There are times when one would rather not be proven right. Nearly four years ago, a California district court invalidated AB 51, which sought to prohibit mandatory arbitration by, among other things, calling for criminal sanctions against employers who use such agreements. Chamber of Commerce of the United States v. Becerra, Case No. 2:19-cv-02456-KJM-DB (E.D. Cal.). We noted then that long-settled case authorities and basic constitutional law all dictated the conclusion that California could not seek to invalidate the Federal Arbitration Act (FAA) through state legislation. We concluded then that the district court had correctly decided the case, but we also cautioned employers to “expect lengthy appeals and more litigation.”

That, of course, has happened.

The plaintiffs appealed the injunction, and on September 15, 2021, a divided Ninth Circuit reversed, thus holding that AB 51 was valid (although limiting enforcement in some circumstances). Chamber of Commerce of the United States v. Bonta, 13 F.4th 766 (9th Cir. 2021) (Bonta having replaced Becerra as California attorney general). We blogged that decision on September 22, 2021. We described the decision as “a mess” and noted the dissent’s stinging opposition that the majority was ignoring California’s plain intent to evade the FAA and proclaiming:

“Like a classic clown bop bag, no matter how many times California is smacked down for violating the Federal Arbitration Act (FAA), the state bounces back with even more creative methods to sidestep the FAA.”

Following a petition for rehearing, and in the wake of the Supreme Court’s decision in Viking River Cruises v. Moriana, 596 U.S. ____ (2022) (itself relating to the FAA’s preemption of a California case concerning claims brought alongside PAGA), the Ninth Circuit issued a new opinion that affirmed the original district court order finding that AB 51 was preempted by the FAA. Chamber of Commerce of the United States v. Bonta, 62 F.4th 473 (9th Cir. 2023). Now, after four years of litigation, the district court has permanently enjoined AB 51 with respect to arbitration agreements covered by the FAA. The court also awarded the U.S. Chamber of Commerce over $800,000 in attorney fees for its efforts in overturning the statute.

So, is this the end? Probably not. California will almost certainly try something else, but in the meantime, AB 51 and its attempt to criminalize the lawful use of arbitration agreements is no longer enforceable.

The bottom line: California has now been permanently enjoined from enforcing AB 51 and its approach of criminalizing the use of employment arbitration agreements, but expect further attempts in California to evade the FAA through legislation.

[View source.]