Do the discovery provisions in SB 940 apply to arbitrations commenced before January 2025?

On Jan. 1, 2025, discovery in arbitrations governed by California law significantly changed with the enactment of Senate Bill  940. SB 940 expands the scope of discovery available in arbitrations and the power of arbitrators to order discovery. Parties currently arbitrating disputes are uncertain as to how SB 940 impacts their proceedings. Do these changes apply retroactively to all pending proceedings or only prospectively to proceedings commenced after Jan. 1, 2025?

Prior to SB 940, California law presumed that discovery in arbitrations was limited. California Code of Civil Procedure (CCP) § 1283.1 previously stated that the discovery described under CCP § 1283.05 (which permits broader discovery in arbitrations) did not apply in an arbitration unless the proceeding involved personal injury or wrongful death, or the parties expressly agreed to expand the scope of discovery by incorporating §1283.05 or the entire California Discovery Act in their arbitration agreement. Also, before the enactment of SB 940, CCP § 1282.6, which allows arbitrators to issue third-party deposition and document subpoenas, applied only if the parties' arbitration agreement expressly incorporated § 1283.05.

SB 940 changed the prior statutory scheme by repealing CCP § 1283.1 in its entirety. It also eliminated any references to § 1283.1 from § 1283.05 and § 1282.6 (SB 940 Discovery Provisions). In short, under pre-SB 940 law, arbitral discovery was presumed to be limited unless the parties expressly agreed to broader discovery. SB 940 reverses that presumption. Now, under SB 940, broad rights to discovery are presumed unless the parties' agreement excludes or limits those broad rights

It is unclear whether parties in pending arbitrations may now seek all discovery allowed under §§ 1282.6 and 1283.05, even if their proceedings commenced prior to Jan. 1, 2025. This article sets forth arguments for and against the application of SB 940 to existing proceedings and suggests the likely effect of SB 940 on discovery in arbitrations given the new law.

Attorneys who wish to limit the impact of SB 940 on pending arbitrations may argue that it does not expressly state that the provisions expanding discovery apply retroactively. SB 940 addresses issues other than discovery in arbitrations, and several of those non-discovery-related provisions under it expressly state that they apply after Jan. 1, 2025; i.e., prospectively, not retroactively. (See, SB 940(1), (2), (3),  SECS. 2, 3, SEC. 4(a)(7).) The SB 940 Discovery Provisions, however, do not state whether the legislature intended those provisions to be retroactive or prospective. (See, SB 940 SEC. 6, amending CCP § 1282.6, and SEC. 7, amending CCP § 1283.05.) In the absence of an express statement as to whether a new law applies retroactively, courts presume that new laws do not apply retroactively. (Evangelatos v. Superior Ct., 44 Cal. 3d 1188, 1206-08 (1988).) The lack of an express statement that the SB 940 Discovery Provisions apply retroactively supports an argument against retroactivity.

Furthermore, the legislative history of SB 940 also does not state whether the legislature intended to expand discovery in all pending arbitrations or only those commencing after Jan. 1, 2025. Because the legislative history suggests that the primary purpose of SB 940 is to enhance fairness in consumer arbitrations, attorneys advocating for limited discovery in a non-consumer arbitration should emphasize that the policy behind SB 940 is inapplicable to their non-consumer proceeding. However, those seeking expanded rights to discovery should note that in the legislative history, the legislature acknowledged the benefit of limited discovery in arbitrations but nonetheless expanded discovery rights in arbitration absent agreement to the contrary.

Those arguing for limited discovery who are parties to agreements executed before SB 940's enactment may also argue that they relied upon the previous law's policy of limited discovery in arbitrations when they agreed to arbitrate their dispute. They may contend that retroactive application of SB 940 to their pre-2025 agreements is contrary to the parties' intentions at the time of contracting. However, as discussed below, a law is not considered to have a retroactive effect unless it changes the legal consequences of past conduct by imposing new or different liabilities based upon that conduct.

Parties seeking to enjoy the expanded discovery under SB 940 will likely argue that it did not merely change the prior law; it eliminated it entirely. Under CCP § 1283.1, discovery in arbitrations was limited to certain types of cases unless the parties expressly agreed otherwise. SB 940 repealed § 1283.1 such that the prior statutory limitation on discovery no longer exists, so arbitrators no longer have statutory authority to limit discovery authorized under §§ 1282.6 and §1283.05, although arbitrators may limit discovery if expressly authorized under the parties' arbitration agreement.

Those who favor the application of SB 940's expanded discovery provisions to all pending arbitrations, including those commenced before 2025, may contend that the legislature's failure to expressly state whether the SB 940 Discovery Provisions apply retroactively or prospectively is irrelevant. Under California law, the presumption that statutes operate prospectively absent a clear indication that the legislature intended otherwise does not apply if the operation of the new law does not "change[ ] the legal consequences of past conduct by imposing new or different liabilities based upon such conduct." (See, Californians for Disability Rts. v. Mervyn's, LLC, 39 Cal. 4th 223, 231 (2006).) If the new law "substantially affects existing rights and obligations," application to a pending proceeding is forbidden "absent an express legislative intent to permit such retroactive application." (Id. at 231 (citations omitted).) But if the new law does not substantially affect existing rights and obligations, application to a pending proceeding is permitted because the application is "prospective." (Id.) It is arguable that applying the SB 940 Discovery Provisions to pending arbitrations does not constitute retroactive application because the provisions do not change the legal consequences of the conduct giving rise to the dispute or the substantive elements of a claim or a defense. SB 940 merely changes the tools available to prove or disprove a claim or defense. Accordingly, the absence of an express statement by the California Legislature regarding the application of SB 940 would be irrelevant.

While there are arguments both for and against the application of SB 940 to arbitrations commenced before 2025, on balance, parties who seek to apply SB 940 to their pre-2025 pending arbitration proceedings are likely to prevail based on the repeal of § 1283.1, the fact that the SB 940 Discovery Provisions are likely to be characterized as prospective within the meaning of the holding in Californians for Disability Rights and the legislative history that indicates the legislature considered the advantages of limited discovery in arbitrations but decided to expand access to discovery in arbitrations regardless. (See also, Vo v. Tech. Credit Union, 108 Cal. App. 5^th 632, 647, n.6 (2025) reh'g denied (Mar. 4, 2025), review filed (Mar. 14, 2025).)

Ultimately, the parties' agreement is preeminent. If an arbitration agreement explicitly limits the scope of discovery, the agreement governs. SB 940 merely reverses prior California policy to limit discovery absent agreement to the contrary. In drafting arbitration clauses for future agreements, it will be necessary to expressly limit discovery if that is the desired outcome.

Parties seeking to limit discovery despite SB 940 may argue that other limiting principles apply. SB 940 modifies California law and may not apply if the parties adopted the Federal Arbitration Act (FAA) in their arbitration agreement. The FAA does not address discovery, but it allows arbitrators to require the attendance of witnesses only at evidentiary hearings and does not permit arbitrators to issue subpoenas for depositions of third-party witnesses. The California Supreme Court is currently reviewing the question whether an arbitration agreement that adopts the FAA preempts state substantive law. (See, Hernandez v. Sohnen Enterprises, 102 Cal.App.5th 222, 238 (2024); see also, Hohenshelt v. Superior Court, 99 Cal.App.5th 1319, 1326 (2024).)

Even where an arbitrator determines that SB 940 applies to a pending arbitration, if the deadline to complete discovery expired before Jan. 1, 2025, the arbitrator is unlikely to allow the participants to avail themselves of the expanded discovery permitted under the new law. Parties may also seek limits to discovery under CCP § 1283.05(e), which states that "[d]epositions for discovery shall not be taken unless leave to do so is first granted by the arbitrator or arbitrators." Finally, the parties may seek limits to discovery if the arbitration agreement states that special procedural rules apply; e.g., JAMS Comprehensive Arbitration Rules & Procedures. The JAMS Comprehensive Arbitration Rules state that each party may take "one deposition of an opposing Party" and that the "necessity of additional depositions shall be determined by the Arbitrator based upon the reasonable need for the requested information, the availability of other discovery options and the burdensomeness of the request on the opposing Parties and the witness." (JAMS Rule 17(b).) The incorporation of these rules may, in effect, amount to an agreement to limit discovery pursuant to the rules incorporated into the agreement.

Lastly, if an arbitration agreement contains express limitations upon discovery, SB 940 does not alter that agreement. In the future, parties who wish to limit the cost and duration of their arbitration proceedings should include provisions in their arbitration agreement that expressly limit the forms and scope of discovery permitted.

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