California narrows dispute resolution clauses in consumer-use agreements

In a recent case, Walt Disney Parks and Resorts US, Inc. moved to compel arbitration of personal injury claims arising from an incident at Disney Springs. Piccolo v. Great Irish Pubs Florida, Inc., No. 2024-CA-001616-O (Fla. Cir. Ct. 2024). The motion was based on the plaintiff’s month-long free trial with Disney+, whose terms and conditions required arbitration for dispute resolution. Although Disney’s motion was ultimately withdrawn, the case prompted California to enact Civil Code § 1670.15, effective January 1, 2026.

Civil Code § 1670.15 seeks to prevent similar scenarios from occurring in California by limiting dispute-resolution provisions in consumer contracts to disputes involving the specific transaction for which the consumer consented to the terms.

Key provisions

Civil Code § 1670.15 limits broadly written alternative dispute resolution clauses in consumer-use contracts to “the use, payment, or provision of the good, service, money, or credit that arises from the transaction in the consumer contract.” Courts are instructed to liberally construe § 1670.15 in favor of plaintiff consumers, and any attempt to waive this law is deemed contrary to public policy and therefore void.

As the statute does not expressly provide for retroactive application, it is presumed to apply only to consumer-use agreements entered into on or after January 1, 2026.

Practical implications

As with Civil Code § 1799.208 – which took effect in 2025 and prohibits businesses from requiring out-of-state arbitration of disputes arising in California – there is argument that the Federal Arbitration Act preempts this statute. However, it will take time for those challenges to be resolved.

In the interim, companies may anticipate increased challenges to broad arbitration provisions, with litigation regarding the scope of a “transaction.”

Outlook

The mandate in § 1670.15 reflects further limitations on consumer-use agreements. Although § 1670.15 governs only dispute-resolution provisions, this new law shows California’s strong desire to limit consumer agreements and paves the way for future initiatives that may limit other provisions in consumer-use agreements.

DLA Piper will continue to monitor developments and will provide updates accordingly.

Learn more

For questions or more information about how § 1670.15 and § 1799.208 may affect consumer-use agreements, please contact the authors.