Legislature Sends Anti-Arbitration Bill to Governor

A California Chamber of Commerce-opposed job killer bill that provides the perfect pleading pathway for class action attorneys to avoid arbitration has passed the Legislature and is on its way to the Governor.

SB 33 (Dodd; D-Napa) will negatively impact employers with unnecessary and costly class action litigation that benefits trial attorneys, not consumers.

The bill passed the Assembly on September 5, 46-23. The Senate concurred in Assembly amendments a day later, 25-13.

Despite being amended eight times, SB 33 still contains ambiguous terms that will create further litigation. Ambiguity, inconsistencies and confusion serve only to benefit trial attorneys and their ability to pursue costlier litigation with high attorney fee recoveries, not consumers.

SB 33 is not limited to the fraudulent creation of financial accounts, as the proponents claim. SB 33 states that a respondent cannot be compelled to arbitration regarding a “purported contractual relationship.” This term is undefined and will create significant litigation over what relationships are included or excluded.

The bill also creates confusion between who is the respondent and the respondent consumer. SB 33 amends a section of the Code of Civil Procedure that refers to “petitioners” and “respondents” of a motion to compel arbitration, meaning the parties to the litigation.

Instead of applying and utilizing these same terms, recent amendments to SB 33 include undefined terms, therefore adding another layer of ambiguity and concern to this bill that will create further litigation.

As amended, SB 33 specifies that its provisions do not go into effect until January 1, 2018. The bill does not limit its application, however, only to contracts created after January 1, 2018, thereby invalidating all existing consumer contracts with a financial institution that include an arbitration provision.

SB 33 precludes the enforcement of a valid arbitration agreement for claims of fraud with a depository institution. SB 33 is sponsored and supported by trial attorneys who would prefer class action litigation as opposed to arbitration because it provides a significantly higher financial recovery for trial attorneys.

Finally, SB 33 is preempted under the Federal Arbitration Act, as emphasized by a recent U.S. Supreme Court opinion, which determined that a Kentucky agreement with a similar anti-arbitration bias is preempted by federal law.

Action Needed

The CalChamber is urging members to contact the Governor and ask him to veto SB 33 as a job killer.

Staff Contact: Jennifer Barrera

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Jennifer Barrera took over as president and CEO of the California Chamber of Commerce on October 1, 2021. She has been part of the CalChamber team since 2010 and stepped into the top position after serving as CalChamber executive vice president, overseeing the development and implementation of policy and strategy for the organization, as well as representing the CalChamber on legal reform issues. Barrera is well-known for her success rate with the CalChamber’s annual list of job killer legislation, efforts to reform the Private Attorneys General Act (PAGA) and leadership working with employers on critical issues, including most recently those arising from the COVID-19 pandemic. In addition, she advises the business compliance activities of the CalChamber on interpreting changes in employment law. Barrera earned a B.A. in English from California State University, Bakersfield, and a J.D. with high honors from California Western School of Law. See full bio