DiCarlo v. MoneyLion, Inc.

Decision Date19 February 2021
Docket NumberNo. 20-55058,20-55058
Citation988 F.3d 1148
Parties Marggieh DICARLO, Individually and on Behalf of All Others Similarly Situated, Plaintiff-Appellant, v. MONEYLION, INC.; MoneyLion of California, LLC; ML Plus, LLC ; ML Wealth, LLC, Defendants-Appellees.
CourtU.S. Court of Appeals — Ninth Circuit

Michael R. Owens (argued) and Bradley T. Wilders, Stueve Sigel Hanson LLP, Kansas City, Missouri; John F. Edgar, Edgar Law Firm LLC, Kansas City, Missouri; for Plaintiff-Appellant.

Fred R. Puglisi (argued) and Jay T. Ramsey, Sheppard Mullin Richter & Hampton LLP, Los Angeles, California, for Defendants-Appellees.

Before: Carlos T. Bea, Amul R. Thapar,* and Daniel P. Collins, Circuit Judges.

THAPAR, Circuit Judge:

Marggieh DiCarlo says that MoneyLion lured her into debt to the tune of several hundred dollars. The district court dismissed her complaint and compelled arbitration instead. We affirm.


MoneyLion operates a smartphone app that offers financial services to its customers.1 One service is the MoneyLion Plus program. The program offers a $500 credit-builder loan. With a 5.99% annual percentage rate, individuals with little or poor credit history can start to create a positive record.

Marggieh DiCarlo wanted to open her own hair salon, but she needed credit. So she enrolled in the Plus program and took out a credit-builder loan.

Like everyone who joins the Plus program, DiCarlo signed a Membership Agreement. The Agreement explains that Plus members owe monthly fees, monthly investment deposits, and (if applicable) monthly loan payments. It also has a provision that gives each party the right to demand arbitration in case of a dispute.

After a few months, DiCarlo fell behind on her fees, deposits, and loan payments. She tried to cancel her Plus membership, but MoneyLion refused. First, she had to pay off the loan in full. And that could happen only after she covered the still-accumulating membership fees. DiCarlo couldn't afford the fees, so she was stuck.

DiCarlo filed this putative class action to take down MoneyLion's "high-tech debt trap." She alleged that MoneyLion had violated, among other things, California's Unfair Competition Law ("UCL"), False Advertising Law ("FAL"), and Consumers Legal Remedies Act ("CLRA"). See Cal. Bus. & Prof. Code § 17200 et seq. (UCL); id. § 17500 et seq. (FAL); Cal. Civ. Code § 1750 et seq. (CLRA). MoneyLion moved to compel arbitration, and the district court granted the motion and dismissed the action. See 9 U.S.C. § 4. This appeal followed.


The focus of this case is the validity (or invalidity) of the Agreement's arbitration provision. If the provision is valid, then the Federal Arbitration Act ("FAA") requires the district court to enforce it strictly. 9 U.S.C. § 2. But DiCarlo insists that the provision violates California law by prohibiting public injunctive relief. If she's right, then the arbitration provision will self-destruct; a poison-pill clause will render the "entire [a]rbitration [p]rovision ... null and void." ER 203 (emphasis omitted). There will be no arbitration obligation for the court to enforce.

The district court rejected DiCarlo's interpretation of the arbitration provision. It determined that the provision allowed public injunctive relief and so did not violate California law.

We review the district court's interpretation of the Agreement (and resulting decision to compel arbitration) de novo. Poublon v. C.H. Robinson Co. , 846 F.3d 1251, 1259 (9th Cir. 2017). The focus is the parties' "objective intent, as evidenced by the words of the contract, rather than the subjective intent of one of the parties." Reilly v. Inquest Tech., Inc. , 218 Cal.App.4th 536, 160 Cal. Rptr. 3d 236, 249 (2013) (cleaned up). When in doubt, both federal and state law point toward interpreting the Agreement to permit arbitration. Cal. Civ. Code § 1643 (instructing courts to adopt a "lawful" contract interpretation that is "capable of being carried into effect" when possible); Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc. , 473 U.S. 614, 626, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985) (favoring arbitration).


California's legal requirement that contracts allow public injunctive relief is known as the McGill rule. See McGill v. Citibank, N.A. , 2 Cal.5th 945, 216 Cal.Rptr.3d 627, 393 P.3d 85 (2017). Public injunctive relief is "relief that by and large benefits the general public ... and that benefits the plaintiff, if at all, only incidentally and/or as a member of the general public." Id. , 216 Cal.Rptr.3d 627, 393 P.3d at 89 (cleaned up).

Consider the relief sought here. Among other things, DiCarlo seeks to enjoin MoneyLion from "[f]alsely advertising to the general public within the State of California that the [credit-builder] Loan contains ‘no hidden fees.’ " ER 149. But what good will that do her in the future? She already knows that these claims are (allegedly) untrue. That's why she sued. DiCarlo seeks the injunction to aid those who do not already know what she has learned. McGill , 216 Cal.Rptr.3d 627, 393 P.3d at 89–90. That is public injunctive relief.

In McGill , the California Supreme Court held that no one can contractually waive all rights to seek public injunctive relief. Id. , 216 Cal.Rptr.3d 627, 393 P.3d at 94; see Blair v. Rent-A-Ctr., Inc. , 928 F.3d 819, 830–31 (9th Cir. 2019) (holding that the FAA does not preempt the McGill rule). The UCL, FAL, and CLRA all authorize public injunctive relief. Cal. Bus. & Prof. Code §§ 17203, 17535 ; Cal. Civ. Code § 1780(a)(2) ; Cruz v. PacifiCare Health Sys., Inc. , 30 Cal.4th 303, 133 Cal.Rptr.2d 58, 66 P.3d 1157, 1162, 1164 (2003). Thus, any contract that bars public injunctive relief in both court and arbitration is invalid. McGill , 216 Cal.Rptr.3d 627, 393 P.3d at 94 ; see Ferguson v. Corinthian Colls., Inc. , 733 F.3d 928, 934–35 (9th Cir. 2013). By permitting either party to compel arbitration unilaterally, the Agreement effectively cuts off the availability of public injunctive relief in court. So the relief must remain possible in arbitration proceedings, or else the arbitration provision violates California law and triggers the poison-pill clause.

MoneyLion insists that DiCarlo can get public injunctive relief in arbitration. The Agreement, after all, "authorize[s]" the arbitrator to "award all [injunctive] remedies available in an individual lawsuit under [California] law." ER 202–03. And, says MoneyLion, public injunctive relief is available in an individual lawsuit. DiCarlo disagrees. She says that she can secure public injunctive relief only by acting as a private attorney general, which the Agreement explicitly prohibits. ER 202. Whoever is right wins.

Thus, the question presented: Is public injunctive relief under the relevant statutes available in an "individual lawsuit" without a plaintiff "act[ing] as a private attorney general"? ER 202–03 (capitals omitted).


To answer that question, we need to determine (A) the scope of an individual lawsuit, and (B) when someone acts as a private attorney general.


What does the Agreement mean by "an individual lawsuit"? To refresh, if public injunctive relief is available in an individual lawsuit under California law, then the arbitrator is "authorized" to grant it under the all-remedies clause. We understand the term (as used in the Agreement) to encapsulate any lawsuit brought by a single plaintiff who represents only herself—no class actions, no mass actions, no derivative actions, etc. This understanding aligns with the Agreement's prohibition of class actions as well as claim joinder. Under the joinder clause, DiCarlo is not allowed to "join or consolidate claim(s) involving you with claims involving any other person." ER 202 (capitals omitted). Each MoneyLion member must arbitrate separately.

DiCarlo argues that the joinder clause does not simply mean members must arbitrate separately. She contends that it restricts an individual lawsuit to one that has no substantial impact on others, including in the relief sought. This would mean that a claim for public injunctive relief, which undoubtedly impacts others, would violate the joinder clause and therefore fall outside an individual lawsuit. DiCarlo is incorrect.

The joinder clause does not prohibit all claims that impact other people. It draws a line between two distinct types of claims—those "involving you" and those "involving any other person"—and prohibits bringing one of each type in the same proceeding. To speak sensibly of joining, consolidating, or separating these types of claims, we must read the categories as exclusive. Claims either "involv[e] you" or "involv[e] any other person." This does not take away from the meaning of an individual lawsuit.

A simple example proves the point. Imagine John is bombarded with robocalls. He sues the company responsible for making his contact information public. His claim "involv[es him]." Then his neighbor, Maria, hears about the lawsuit and wants to get in on the action. She says that she too has been weighed down by the constant calls. If John brings a second claim in his lawsuit that relies on robocalls to Maria, this claim will "involv[e] any other person" (Maria) and will not be his own claim.

The joinder clause here says that John and Maria are both free to attack the company's practice, but they must do so separately. John may not assert claims on behalf of both of them or proceed with Maria as a co-plaintiff (joinder). Nor can they seek to try the two lawsuits together (consolidation).

None of this hinges on the relief sought. If Maria never sued, John's victory against the company could theoretically result in an injunction that broadly affects others, or a damages action so large as to run the company out of business. Both results would have enormous impact on others, including Maria. But it is still John's claim only.


What about a "private attorney general"? Recall that, under the...

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