U.S. District Judge Kimberly Mueller of the Eastern District of California, who previously granted a temporary restraining order barring the enforcement of Assembly Bill 51, on Friday granted a preliminary injunction blocking the law that she found preempted by the Federal Arbitration Act.

A federal judge in Sacramento has once again called a stop to enforcement of a California law that would outlaw mandatory arbitration agreements in employment contracts in the state.

U.S. District Judge Kimberly Mueller of the Eastern District of California, who late last year granted a temporary restraining order (https://www.law.com/therecorder/2019/12/30/judge-blocks-californias-mandatory- employee-arbitration-ban/) barring the enforcement of Assembly Bill 51, on Friday granted a preliminary injunction “in full” blocking the state from enforcing the law that she has found preempted by the Federal Arbitration Act. Mueller issued the injunction in a minute order but said that she would lay out her reasoning in a forthcoming written order “in the coming days.”

In issuing a temporary restraining order in the case last month, Mueller wrote that if the law were allowed to go in place it could disrupt the creation of employment contracts, especially given that a violation of the AB51 would be considered a misdemeanor.

Business groups including the U.S. Chamber of Commerce, the National Retail Federation and the California Retailers Association sued to block the law claiming it was preempted by the Federal Arbitration Act. Mayer Brown’s Donald Falk and Archis Parasharami and Bruce Sarchet of Littler Mendelson represented the plaintiffs at a Jan. 10 hearing on the preliminary injunction motion. Falk said in an email Friday that he and his clients were "gratified by the court’s order and look forward to her full written decision and the further proceedings in this case."

Allan Zaremberg, president and CEO of the California Chamber of Commerce, another of the plaintiffs, said the group was “pleased the court recognized the fact that placing businesses at risk for criminal penalties fora practice that has long been supported both by California and federal law was excessive.”

Chad Stegeman of the California Department of Justice represented the state. A press representative of the department that the office was reviewing the decision.

Jacqueline Serna, deputy legislative director at Consumer Attorneys of California, which backed the bill, said that the decision will mean worker grievances “will for now continue to be forced into private and secret arbitrations rather than have a shot at justice in the fairer forum of a court of law.”

“Our hope is that, ultimately, in the courts or in Congress, fairness will prevail and this era of forced arbitration can be put behind us,” she said.

 

**Reprinted with permission from the January 31, 2020 edition of The Recorder © 2020 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.