Federal Court Grants TRO Halting Enforcement of California Anti-Arbitration Statute

Earlier today, a federal judge in California entered a temporary restraining order enjoining the California Attorney General and other state officials from enforcing AB 51, pending the resolution of a motion for preliminary injunction filed by a coalition of business associations challenging the constitutionality of the statute. (Mayer Brown filed the lawsuit on behalf of the U.S. Chamber of Commerce and the California Chamber of Commerce.)

AB 51, which is scheduled to go into effect on January 1, 2020, imposes criminal and civil penalties on businesses entering into arbitration agreements—whether as a condition of employment or on an opt-out basis. The coalition’s lawsuit argues that AB 51 is preempted by the Federal Arbitration Act. The court concluded that there are “serious questions” regarding whether AB 51 is preempted and found “persuasive” the associations’ arguments that allowing AB 51 to take effect, “even briefly,” would subject businesses to irreparable harms and “cause disruption in the making of employment contracts.”

The hearing for the preliminary injunction motion is set for January 10, 2020. A copy of the order granting the temporary restraining order is available here.