ABTL Report - Fall 2026 Edition - Flipbook - Page 11
ABTL - Los Angeles
Fall 2026
governed by the laws of a different state with less permissive
arbitration discovery statutes. It appears again that the forum is
key. On this issue, the Narrowers will bene昀椀t from California
authority providing that a general choice-of-law provision
invokes a state’s arbitration rules. (Cronus, supra, 35 Cal.4th at
p. 393.) The Expanders, by contrast, will bene昀椀t from federal
common law providing that a general choice-of-law provision
does not operate to invoke that state’s arbitration rules.
(Mastrobuono v. Shearson Lehman Hutton, Inc. (1995) 514 U.S.
52, 63–64; Wolsey, Ltd. v. Foodmaker, Inc. (9th Cir. 1998) 144
F.3d 1205, 1213.) Thus, another issue that may arise is which
body of law—state or federal—an arbitrator should use to make
a choice-of-law determination.
A SEA CHANGE? C.C.P. § 1283.05 AMENDMENT BROADENS DISCOVERY
RIGHTS FOR LITIGANTS IN ARBITRATION...continued from Page 10
unconscionable because it was governed by the FAA and
therefore did not allow necessary party and nonparty discovery.
The Court rejected the plaintiff’s argument in that context.
(League v. Guidehouse, Inc. (C.D.Cal. Oct. 3, 2024, No. CV 2310151-MWF (JPRx)) 2024 WL 5311157, at p. *3.) For the time
being, parties should carefully analyze the extent to which the
language in their arbitration agreements incorporates the FAA
and avail themselves of any language that suggests broad FAA
incorporation (for Narrowers) or limited FAA incorporation (for
Expanders).
What if the agreement (assuming it involves interstate
commerce) is silent on procedural rules altogether? The
Expanders will argue that under Volt Information Sciences,
Inc. v. Board of Trustees of Leland Stanford Junior University
(1989) 489 U.S. 468 and Cronus Investments, Inc. v. Concierge
Services (2005) 35 Cal.4th 376, when a California state court
is asked to compel a case to arbitration, California’s procedural
law—including section 1283.05—governs, and the FAA does
not directly con昀氀ict with section 1283.05.3 The Narrowers
will argue that section 1283.05 is preempted because it directly
con昀氀icts with the FAA’s policy of ef昀椀cient arbitration of
disputes. One of the Expanders’ rebuttals would be that “[t]
here is no federal policy favoring arbitration under a certain set
of procedural rules; the federal policy is simply to ensure the
enforceability, according to their terms, of private agreements to
arbitrate.” (Volt, supra, 489 U.S. at p. 476.) As of the publication
of this article, it does not appear that this precise issue has been
presented to any appeals court.
Drafters whose arbitrations may take place in California and
who wish to avoid the effect of section 1283.05 may be able to
strengthen their position by expressly indicating that a particular
state’s arbitration procedures apply. Even with careful effort,
however, under California law a court (or arbitrator) may choose
not to enforce a choice-of-law clause if the result is contrary to
public policy.
Retroactivity
The main retroactivity issue arises when an arbitration
agreement was signed before January 1, 2025, and the arbitration
is initiated after January 1, 2025. The Expanders generally have
the stronger position on this issue based on the plain language
of the 昀椀rst sentence of section 1283.05. Nevertheless, the
Narrowers are not without arguments and should also explore
whether they have any constitutional arguments based on the
Contracts Clause under the facts of their case. (Cf. Allied
Structural Steel Co. v. Spannaus (1978) 438 U.S. 234.)
Choice of Law
New section 1283.05 is likely to implicate myriad choiceof-law issues; this section brie昀氀y surveys just a few. To begin
with: drafters of arbitration agreements should be aware that
by indicating that California law “governs” the arbitration
agreement, the California Arbitration Act, including the new
provisions enacted by SB 940, will apply, even if the agreement
also refers to and incorporates the rules of a speci昀椀ed ADR
provider. (Mastick v. TD Ameritrade, Inc. (2012) 209 Cal.
App.4th 1258, 1264–1265.)
CONCLUSION
While it remains to be seen whether new section 1283.05
is truly a sea change, what is clear is that the new law moves
the needle signi昀椀cantly with respect to two competing policy
considerations. The 昀椀rst is that arbitration should provide for
ef昀椀cient and economical resolution of disputes. The second is
that arbitration should allow for parties to develop a complete
record, so that cases are decided based on all available relevant
evidence. It appears that new section 1283.05 embodies a policy
that de-emphasizes the former and emphasizes the latter.
Another question is whether section 1283.05 will apply
when an arbitration takes place in California but the arbitration
agreement states that the agreement or the arbitration shall be
Michael Alfera is a Senior Associate at Munck Wilson Mandala,
LLP
The rule is not the same in federal court, where parties may 昀椀nd it easier to argue
that the FAA applies and therefore limits discovery. Thus, the enactment of SB 940
may profoundly impact the desirability of federal court for parties to arbitration,
with the Narrowers potentially gaining greater incentive to 昀椀le in federal court or
remove before compelling arbitration.
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