On August 31, 2021, Governor Gavin Newsom signed Assembly Bill 272 (“AB 272”) into law. The bill has significant implications for arbitration provisions in enrollment agreements for California private schools.
AB 272 adds Section 1002.7 to the California Code of Civil Procedure. The new law states that the Legislature deems arbitration provisions in enrollment agreements that “waive a legal right, remedy, forum, proceeding, or procedure arising out of a criminal sexual assault or criminal sexual battery” unconscionable. The minor may disaffirm these provisions. As a result, arbitration agreements covering these claims may not be enforceable.
Whether the new law will be enforceable is somewhat unclear. The California Chamber of Commerce opposed AB 272 based on its contention that the Federal Arbitration Act (“FAA”) likely preempts the bill. The FAA generally preempts state laws and court decisions that disfavor arbitration. The California Chamber of Commerce also noted its belief that AB 272 is inconsistent with the U.S. Supreme Court’s decision in AT&T Mobility L.L.C. v. Concepcion (2011) 563 U.S. 333, because “it provides that a generally applicable contract defense (unconscionability) applies specifically to arbitration clauses in otherwise valid enrollment agreements.”
The practical impact of AB 272 is that schools will need to evaluate their existing arbitration agreements and consider revising them next year.
This Special Bulletin is published for the benefit of the clients of Liebert Cassidy Whitmore. The information in this Special Bulletin should not be acted upon without professional advice.
