute because the paragraph in the subscriber agreement requiring arbitration before the AAA governs appeals ‘“not related to quality of care’ ” and his complaint “is solely . . . directed to the ‘quality of care’ provided by PacifiCare.” Second, he argued that his requests for injunctive relief are inarbitrable under Broughton. Third, he argued that the arbitration clause is unconscionable. Finally, he argued that because PacifiCare did not enter into any agreement with either him or his employer, it may not invoke the arbitration clause.

PacifiCare offered several arguments in response. Regarding Cruz’s contention under Broughton, PacifiCare argued that Broughton prohibits arbitration only of claims for injunctive relief under the CLRA, and does not prohibit arbitration of Cruz’s “monetary” claims for disgorgement, restitution and reimbursement or his request for injunctive relief under Business and Professions Code sections 17200 and 17500. Regarding the scope of arbitration, PacifiCare argued that because the language of paragraph 15.02 of the subscriber agreement requires “BINDING ARBITRATION TO RESOLVE ANY AND ALL DISPUTES BETWEEN PACIFICARE AND GROUP OR MEMBER” (italics added), it includes claims related to quality of care. Supporting this interpretation, PacifiCare asserted, is the fact that “the one example [paragraph 15.02] provides of a covered dispute— ‘allegations against PacifiCare of medical malpractice’—addresses a claim involving quality of care.” PacifiCare also argued that “even if ‘quality of care’ issues were exempt from arbitration,” Cruz does not raise quality of care issues, and his claims therefore do not fall within this exemption. Finally, PacifiCare argued that the arbitration clause was not unconscionable.

The trial court denied PacifiCare’s motion to compel arbitration. It reasoned that Broughton expressly precludes arbitration of Cruz’s claim for injunctive relief under the CLRA, and it “extended” Broughton’s reasoning to claims for injunctive relief under Business and Professions Code sections 17200 and 17500 “by an individual acting as a private attorney general.” The court also reasoned that Cruz’s claims for disgorgement, restitution, and unjust enrichment are inarbitrable as essentially equitable remedies distinct from damages. Given these conclusions, the court expressly declined to rule on any of Cruz’s other objections to PacifiCare’s motion.

The Court of Appeal affirmed, relying on Broughton and rejecting PacifiCare’s argument that the United States Supreme Court had abrogated Broughton in subsequent decisions. It also upheld the trial court’s extension of Broughton to claims for disgorgement and restitution under Business and Professions Code section 17200 et seq., relying primarily on the public benefit derived from those remedies and the interrelationship between those remedies and injunctive relief. The court limited its holding to equitable remedies within the context of class action claims. Like the trial court, the Court of Appeal did not consider any of Cruz’s other arguments against arbitration. We then granted PacifiCare’s petition for review.

II. Discussion

A. Did Green Tree and Circuit City Overrule Broughton?

PacifiCare contends that our decision in Broughton, supra, 21 Cal.4th 1066, holding that injunctive relief claims under the CLRA are inarbitrable, should be overruled in light of Green Tree, supra, 531 U.S. 79, and Circuit City, supra, 532 U.S. 105. According to PacifiCare, these two post -Broughton decisions, read in conjunction with earlier United States Supreme Court decisions, make clear that only Congress—and not state legislatures—may create exceptions to the Federal Arbitration Act’s (FAA) requirement that arbitration agreements be enforced according to their terms, and that therefore state courts cannot hold that certain requests for public injunctive relief are inarbitrable. We disagree.

In Broughton, we recognized that the United States Supreme Court has emphasized Congress’s and its own policy in favor of arbitration and, at least since 1984, has rejected numerous efforts and arguments by state courts, federal courts and litigants to declare certain classes of cases not subject to arbitration. (Broughton, supra, 21 Cal.4th at pp. 1074-1075.) Indeed, we acknowledged the Supreme Court’s broad statement in its seminal arbitration case, Southland Corp. v. Keating (1984) 465 U.S. 1, 10 [104 S.Ct. 852, 858, 79 L.Ed.2d 1], that “ ‘[i]n enacting § 2 of the [FAA], Congress declared a national policy favoring arbitration and withdrew the power of the states to require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration.’ ” (Broughton, supra, 21 Cal.4th at p. 1074.)

We nonetheless held that requests for injunctive relief designed to benefit the public presented a narrow exception to the rule that the FAA requires state courts to honor arbitration agreements. We reasoned that the Supreme Court has acknowledged that Congress may “ ‘require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration’ ” (Broughton, supra, 21 Cal.4th at p. 1074, quoting Southland Corp. v. Keating, supra, 465 U.S. at p. 10 [104 S.Ct. at p. 858]), and that “[t]he unsuitability of a statutory claim for arbitration turns on congressional intent, which can be discovered in the text of the statute in question, its legislative history or in an ‘ “inherent conflict” between arbitration and the [statute’s] underlying purposes.’ ” (Broughton, supra, 21 Cal.4th at p. 1075, quoting Gilmer v. Interstate/Johnson Lane Corp. (1991) 500 U.S. 20, 26 [111 S.Ct. 1647, 1652, 114 L.Ed.2d 26] (Gilmer).)

We then concluded that there was indeed an inherent conflict between arbitration and the CLRA’s authorization in Civil Code section 1780, subdivision (a)(2) for injunctive relief designed to protect the public, e.g., to stop deceptive business practices. As we stated: “[T]here are two factors taken in combination that make for an ‘inherent conflict’ between arbitration and the underlying purpose of the CLRA’s injunctive relief remedy. First, that relief is for the benefit of the general public rather than the party bringing the action.” (Broughton, supra, 21 Cal.4th at p. 1082.) In reaching this conclusion, we distinguished requests for public injunctions from other sorts of actions, such as antitrust suits, in which the public benefit is incidental to the plaintiffs award of damages; unlike private suits for damages, in a public injunction action a plaintiff acts in the purest sense as a private attorney general. {Id. at pp. 1075-1077.) “Second, the judicial forum has significant institutional advantages over arbitration in administering a public injunctive remedy, which as a consequence will likely lead to the diminution or frustration of the public benefit if the remedy is entrusted to arbitrators.” (Id. at p. 1082.) We reasoned that an arbitrator lacked the institutional continuity and the appropriate jurisdiction to sufficiently enforce and, if needed, modify a public injunction. {Id. at p. 1081.)¹ We concluded: “Given this inherent conflict, we will presume, absent indications to the contrary, that the Legislature did not intend that the injunctive relief claims be arbitrated.” (Broughton, at p. 1082.) We discerned no such legislative intent. (Ibid.)

We further concluded that denying arbitration in this one area would not violate the FAA. As we stated: “[A]lthough the court has stated generally that the capacity to withdraw statutory rights from the scope of arbitration agreements is the prerogative solely of Congress, not state courts or legislatures (Southland Corp. v. Keating, supra, 465 U.S. at p. 18 [104 S.Ct. at p. 862]), it has never directly decided whether a legislature may restrict a private arbitration agreement when it inherently conflicts with a public statutory purpose that transcends private interests. In the present case, as discussed, we believe there is such an inherent conflict between arbitration and a statutory injunctive relief remedy designed for the protection of the general public. Although both California and federal law recognize the important policy of enforcing arbitration agreements, it would be perverse to extend the policy so far as to preclude states from passing legislation the purposes of which make it incompatible with arbitration, or to compel states to permit the vitiation through arbitration of the substantive rights afforded by such legislation.

“In other terms, our holding does not represent a ‘ “suspicion of arbitration as a method of weakening the protections afforded in the substantive law to would-be complainants” . . . “out of step with our current strong endorsement of the federal statutes favoring this method of resolving disputes” ’ [Citation.] Rather, it is a recognition that arbitration cannot necessarily afford all the advantages of adjudication in the area of private attorney general actions, that in a narrow class of such actions arbitration is inappropriate, and that this inappropriateness does not turn on the happenstance of whether the rights and remedies being adjudicated are of state or federal derivation.

“Nor does anything in the legislative history of the FAA suggest that Congress contemplated ‘public injunction’ arbitration within the universe of arbitration agreements it was attempting to enforce. Indeed, the primary focus of the drafters of the FAA appears to have been on the utility of arbitration in resolving ordinary commercial disputes. [Citations.] Although the court has interpreted the FAA to extend to noncommercial statutory claims, it is doubtful Congress would have envisioned the extension of the FAA to enforce arbitral jurisdiction over a public injunction.” (Broughton, supra, 21 Cal.4th at pp. 1083-1084, fn. omitted.)

The recent United States Supreme Court cases cited by PacifiCare have little if any bearing on our holding in Broughton. In Circuit City, supra, 532 U.S. 105, the court concluded that section 1 of the FAA, which exempts from the scope of the FAA “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce” (9 U.S.C. § 1), did not exempt most employment contracts. The opinion was principally concerned with an analysis of the meaning of section 1, not the preemptive scope of section 2. The majority rejected the position of various amici curiae, including attorneys general of 22 states, who argued that applying the FAA to employment contracts would interfere with the employment policies of the states. In rejecting this argument, the court reaffirmed Southland, and declined to “chip away” at that case by what the majority termed “an unconventional reading” of section 1. (Circuit City, supra, 532 U.S. at p. 122 [121 S.Ct. at p. 1313].) Broughton, of course, was neither predicated on overruling Southland nor on construing section 1 of the FAA. The Circuit City court did not address the central question in Broughton—whether public injunctions were arbitrable. Nor did it shed any further light on the “inherently incompatible” exception to arbitrability.

Still less is Green Tree, supra, 531 U.S. 79, relevant to Broughton. That case was narrowly focused on the issue of cost sharing in the arbitration of federal statutory claims. Green Tree’s holding did not concern federal preemption of state arbitration claims. Nor did its reiteration of Congress’s strong pro-arbitration policy (id. at p. 92 [121 S.Ct. at pp. 522-523]) call Broughton into question. As discussed above, Broughton takes such a policy as a given. (Broughton, supra, 21 Cal.4th at pp. 1074-1075.)

In sum, nothing that is novel about Green Tree or Circuit City has any bearing on Broughton. The only parts of these opinions that remotely pertain to Broughton are recapitulations of familiar themes regarding the importance of enforcing arbitration agreements and the inability of states to prevent that enforcement. These were amply considered in Broughton. Moreover, we were presented in Broughton with extensive argument that CLRA public injunctions were arbitrable. (See Broughton, supra, 21 Cal.4th at pp. 1088-1103 (dis. opn. of Chin, J.).) We decline PacifiCare’s invitation to revisit this argument.

B. Are Injunctions Under Business and Professions Code Sections 17200 and 17500 Arbitrable?

PacifiCare contends that even if we affirm our holding in Broughton that claims for injunctive relief under the CLRA are inarbitrable, the same should not hold true for injunctive relief claims under the unfair competition law (UCL), Business and Professions Code section 17200 et seq., and claims of false advertising under Business and Professions Code section 17500. We disagree under the circumstances of the present case.

The UCL is intended to proscribe “unfair or fraudulent business act[s] or practice[s] and unfair, deceptive, untrue or misleading advertising . . . .” (Bus. & Prof. Code, § 17200.) The law provides that any person engaged in unfair competition may be enjoined. (Id., § 17203.) Moreover, “[standing to sue under the UCL is expansive .... Unfair competition actions can be brought by a public prosecutor or ‘by any person acting for the interests of itself, its members or the general public.’ ” (Korea Supply Co. v. Lockheed Martin Corp. ((2003) 29 Cal.4th 1134, 1143 [131 Cal.Rptr.2d 29, 63 P.3d 937] (Korea Supply), quoting Bus. & Prof. Code, § 17204.) The UCL is intended to protect competitors as well as consumers from unfair practices. (Tippett v. Terich (1995) 37 Cal.App.4th 1517, 1536 [44 Cal.Rptr.2d 862].) Thus, there may be occasions in which the injunctive power of the UCL is used primarily to redress injuries to competing businesses and only incidentally for the public benefit. (See, e.g., Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 188-190 [83 Cal.Rptr.2d 548, 973 P.2d 527].) In Broughton, we declined to decide whether requests for injunctive relief designed primarily to rectify individual wrongs were arbitrable. (Broughton, supra, 21 Cal.4th at p. 1080, fn. 5.)

We need not decide whether UCL injunctive relief actions brought by injured business competitors are arbitrable. In the present case, the request for injunctive relief is clearly for the benefit of health care consumers and the general public by seeking to enjoin PacifiCare’s alleged deceptive advertising practices. The claim is virtually indistinguishable from the CLRA claim that was at issue in Broughton. (Broughton, supra, 21 Cal.4th at p. 1072 [Broughton sought to enjoin health care company’s alleged deceptive advertising of its medical services].)

The same is true of Cruz’s request to enjoin PacifiCare’s alleged misleading advertising under Business and Professions Code section 17500. That section makes unlawful “untrue or misleading” statements designed to “induce the public to enter into any obligation” to purchase various goods and services. (Ibid) Section 17535 authorizes the enjoining of such statements by various government officials and members of the public. Cruz’s injunctive relief claim under section 17535 is essentially requesting the same relief for the same reason as is his UCL claim. (See Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 210 [197 Cal.Rptr. 783, 673 P.2d 660] [same false advertising claim may give rise to actions under the UCL and Bus. & Prof. Code, § 17500].) In other words, Cruz’s action to enjoin PacifiCare’s alleged deceptive business practices is undertaken for the public benefit, whether designated as a claim under the CLRA or Business and Professions Code section 17200 or section 17500: it is designed to prevent further harm to the public at large rather than to redress or prevent injury to a plaintiff. As such, for the reasons discussed in Broughton, there is an “ ‘inherent conflict’ between arbitration and the underlying purpose of [those statutes’] injunctive relief remedy.” (Broughton, supra, 21 Cal.4th at p. 1082.)

We therefore conclude that Cruz’s injunctive relief claim is inarbitrable unless there are indications of legislative intent to the contrary in the UCL or Business and Professions Code section 17500. (Broughton, supra, 21 Cal.4th at p. 1082.) We discern no such intent. Business and Professions Code sections 17203 and 17535 both provide that injunctive relief claims are to be brought in “any court of competent jurisdiction.” (Italics added.) PacifiCare points to certain features in the CLRA not present in the UCL, such as the CLRA antiwaiver provision (Civ. Code, § 1751) and the fact that it provides for more extensive remedies than the UCL or Business and Professions Code section 17500 (Civ. Code, § 1780). (See Broughton, supra, 21 Cal.4th at p. 1077.) But these were not the characteristics we relied on in concluding that requests for injunctive relief under the CLRA are inarbitrable. (Broughton, at p. 1082.) The absence of these features in the UCL or in Business and Professions Code section 17500 does not persuade us that the Legislature intended to allow arbitration of public injunctive relief requests under these statutes. We therefore conclude that each of Cruz’s injunctive relief requests is inarbitrable.²

C. Are Cruz’s Claims for Restitution and Disgorgement Under the UCL Arbitrable?

PacifiCare contends the Court of Appeal erred in extending Broughton to hold that claims for restitution and disgorgement under the UCL are inarbitrable. We agree.

In Broughton, we held that damages claims under the CLRA are arbitrable, notwithstanding the fact that such claims vindicate important statutory rights. After reviewing United States Supreme Court precedent regarding the arbitration of antitrust and other federal statutory claims, we concluded that such precedent establishes that “statutory damages claims are fully arbitrable. Such an action is primarily for the benefit of a party to the arbitration, even if the action incidentally vindicates important public interests. [Citation.] In the context of statutory damage claims, the United States Supreme Court has consistently rejected plaintiffs’ arguments that abbreviated discovery, arbitration’s inability to establish binding precedent, and a plaintiffs right to a jury trial render the arbitral forum inadequate, or that submission of resolution of the claims to arbitration is in any sense a waiver of the substantive rights afforded by statute. [Citations.] ‘By agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum.’ ” (Broughton, supra, 21 Cal.4th at p. 1084.)³

Under the UCL, remedies are limited. “A UCL action is equitable in nature; damages cannot be recovered. [Citation.] . . . ‘[Prevailing plaintiffs are generally limited to injunctive relief and restitution.’” (Korea Supply, supra, 29 Cal.4th at p. 1144.) In the UCL context, an order for restitution is an order “compelling a UCL defendant to return money obtained through an unfair business practice to those persons in interest from whom the property was taken, that is, to persons who had an ownership interest in the property or those claiming through that person.” (Kraus v. Trinity Management Services, Inc. (2000) 23 Cal.4th 116, 126-127 [96 Cal.Rptr.2d 485, 999 P.2d 718], fn. omitted.)

As we noted in Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 173 [96 Cal.Rptr.2d 518, 999 P.2d 706], Civil Code section 3281 defines “damages”: “Every person who suffers detriment from the unlawful act or omission of another, may recover from the person in fault a compensation therefor in money, which is called damages.” We concluded that damages, thus broadly defined, “may include a restitutionary element.” (Cortez, supra, 23 Cal.4th at p. 174.) Given this overlap, there appears to be no reason why restitutionary claims, like CLRA claims for damages, should not be arbitrable. Nothing in Broughton’s functional analysis suggests that the mere designation of restitution as an equitable remedy makes the request for the remedy inarbitrable. Moreover, although Cruz argues that restitution under the UCL accomplishes a public purpose by deterring unlawful conduct, the same could be said of damages under the CLRA or under various federal statutes. This deterrent effect is, however, incidental to the private benefits obtained from those bringing the restitutionary or damages action. (Broughton, supra, 21 Cal.4th at p. 1084.) The Supreme Court has made clear that such actions, notwithstanding the public benefit, are fully arbitrable under the FAA. (Ibid..)⁴

The Court of Appeal in the present case expressly limited its holding of inarbitrability to UCL class action suits. A class action may be primarily for the public benefit. But public benefit is only one of the factors we identified in Broughton as weighing in favor of the action’s inarbitrability. (Broughton, supra, 21 Cal.4th at p. 1082.) The other factor, the “institutional advantages” of the judicial forum over arbitration in the administration of a public injunction, is not present. (Ibid.) It may be the case that under the UCL, a class action would allow for disgorgement into a fluid recovery fund and distribution by various means. (See Kraus v. Trinity Management Services, Inc., supra, 23 Cal.4th at pp. 127, 137; Korea Supply, supra, 29 Cal.4th at p. 1148, fn. 6.) But the establishment of such a fund and the distribution of its proceeds does not present the same order of institutional difficulty as does the maintenance of a permanent statewide injunction requiring judicial supervision. We agree with the one published case on this issue that “[u]n-like a public injunction, disgorgement of funds does not need to be continuously monitored because its object is limited in time and scope. Once the profits to be disgorged and the recipients of those funds are identified, there is no need for long term modification and correction necessitating judicial supervision. Therefore, . . . disgorgement of funds is essentially the same as awarding money damages, and within the power of the arbitrators to award. [T]here is no ‘inherent conflict’ between this remedy and arbitration.” (Arriaga v. Cross Country Bank (S.D.Cal. 2001) 163 F.Supp.2d 1189, 1197.)

Moreover, in this state we recognize classwide arbitration as a means of bringing collective legal action by parties bound to an arbitration agreement. (Keating v. Superior Court (1982) 31 Cal.3d 584, 612-613 [183 Cal.Rptr. 360, 645 P.2d 1192], overruled on other grounds in Southland Corp. v. Keating, supra, 465 U.S. 1; Blue Cross of California v. Superior Court (1998) 67 Cal.App.4th 42 [78 Cal.Rptr.2d 779].) Without addressing questions not before us, we anticipate that courts may find it appropriate to become involved in supervising the equitable distribution of assets resulting from a class recovery, assuming entitlement to such recovery has been established. But we foresee that they would be able to do so without becoming involved in the merits of the underlying dispute. The same cannot be said for the supervision, continued enforcement, and modification of a public injunction, wherein judicial involvement would appear to be both inevitable and desirable. (See Broughton, supra, 21 Cal.4th at pp. 1080-1082.)⁵

Amici Curiae Trial Lawyers for Public Justice et al. argue that a recent United States Supreme Court case, EEOC v. Waffle House, Inc. (2002) 534 U.S. 279 [122 S.Ct. 754, 151 L.Ed.2d 755], supports their position that all UCL claims are inarbitrable. In Waffle House, the Supreme Court majority held that the Equal Employment Opportunity Commission (EEOC) may sue employers not only when it seeks to enjoin discriminatory employment practices, but also for victim-specific relief, such as reinstatement and backpay, even when the employee on whose behalf it is acting is a party to a binding arbitration agreement. The court reasoned that the EEOC was neither a party to the arbitration agreement nor a mere proxy for the employee on whose behalf the action was brought, but rather an agency charged by Congress with the vindication of the public interest. (Id. at pp. 288-291 [122 S.Ct. at pp. 761-762].) The court noted their conclusion might have differed if the EEOC could prosecute the action without the employee’s consent, or if the employee had the final say in the EEOC’s prayer for relief. (Id. at p. 291 [122 S.Ct. at p. 763].) The three-person dissent agreed with the majority that the EEOC was not bound by employee arbitration agreements when it pursued non-victim-specific relief, but would have held that it was prevented by the arbitration agreement from bringing an action for victim-specific relief on those employees’ behalf. (Id. at p. 298 [122 S.Ct. at pp. 766-767] (dis. opn. of Thomas, J.).)

Amici curiae compare the private attorney general action brought under Business and Professions Code section 17204 with an action brought by the EEOC, and argue that anyone acting in a private attorney general capacity should not be bound by an arbitration agreement. But in light of the United States Supreme Court’s strong presumption in favor of enforcing arbitration agreements reviewed above, we do not read Waffle House as permitting a party to an arbitration agreement to evade its contractual obligation to settle its own restitutionary claims through arbitration merely by acting as a representative on behalf of other similarly situated claimants.⁶

We therefore conclude that Cruz’s actions for restitution and/or disgorgement, whether brought as an individual or as a class action, are arbitrable.⁷ By the same logic, his common law claim for unjust enrichment, which is essentially an action for restitution (see Lauriedale Associates Ltd. v. Wilson (1992) 7 Cal.App.4th 1439, 1448 [9 Cal.Rptr.2d 774]), is also arbitrable.

Finally, we note that when there is a severance of arbitrable from inarbitrable claims, the trial court has the discretion to stay proceedings on the inarbitrable claims pending resolution of the arbitration. (Code Civ. Proc., § 1281.4; Madden v. Kaiser Foundation Hospitals (1976) 17 Cal.3d 699, 714 [131 Cal.Rptr. 882, 552 P.2d 1178].) We agree with the Court of Appeal in Coast Plaza Doctors Hospital v. Blue Cross of California, supra, 83 Cal.App.4th at page 693, that such a stay is generally in order under these circumstances. “A stay is appropriate where ‘[i]n the absence of a stay, the continuation of the proceedings in the trial court disrupts the arbitration proceedings and can render them ineffective.’ ” (Ibid.)⁸

III. Disposition

Although Cruz’s monetary equitable relief claims are not inherently inarbitrable, he contends, as noted, that the arbitration agreement should not be enforced for other reasons, such as because his claims are outside the scope of the arbitration agreement and because the agreement is unconscionable. The trial court, holding all of the claims inarbitrable per se, did not address these contentions. These objections to arbitration may be reasserted on remand.

The judgment of the Court of Appeal is affirmed in part and reversed in part, and the cause is remanded for further proceedings consistent with this opinion.

George, C. J., Kennard, J., and Reardon, J., ^* concurred.

1 Justice Chin’s concurring and dissenting opinion finds significant the United States Supreme Court’s holding that a decision of the New York Court of Appeals, Garrity v. Lyle Stuart, Inc. (1976) 40 N.Y.2d 354 [386 N.Y.S.2d 831, 353 N.E.2d 793, 83 A.L.R.3d 1024], prohibiting arbitration of punitive damages claims, is preempted by the FAA. (Mastrobuono v. Shearson Lehman Hutton, Inc. (1995) 514 U.S. 52, 58 [115 S.Ct. 1212, 1216-1217, 131 L.Ed.2d 76].) In particular, the opinion points to the Supreme Court’s implicit rejection of Garrity’s rationale that punitive damage awards require “rather close judicial supervision” that would be lacking in arbitration. (Garrity, supra, 386 N.Y.S.2d at p. 834 [353 N.E.2d at p. 796].) Yet it is evident that what Garrity meant by “judicial supervision” was simply adequate judicial and appellate review of punitive damage awards, not the ongoing monitoring, enforcement, and modification that is required of public injunctions. (See id. at p. 835 [353 N.E.2d at p. 797.].) As we have recognized, the supposed inadequacy of judicial review of arbitration awards is not grounds for holding a claim inarbitrable, even when the arbitration involves a matter of public importance. (Broughton, supra, 21 Cal.4th at p. 1086.) Moreover, punitive damages, unlike public injunctions, confer a direct benefit on the plaintiffs seeking them, and are in principle little different from the treble damages antitrust awards that we acknowledged in Broughton to be fully arbitrable. (Id. at pp. 1075-1076.)

2 We note that the Courts of Appeal that have considered this issue have reached a similar conclusion. (See Warren-Guthrie v. Health Net (2000) 84 Cal.App.4th 804, 817 [101 Cal.Rptr.2d 260] [concluding injunctive relief request under Bus. & Prof. Code, § 17200 inarbitrable under Broughton]; Coast Plaza Doctors Hospital v. Blue Cross of California (2000) 83 Cal.App.4th 677, 692 [99 Cal.Rptr.2d 809] [same]; Groom v. Health Net (2000) 82 Cal.App.4th 1189, 1199 [98 Cal.Rptr.2d 836] [same].)

3 In Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 99-113 [99 Cal.Rptr.2d 745, 6 P.3d 669], we held that arbitration of unwaivable statutory claims pursuant to a mandatory arbitration employment agreement required the incorporation of certain procedural protections. Cruz does not raise the issue whether those protections apply in the present context of arbitrating statutory consumer protection claims, and we do not address this issue.

4 We note that the language authorizing restitution for misleading advertising practices under Business and Professions Code section 17535 is virtually identical to the language authorizing restitution found in section 17203 under the UCL. Both provisions declare that a “court may make such orders or judgments” as “may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by” the business practices made unlawfiil by the statute in question. We therefore assume, at least on the issue of arbitrability, that section 17535 should be construed the same way as section 17203.

5 We note that the United States Supreme Court has recently granted a writ of certiorari in a case that may decide the validity of classwide arbitration when class action is not provided for in the arbitration agreement. (Green Tree Fin. Corp. v. Bazzle (2002) 351 S.C. 244 [569 S.E.2d 349] cert, granted (2003) 537 U.S. 1098 [123 S.Ct. 817, 154 L.Ed.2d 766].) The unavailability of classwide arbitration would not alter our conclusion in the present case. As the Supreme Court has stated in rejecting the argument that the unavailability of classwide relief is grounds for not enforcing an arbitration agreement: “ ‘[E]ven if the arbitration could not go forward as a class action or class relief could not be granted by the arbitrator, the fact that [a statute] provides for the possibility of bringing a collective action does not mean that individual attempts at conciliation were intended to be barred.’ ” (Gilmer, supra, 500 U.S. at p. 32 [111 S.Ct. at p. 1655].)

6 Although we do not agree with amici curiae that Waffle House requires us to extend Broughton, neither do we agree with Justice Chin’s concurring and dissenting opinion that the former case requires us to overrule the latter. (Cone. & dis. opn. of Chin, J., post, at p. 335.) As we have discussed, Waffle House recognizes that the EEOC’s action on behalf of parties to an arbitration agreement in order to vindicate the public interest is not confined to injunctions, but can encompass the full range of victim-specific relief. But it does not follow, either logically or intuitively, that all forms of relief must therefore be arbitrable for private parties bound by arbitration agreements. For reasons explained above, and in Broughton, we hold that for consumers bound by arbitration agreements, public injunctions are inarbitrable. Nothing in Waffle House contradicts or calls into question that conclusion. If anything, Waffle House suggests the Supreme Court’s agreement that a party acting entirely on behalf of the public—in the EEOC’s case in all of its actions and in Cruz’s case when he pursues a public injunction—acts beyond the scope of any arbitration agreement.

7 The question whether someone who is not a party to an arbitration agreement may bring a representative action pursuant to Business and Professions Code section 17204 for restitution on behalf of injured consumers who are parties to the arbitration agreement is one that is not before us, and about which we express no opinion.

8 In his brief, Cruz argues for the first time that under an FAA exemption established by the federal McCarran-Ferguson Act (15 U.S.C. § 1011 et seq.), the FAA does not apply to the arbitration agreement in this case. We decline to address this argument because Cruz failed to raise it below. (See Cal. Rules of Court, rule 29(b)(1); People v. Slayton (2001) 26 Cal.4th 1076, 1083 [112 Cal.Rptr.2d 561, 32 P.3d 1073].)

* Associate Justice of the Court of Appeal, First Appellate District, Division Four, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.