For years, companies have relied on broad arbitration agreements in their terms of service that mandate arbitration of all consumer claims, regardless of the nature of the claim. A new California bill—California Civil Code § 1670.15—calls these “infinite” arbitration provisions into question.

The bill was seemingly prompted by a widely publicized case in which Disney sought to compel arbitration of a wrongful death claim arising from an incident at Disney Springs. Disney argued that the decedent had agreed to a mandatory arbitration provision when signing up for a Disney+ trial account. The bill’s proponents sought to ensure that consumer arbitration agreements only apply to claims that relate to the original contract containing the arbitration provision. 

California Civil Code § 1670.15 prohibits “dispute resolution terms and conditions” in consumer contracts from reaching beyond the specific transaction that the contract governs. Under this law, arbitration, forum-selection, and choice-of-law clauses must be limited to “the use, payment, or provision” of the good or service covered by the terms. Any clause that reaches further is void as against public policy, and the statute expressly bars parties from contracting around that limitation.

At its most expansive, § 1670.15 could render a company's entire arbitration agreement unenforceable, not just unenforceable as to out-of-scope claims (such as torts or wrongful-death claims). But the law has an uncertain future in the face of expected preemption challenges. And if it survives, significant questions remain about how it will operate in practice.

The Threshold Question – Federal Preemption

The Federal Arbitration Act preempts state laws that single out arbitration for disfavored treatment or that impose special burdens on arbitration agreements. AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011). California has a track record of enacting arbitration restrictions that federal courts have invalidated on that basis. Recently, the Ninth Circuit struck down AB 51, which prohibited mandatory arbitration in employment contracts. Chamber of Commerce of the United States v. Bonta, 62 F.4th 473 (9th Cir. 2023).

Civil Code § 1670.15's proponents sought to anticipate an FAA preemption challenge by framing the provision as a general contract-scope rule applicable to all dispute resolution provisions, not just a law that targets arbitration by name. The proponents argue that under Supreme Court precedent, a neutral and generally applicable contract principle can survive FAA preemption even if it incidentally limits the reach of an arbitration clause. Whether § 1670.15 qualifies as neutral and general, or whether courts will look through its “dispute resolution” framing and treat it as a targeted restriction on arbitration, is the statute's central legal vulnerability.

As of this post, no court has addressed the preemption issue. For now, the law is in effect.

Testing the Boundaries – Severability, Retroactivity, Delegation, and Scope

If § 1670.15 survives preemption challenge, the next set of questions concerns how courts will apply the statute. None of these questions has been resolved, and each presents meaningful risk.

Severability

Where an arbitration provision reaches beyond what § 1670.15 permits, a court will have to decide what to do with it. The statute does not specify whether a court should narrow the clause to its lawful scope or void the entire arbitration provision. That determination will likely depend on the specific contract; in particular, whether there is a severability clause and how broadly the severability clause is drafted. The stakes here are significant: a company that loses its entire arbitration provision faces exposure to consumer class action litigation in court—actions that the arbitration provision would otherwise have covered without controversy.

Retroactivity

The statute also does not state whether it applies to consumer contracts entered into before January 1, 2026. Earlier versions of the bill included an explicit provision that it applies prospectively, namely, to contracts newly entered after January 1, 2026. The enacted text does not. That omission opens the door to arguments that § 1670.15 governs pre-2026 agreements. This issue has special significance for contracts that auto-renew or are amended after the effective date. Thus, companies with long-term or automatically renewing consumer agreements should not assume that their pre-2026 terms are categorically outside this statute's reach.

Delegation

Most arbitration agreements include delegation clauses—provisions that assign to the arbitrator, rather than a court, the threshold question of whether a particular dispute falls within the scope of the agreement. These are often strictly enforced, but courts might allocate to themselves the authority to determine at the outset whether an arbitration provision violates the statute. If courts take that view, companies should expect more up-front judicial scrutiny of their terms and more motion practice on arbitrability before any merits proceeding begins.

Scope

The statute limits dispute clauses to “the use, payment, or provision” of the specific product or service provided by the consumer terms of use. The outer boundaries of that standard will take time to develop. At one end of the spectrum, there are personal injury claims clearly unrelated to an online product or service; at the other end, there are billing disputes directly concerning that product or service. Then there is likely to be more contested terrain: data breach and privacy claims, advertising pixel and tracking technology claims, marketing-related disputes, and claims involving affiliated entities or bundled products. Parties will likely litigate, and courts will have to decide, what it actually means for a claim to arise from a particular transaction.

Conclusion

Companies should not assume that § 1670.15 will be struck down, and even if it is, the litigation required to get there may take years. In the interim, the right approach depends on a company-specific assessment: the breadth of existing terms, the realistic universe of consumer claims in California, and the operational burden of revising terms and managing re-assent mechanisms. Getting ahead of these questions on your own timeline and terms, and not a plaintiff's, is a crucial risk mitigation measure.