Senator Thomas J. Umberg (D-Santa Ana) announced the introduction of Senate Bill 82, which aims to restrict overly broad terms and conditions that require unsuspecting consumers to sign “infinite” arbitration clauses.
“Arbitration can be an effective resource for resolving disputes in a manner that is much cheaper and faster than a formal trial. However, the process is not without its shortcomings,” stated Senator Umberg, Chair of the Senate Judiciary Committee. “The media has reported on some utterly absurd scenarios in recent years with companies that have employed the use of infinite arbitration clauses,” he continued. “It’s time for this ridiculousness to end.”
Arbitration clauses were traditionally limited to disputes related to a specific contract. However, “infinite” arbitration clauses try to require arbitration for all future disputes, even those unrelated to the original agreement. When agreements contain “infinite clauses,” they can bind individuals who never agreed to arbitration, such as family members or corporate affiliates, and be overly broad in their scope. Some companies have claimed that all disputes—no matter how unrelated—must go to arbitration. Courts have often struck down such broad clauses, citing unfairness and lack of clear agreement, but companies continue to include them.
In 2020, a class action lawsuit regarding unsolicited DIRECTV advertisements was forced into arbitration because the named plaintiff had signed an agreement with AT&T, who was at the time unaffiliated with DIRECTV, with a forced arbitration clause (DIRECTV later became affiliated with AT&T well after the plaintiff signed the agreement). (Mey v. DirectTV, LLC, No. 18-1534, 4th Circ. 2020)
In 2021 a family who was suing Walmart alleging one of its employees falsely and without evidence accused the family of shoplifting was forced into arbitration because, months prior, one member of the family had signed a contract containing an arbitration clause in order to drive for Walmart’s grocery delivery service. (Smith v. Walmart, Inc., Civil Action 7:22-cv-00568)
In 2022, the estate of man who died in an Airbnb was forced into arbitration from a clause in the Airbnb account agreement even though he wasn’t renting the property where he died. (Airbnb Inc. v. Rice, No. 81346, Nev. 2022)
A New Jersey couple were injured in an Uber accident in 2022. They attempted to sue Uber, but the court ruled that due to an arbitration agreement accepted through an Uber Eats account—allegedly used by their minor daughter to order a pizza—the couple was bound to resolve their claims through arbitration rather than in court.
In 2024, Disney forced a man whose wife died after having an allergic reaction to food eaten at a theme park restaurant into arbitration based upon a clause the widower agreed to in a subscriber agreement when signing up for the Disney+ streaming service. After receiving a large amount of media attention, Disney later dropped their push for arbitration and settled with the plaintiff.
Senator Umberg’s Senate Bill 82, co-sponsored by the Consumer Attorneys of California, Consumer Watchdog, and the Consumer Federation of California aims to ensure that arbitration clauses between consumers and businesses apply only to the specific product or service covered by the agreement.
“Though the arbitration process can be useful for resolving disputes quickly, powerful corporations often abuse this process – taking advantage of consumers by moving legal proceedings out from under the public eye,” said Geoff Wells, President, Consumer Attorneys of California. “Attempting to use ‘infinite’ pre-dispute arbitration clauses to bind an individual and even their family to a corporation and all corporate affiliates silences victims of wrongdoing and prevents them from ever having their day in court. CAOC is grateful to Senator Umberg for authoring Senate Bill 82, which will protect consumers by curbing this dangerous overreach.”
“When signing a contract, consumers are agreeing to the terms specific to that product or service with that company, not its entire network of subsidiaries,” said Consumer Federation of California Executive Director Robert Herrell. “It’s a clear abuse of power for companies to impose ‘infinite’ arbitration clauses that force consumers—and even their family members—into arbitration, often without their consent, for disputes unrelated to the original agreement or outside the scope of the service they initially signed up for.”
Jamie Court, President of Consumer Watchdog noted that, “Our 7th amendment right to trial by jury is not something that we should sign away in perpetuity and for all purposes when we click on a Disney plus trial subscription. Companies need to be accountable in court unless they specifically request that we sign an arbitration agreement for a specific product or service.”
SB 82 is expected to be heard in the Senate Judiciary Committee in March or April.