California SB 82 and the end of “infinite” arbitration

Effective January 1, 2026, SB 82 will add Section 1670.15 to the California Civil Code, which may materially reshape how the enforcement of dispute resolution provisions in consumer agreements may be enforced in California.

Overview of SB 82

According to its legislative history, SB 82 attempts to curb the proliferation of what is known as “infinite arbitration clauses” by limiting the dispute resolution terms in consumer agreements.  Specifically, SB 82 limits dispute resolution terms in a “consumer use agreement” to claims arising out of and relating to the use, payment, or provision of the specific good, service, money, or credit provided by that agreement. Contractual provisions that purport to require arbitration or other dispute resolution for unrelated future disputes (including disputes involving different products, services, or affiliates) are void, unenforceable, and deemed contrary to public policy.

In simple terms, SB 82 limits arbitration agreements to disputes tied to the specific consumer transaction, rather than to the consumer relationship as a whole. For example, a consumer agrees to arbitration when joining a gym. If the gym’s van later hits the consumer in a grocery store parking lot, SB 82 may prevent the gym from using the membership agreement to force the personal injury claim into arbitration.

SB 82 attempts to statutorily narrow the scope of claims subject to arbitration to prevent unrelated future disputes from being swept into arbitration.

Federal Arbitration Act preemption risk

As stated above, California has framed SB 82 as a restriction on contractual scope, not a ban on arbitration, an approach intended to avoid direct conflict with federal arbitration law.

That said, SB 82 is likely to face challenges on the grounds that it is preempted by the FAA, which has a strong policy favoring arbitration and preempts state laws that single out arbitration agreements for disfavored treatment. Although SB 82 does not ban arbitration, opponents argue that limiting the scope of arbitrable claims effectively disfavors arbitration and therefore conflicts with the FAA. On the other hand, proponents counter that SB 82 merely enforces traditional contract‑law principles by ensuring that dispute resolution provisions apply only to disputes arising from the contract in which they appear. Courts will ultimately determine whether this distinction is sufficient to avoid preemption. Until the courts make that determination on preemption, SB 82 continues to be effective in California.

Key open questions and litigation implications

SB 82 raises several unresolved issues that are likely to be litigated early and often:

• Retroactivity: SB 82 takes effect on January 1, 2026. Despite this clear start date, the statute remains silent on its impact on existing agreements that predate SB 82’s effective date that either continue or are amended after the effective date. This silence invites litigation over whether the law can reach older contracts without unconstitutionally interfering with vested contractual obligations.
• Scope of covered claims: Threshold questions of arbitrability will become a primary focus for California litigants. Because SB 82 limits arbitration to claims arising directly from the specific good or service provided under the consumer contract, many ancillary disputes, such as personal injury or data privacy claims, may fall into a legal gray area. Businesses will face a higher burden to prove that such claims are sufficiently tied to the consumer agreement to remain in arbitration.
• Delegation and who decides arbitrability: SB 82’s public policy language may empower courts to decide threshold scope questions even when a contract includes a delegation clause. Because the statute deems arbitration provisions that are overbroad as void, judges are likely to resolve these disputes themselves rather than referring them to an arbitrator. This shift will almost certainly increase front-loaded motion practice and litigation costs at the outset of a case.
• Claim‑splitting and venue issues: SB 82 increases the likelihood of “split” litigation, where a single dispute is divided between a courtroom and an arbitration service. Because certain claims may now fall outside the legal scope of an arbitration clause, businesses should prepare for aggressive motion practice regarding the coordination of these two tracks. Disputes over venue and the priority of proceedings will likely become a standard feature of California consumer litigation.

Practical considerations for businesses

Companies doing business with California consumers should review their dispute resolution portfolios immediately. Because SB 82 is now effective, reliance on legacy “catch-all” provisions carries significant litigation risk. We recommend focusing on the following areas:

• Narrowing overly broad provisions: Update language to ensure arbitration is strictly limited to the specific product or service provided in the agreement. By explicitly limiting the clause to claims arising from the use, payment, or provision of the identified good or service, companies can demonstrate compliance with Section 1670.15 of the Civil Code and reduce the risk of a court voiding the entire agreement as overbroad.
• Reassessing affiliate sweeps: Remove or limit language that attempts to sweep in unrelated disputes involving parent companies, subsidiaries, or separate business units. SB 82 mandates a strict nexus between the arbitration agreement and the specific service provided. Provisions that “sweep in” separate affiliates for unrelated conduct are now a primary target for public policy challenges in California courts.
• Evaluating delegation and severability: Review whether existing delegation clauses remain enforceable in light of the public policy restrictions in Section 1670.15 of the Civil Code. If a court determines that SB 82’s protections cannot be waived, the presence of a delegation clause may no longer prevent a judge from ruling on the scope of the arbitration agreement.
• Audit contract renewals: Identify ongoing consumer agreements that may be modified or renewed after January 1, 2026. Because SB 82 applies to contracts “entered into” after the effective date, any post-deadline amendment or automatic renewal could be characterized as a new agreement, inadvertently subjecting legacy arbitration clauses to the statute’s restrictive scope.

Client Alert 2026-009