The recently-enacted consumer data privacy measure, Assembly Bill 375 (Chau), contains a provision that likely violates federal law and it should be removed from the bill that does not take effect until January 1, 2020. This provision would void a waiver of a consumer’s rights under this new law and is a gift to the plaintiff’s bar.
Because the new law becomes operative on January 1, 2020, the Legislature has sufficient time to remove this likely unlawful provision or it should be challenged in court as a violation of federal law. The objectionable provision is contained in new Civil Code Section 1798.192 and reads as follows: “Any provision of a contract or agreement of any kind that purports to waive or limit in any way a consumer’s rights under this title, including, but not limited to, any right to a remedy or means of enforcement, shall be deemed contrary to public policy and shall be void and unenforceable.”
This provision may run afoul of the FAA because it would void any existing contract or agreement, as well as preclude any future ones, that requires legal disputes to be subject to arbitration because of the language it uses, “means of enforcement.” The federal and state courts have consistently struck down state laws that attempt to limit the use of arbitration.
The Federal Arbitration Act (FAA) provides, in part, that agreements to arbitrate “shall be valid, irrevocable and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” (see 9 USC Section 2) In reviewing this provision of AB 375, it is likely in violation of the U.S. Supreme Court’s view on the reach of the FAA regarding state efforts to limit or preclude the use of arbitration.
More than three decades ago, the high court explained the purpose of the FAA. In Southland Corp. v. Keating (1984) 465 US 1, the US Supreme Court held: “In enacting Section 2 of the FAA…Congress declared a national policy favoring arbitration and withdrew the power of the states to require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration.”
As might be expected, AB 375 contains a severability clause in Section 4 of the bill that provides, “if any provision of this bill or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.” As such, if a court strikes down this provision as violating federal law, then the remainder of AB 375 will remain in effect. In the meantime, the Legislature should address the issue and not wait for a lengthy and costly legal battle on this one provision.
Chris Micheli is an attorney and lobbyist at the Sacramento governmental relations firms of Aprea & Micheli, Inc. He can be reached at 916-448-3075.