The FAA establishes a federal policy favoring arbitration as an alternative to litigation. In 2019, California enacted AB 51. The statute effectively prohibits mandatory arbitration by forbidding employers to require applicants or employees to waive the right to file a lawsuit.
The Chamber of Commerce sued. The district court granted a preliminary injunction prohibiting California officials from enforcing the law, and California appealed.
The Ninth Circuit stated that the Supreme Court has made clear that the FAA’s preemptive scope extends beyond state rules that affect the enforceability of arbitration agreements to include state rules that burden the formation of arbitration agreements.
The state has the option of asking the full Ninth Circuit to review the panel decision or petitioning the U.S. Supreme Court for review. If California does not seek review, the case will go back to the district court for a ruling on the merits, which the court has already indicated is likely to favor the challengers.