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California’s SB 940 and the Evolving Strategic Landscape of Mass Arbitration
It’s been nearly a year since SB 940 took effect in California, fundamentally altering consumer arbitration by (1) allowing consumers to resolve disputes in small claims court (if the dispute qualifies), even if the contract mandates arbitration; and (2) allowing traditional discovery, subject to the approval of the arbitrator, even if the arbitration agreement prohibits it.
When the law passed, many expected a wave of litigation and judicial interpretation, especially over questions of FAA preemption, scope and enforceability. But as of December 2025, there are still no reported trial court or appellate decisions clarifying how SB 940 will be applied in practice. In the absence of case law, counsel are navigating a legal gray zone—drafting around risks that haven’t yet been tested and managing arbitration proceedings that vary widely depending on how arbitrators interpret the statute.
This article offers a foundational overview of SB 940’s practical implications as it pertains to allowing discovery in mass arbitrations. While the statute is now a year old, much remains unsettled, making proactive planning and neutral procedural design more important than ever.
Discovery in High-Volume Arbitrations
Historically, one of arbitration’s core advantages was efficiency: streamlined procedures, limited discovery and faster resolutions than traditional litigation. California’s prior regime limited discovery in arbitration unless the agreement expressly allowed it or the dispute involved specific statutory claims like personal injury. But under SB 940, parties now have the same discovery rights as they would in a non-limited civil case in superior court— subject to the arbitrator’s approval. While the SB 940 aim to enhance procedural fairness for consumers is broadly supported, the statute also introduces significant complexity for all parties, especially in large-scale consumer arbitrations where discovery can mirror civil litigation.
Mass arbitration has become an increasingly common approach in disputes involving privacy, employment and consumer contracts. In these situations, hundreds or thousands of similar claims may be filed simultaneously. SB 940 now creates the potential for expansive discovery across those individual matters.
Under the new regime, both sides may face broader discovery obligations, potentially across hundreds or thousands of individual arbitrations, raising cost, coordination and consistency concerns. For example, the risk of duplicative depositions, overlapping deadlines and motion practice before different arbitrators can affect the efficiency and fairness of the entire process.
The Risk of Inconsistent Outcomes
Expanded discovery across multiple, parallel arbitration tracks may lead to divergent rulings on privilege, scope or admissibility. Parties may also face the logistical challenge of managing repeated testimony or differing interpretations of procedural rules, particularly when arbitrators apply SB 940 inconsistently due to limited guidance.
These issues create risk for all stakeholders—whether claimant or respondent—and underscore the value of coherent, centralized processes wherever possible.
Centralized Solutions and Legal Framework
Importantly, SB 940 does not preclude the use of procedural tools such as consolidation, stays of individual arbitrations or adjudication of common issues before a coordinated panel. These structures can reduce redundancy and enhance consistency—particularly in large-scale matters involving shared factual or legal questions.
Such approaches are supported by case law. In Jones v. Starz Entertainment, the Ninth Circuit affirmed the legitimacy of consolidation in arbitration where the agreement allows it. SB 940 does not alter that holding and leaves room for arbitration models that preserve fairness while improving procedural efficiency.
Clause Drafting Considerations for Mass Claims:
In light of SB 940’s impact, now is the right time for companies and counsel to revisit their arbitration clauses, especially when disputes may arise in California or involve consumers or employees in the state. For contracts involving large user bases, it’s critical to build in mechanisms that allow for consolidation, stays, or adjudication of common issues. Without these tools, SB 940 could expose both sides to hundreds of parallel discovery tracks, each with its own burdens and timing.
FedArb’s ADR-MDL model is specifically designed for these scenarios. It allows parties to centralize discovery before a panel of experienced former judges, resolve threshold and common legal issues efficiently, and stay individual arbitrations pending those rulings. This structure not only reduces duplicative effort but supports consistency and fairness across cases.
To learn more, visit FedArb’s Mass Arbitration page.
Looking Ahead
SB 940 is part of a broader evolution in arbitration, where procedural expectations are increasingly shaped by statutory mandates rather than party agreement alone. The statute’s long-term impact may depend on how California courts reconcile its provisions with the FAA—and whether its discovery regime is enforced in contracts that specify non-California rules or law.
In the meantime, arbitrators are the primary interpreters of SB 940. Anecdotal reports suggest variation in how the statute is applied—particularly when agreements are silent on governing law or procedural rules. This makes clause clarity and arbitrator selection critical tools for all parties seeking consistency and fairness.
Kennen D. Hagen is the president and CEO of FedArb.