New California Law Seeks to Prohibit “Infinite” Arbitration Clauses
By Kendall Wilson
March 5, 2026
It is a common adage amongst lawyers that “bad facts make bad law.” Recently, a tragic death and a public relations misstep by Disney led to the passage of a new law that may have wide-ranging effects for financial institutions. Time will tell whether Senate Bill 82 (or “SB 82,” which is now California Civ. Code § 1670.15) is “good” or “bad” – and at some point, the Supreme Court will almost certainly be asked to decide whether it is constitutional. But for now, financial institutions seeking to arbitrate consumer disputes may need to take a hard look at their arbitration clauses to ensure they are enforceable under the new law.
Tragedy, Disney, and Public Outrage at “Infinite” Arbitration Clauses
In 2023, a Disneyland visitor sadly and unexpectedly passed away, apparently due to an allergic reaction to food she consumed at the park. Her husband filed a wrongful death lawsuit against the Walt Disney Company, and in May 2024, Disney tried to force the recently widowed plaintiff to arbitrate the lawsuit. Arbitration, of course, is a matter of contract – parties can generally only be forced to arbitrate a dispute if they have agreed to do so. So what was the basis for Disney’s argument that that the plaintiff had agreed to arbitrate his wrongful death action? Apparently in 2019, the plaintiff had signed up for a month-long trial of Disney’s streaming service, “Disney+.” The terms and conditions of the Disney+ trial subscription apparently included a provision stating that he agreed to arbitrate “any dispute” with “The Walt Disney Company or its affiliates.” Disney’s lawyers argued that the wrongful death lawsuit – arising from the death of the plaintiff’s wife at the Disneyland park four years after he signed up for the streaming subscription – fell within the broad scope of “any dispute” between the plaintiff and Disney, and that he therefore should be required to resolve his claim through arbitration.
The public backlash was swift and predictable. Disney eventually backed down from its efforts to move the dispute to arbitration, but the furor – short lived though it was – shone a spotlight on what had once been an obscure, esoteric issue: so-called “infinite” arbitration clauses, which require consumers to arbitrate any and all disputes that may arise with a company, even if the dispute is unrelated to the product or service that is the subject of the original agreement to arbitrate.
It didn’t take long for the California Assembly – which makes no secret of its contempt for arbitration – to respond. In 2025, the Assembly passed SB 82, which states: “Dispute resolution terms and conditions of a consumer use agreement shall be limited to the use, payment, or provision of the good, service, money, or credit provided by that consumer use agreement.” The bill, which is now codified at Cal. Civ. Code § 1670.15, took effect on January 1, 2026.
What Does SB 82 Mean for California Financial Institutions?
In the long run, SB 82 – like several previous California laws seeking to limit or invalidate arbitration agreements – may be struck down as a violation of the Federal Arbitration Act (or “FAA”), which requires states to place arbitration agreements on equal footing with all other contracts. In other words, agreements to arbitrate are enforceable under federal law, except on the same grounds that would invalidate any other contract; and state laws that single out arbitration agreements as invalid or unenforceable simply by virtue of being arbitration agreements run the risk of being declared contrary to the FAA and therefore unconstitutional. The Supreme Court has already swatted down various California laws targeting arbitration six times, and SB 82 could very well be the law that takes California back to the Justices for round seven.
For now, however, financial institutions operating in California will need to reckon with SB 82, and it’s not difficult to imagine the scenarios in which it might come into play. Disney’s attempt to shoehorn a TV trial subscription into an agreement to arbitrate a wrongful death claim was clearly a serious overreach, and the outcry is understandable. But the broad language of the statute could potentially be used to attack arbitration agreements in situations that are much more subtle. Consider, for example, the common credit union practice of having an overarching member agreement that governs the member’s overall relationship with the credit union. Such agreements frequently require members to arbitrate “any dispute” that arises between the member and the credit union. Now consider a situation in which a member signs this agreement in the context of a relatively small deposit account, and later defaults on a much larger personal loan? Or a member who is injured on credit union property while making a deposit? If the credit union sought to arbitrate these disputes, would they be struck down as being outside the purview of “the good, service, money, or credit provided” under the original member agreement?
With SB 82 having been on the books only two months, we have virtually no guidance as to courts will interpret it, or how the arbitration agreements described above would fare if challenged. Until the courts weigh in, it would be wise for California financial institutions to have legal counsel examine their arbitration clauses in light of the new law, to assist with ensuring the highest possibility that such clauses will be enforced.
About the Author
Kendall Wilson
Kendall Wilson is a Senior Associate Attorney at SW&M, bringing over 15 years of diverse legal experience to the firm. Kendall’s practice is centered on representing credit unions in a wide range of legal matters, including labor and employment issues, […]
Learn More