2018’s Assembly Bill 3247 was signed into law by Governor Jerry Brown on July 16, 2018, as Chapter 106. The law has been in effect since January 1, 2019. This new law modified the arbitration agreement enforcement language in the California Code of Civil Procedure.

https://soundcloud.com/capimpactca/ab-3247

AB 3247 was authored by the full Assembly Judiciary Committee. The new law amends Section 1281.1 of the California Code of Civil Procedure, which is the provision of the Code of Civil Procedure that governs arbitration agreements in the state of California.

The bill makes two changes to existing California law, one change is technical while the other is substantive. The technical amendment is specific to the arbitration agreement and substitutes the word “that” for “such.” The substantive change to existing law is made in Section 1281.2, subdivision (b), which now says that grounds exist for “rescission” of the agreement, as opposed to revocation.

As a result, this bill provides that a court is not required to order parties to arbitrate a controversy if the court determines that grounds exist for rescission of the agreement rather than revocation of the agreement.

Ab 3247 had no officially listed supporters or opponents. Instead, what members of the Legislature saw in their Floor Analyses was that in the California Supreme Court’s decision in Armendariz v. Foundation Health Site Care Services, the California Supreme Court made it clear that rescission is the appropriate terminology, not revocation. AB 3247 corrects this misnomer by replacing the term “revocation” Section 1281.2 of the California Code of Civil Procedure with the word rescission, clarifying the statute.

Lastly, one fun fact about the Armendariz decision as it relates to AB 3247. The part of the decision in Armendariz v. Foundation Health Site Care Services that led to the drafting and passage of AB 3247 is that it was in a footnote where the California Supreme Court noted what the correct terminology should be.