It seems as if the California Legislature can’t help itself. Even after starting the year promising to work on making California more affordable, state officials are still pursuing policies that would drive up costs.
As family business owners across California swim against the tide in an effort to keep their doors open and serve their communities, Sen. Tom Umberg, D-Santa Ana, is advancing a piece of legislation that, while well-intentioned, would hand trial attorneys a major win at the expense of our family businesses – including many mom-and-pop storefronts that make our communities unique.
At first glance, Sen. Umberg’s Senate Bill 82 may seem like a technical update to California laws governing arbitration. In reality, it’s a gift to trial attorneys – and a lawsuit trap for the thousands of mom-and-pop shops already burdened by inflation, tariffs, rising rents, and a tough regulatory climate.
SB 82 would drastically restrict the ability of family businesses to resolve disputes through arbitration, a faster, fairer, and far less expensive alternative to courtroom litigation. Instead, it opens the door to more lawsuits, more legal costs, and more uncertainty – just when family businesses can least afford it.
Under this bill, arbitration clauses in “consumer use agreements” could only cover disputes about the “use, payment, or provision” of the good or service. That language is vague at best and invites costly confusion. If a customer slips and falls on a shop floor, is that about the “provision” of a service? If a product is returned damaged, is that covered under “use”? No one knows.
Diverting more arbitration cases to the trial courts won’t just burden business owners. By drastically reducing the types of claims allowed to be arbitrated, this bill would potentially result in hundreds of thousands of new cases in our already-clogged California courts – delaying justice and potential payouts for victims.
Let’s be clear: arbitration is not anti-consumer. Studies have shown that consumers often recover more through arbitration than through lawsuits. It’s faster, more affordable, and less adversarial. That’s why both businesses and consumers benefit from it.
Therefore, if arbitration is beneficial for both consumers and businesses, the only people who win by limiting it are the trial attorneys. Pushing more disputes into our courts would give trial attorneys more opportunities to extract settlements by threatening lengthy and expensive lawsuits. This may enrich a few lawyers you see on billboards throughout Southern California, but it drains time, money, and energy from family business owners who want to spend their days serving customers, not sitting in courtrooms.
If SB 82 becomes law, it will also likely trigger years of litigation over its legality. Last year, a federal court struck down a similar bill dealing with arbitration because it was preempted by federal law. The same judge ordered state officials to pay over $800,000 in legal fees. California taxpayers and family businesses can’t afford a repeat performance.
Instead of making it harder to resolve disputes, lawmakers should be working to reduce costs, increase clarity, and protect the limited resources of businesses. SB 82 does the opposite.
We urge the Legislature to reject SB 82. Family businesses are the backbone of our economy. They deserve support, not new legal landmines and traps.
Ken Monroe is the chairman of Family Business Association of California and CEO of Holt of California.