As we wrote here, United States District Court Judge Kimberly J. Mueller of the Eastern District of California wrote a brief “minute order” explaining that she was issuing a preliminary injunction to halt enforcement of California’s controversial anti-arbitration law, known as AB 51.
The new law, which was set to go into effect on January 1, 2020, would outlaw mandatory arbitration agreements with employees. AB 51 would also prohibit arbitration agreements that would require individuals to take affirmative action to be excluded from arbitration, such as opting out. The law would also appear to extend to jury waivers and class action waivers. And it would include criminal penalties.
As she had indicated she would do, Judge Mueller has now issued a more detailed order explaining her decision to enjoin enforcement of the statute.
In her order, Judge Mueller found that the business groups that had filed suit were likely to prevail on their argument that AB 51 is preempted by the Federal Arbitration Act (“FAA”). And she found that, absent an injunction, AB 51 would cause irreparable harm to business groups not only by affecting the California employment market, but by exposing businesses to criminal charges.
It seems highly unlikely that this order will be the death of the controversial statute. Instead, it appears likely that the attorney general will appeal the decision to the Ninth Circuit Court of Appeal – and that whichever side is on the losing end there will seek review by the United States Supreme Court.
We will continue to monitor the developments on this issue.