A Practical Framework for Arbitrators Navigating Website Tracking Disputes, SB 940, and the Hohenshelt Decision

An arbitrator receives a demand from a California consumer alleging that a national retailer’s website embedded session-replay software that captured her browsing activity and transmitted it to third parties without her knowledge or consent. She asserts claims under the California Invasion of Privacy Act (“CIPA”), the federal Wiretap Act, and common law invasion of privacy. The retailer’s terms of service specify that all disputes will be governed by Virginia law. The consumer’s counsel objects and demands application of California law.

Now what?

This scenario is no longer hypothetical. Over the past several years, plaintiffs’ counsel have pursued thousands of claims alleging that common website tracking technologies, session replay tools, analytics cookies, advertising pixels, violate decades-old wiretapping statutes never contemplated for the digital age. These disputes frequently land in arbitration, where choice-of-law questions can determine the entire outcome. A consumer whose CIPA claims survive has access to $5,000 per-violation statutory damages.¹ A consumer whose claims are governed by a state with no comparable privacy statute may have nothing at all.

California’s enactment of Senate Bill 940, effective January 1, 2025, changed the landscape for newer contracts. But for agreements predating SB 940, which arbitrators will encounter for years to come, the choice-of-law question still requires careful analysis. And the California Supreme Court’s August 2025 decision in Hohenshelt v. Superior Court² has added new complexity to the federal preemption questions that shadow this entire area. This article offers a practical framework for arbitrators working through these issues.

The Claims at Stake

Website tracking disputes typically involve three categories of claims, each governed by different choice-of-law rules.

CIPA claims are the primary battleground. Section 631 of the California Penal Code prohibits the unauthorized interception of communications, and Section 638.51 prohibits the installation of pen register or trap and trace devices without a court order.³ When a website embeds third-party tracking code that captures a user’s interactions, plaintiffs argue the website operator has intercepted the user’s communications or aided a third party’s interception. These are the claims most directly affected by contractual choice-of-law provisions.

Federal Wiretap Act claims provide an important strategic backstop. The Wiretap Act applies uniformly throughout the United States and cannot be displaced by contractual choice-of-law provisions.⁴ Claimants who assert parallel federal claims ensure they retain at least one viable theory regardless of the arbitrator’s choice-of-law ruling.

Common law privacy torts, e.g., invasion of privacy and intrusion upon seclusion, are governed by the law of the state with the most significant relationship to the occurrence under Restatement Section 145.⁵ In tracking cases, the injury typically occurs where the consumer is located when the interception happens, which usually points to the consumer’s home state regardless of what the contract says.

Understanding this layered structure matters because the choice-of-law dispute may be relevant only to the CIPA claims. An arbitrator who recognizes this early can frame the analysis more efficiently.

CA Senate Bill 940: The New Statutory Shortcut

For contracts entered into, modified, or extended on or after January 1, 2025, California Civil Code Section 1799.208 provides a relatively straightforward answer. The statute prohibits sellers from requiring consumers to arbitrate claims arising in California under the substantive law of another state.⁶ Any such provision is voidable by the consumer, and a court may award attorney’s fees to consumers who enforce this right.⁷

For arbitrators, this means the analysis in post-2025 contract cases is limited to threshold questions: Is the claimant a California consumer? Do the claims arise in California? Has the claimant affirmatively invoked the statute? Because the right is “voidable by the consumer,” the consumer must raise it, an arbitrator should not apply the statute sua sponte. Prudent practice is to inquire early in the proceeding whether the claimant wishes to invoke Section 1799.208.

The Preemption Question

The harder issue is whether Section 1799.208 is preempted by the Federal Arbitration Act (“FAA”). The Supreme Court has held that state laws that “apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue” are preempted by the FAA.⁸ Section 1799.208 presents a plausible target for this doctrine because it regulates only arbitration provisions.

The legislative history makes the vulnerability more concrete. The original bill prohibited requiring a consumer to “adjudicate” outside California, a term that covered both arbitration and litigation. Had this broader language survived, a preemption challenge would have been substantially harder. But a June 2024 amendment narrowed the prohibition to arbitration only, creating the precise asymmetry the FAA’s equal-treatment principle targets: arbitration clauses are restricted, while identical litigation forum-selection clauses are not.⁹

The Legislature relied on Zhang v. Superior Court of Los Angeles County,¹⁰ which upheld Labor Code Section 925, a similar provision prohibiting employers from requiring California employees to adjudicate claims outside the state. But the analogy is imperfect: Section 925 applies to both arbitration and litigation, whereas Section 1799.208 applies only to arbitration.

What Hohenshelt Tells Us—And What It Doesn’t

The California Supreme Court’s August 2025 decision in Hohenshelt v. Superior Court is the most significant FAA preemption ruling to emerge from SB 940’s broader legislative package, though it addressed the arbitration fee payment provisions (Code of Civil Procedure Section 1281.98) rather than Section 1799.208 directly.²

The case resolved a split of authority on whether the FAA preempts California’s requirement that the drafting party pay arbitration fees within thirty days or risk forfeiting the right to arbitrate. Writing for the majority, Justice Liu rejected the statute’s “rigid construction” and held that Section 1281.98 must be read against the backdrop of longstanding California statutes that authorize courts to prevent unjust forfeitures. Under this reading, forfeiture occurs only when nonpayment is “willful, grossly negligent, or fraudulent,” and because the statute so construed does not single out arbitration for disfavored treatment, it survives FAA scrutiny.¹¹

A concurring opinion by Justice Groban added a practical observation: when the California Arbitration Act (“CAA”) governs the proceeding rather than the FAA, no preemption analysis is needed at all. Unless the parties expressly invoke both the FAA’s substantive and procedural rules, California courts will apply CAA procedural rules by default.¹²

Hohenshelt offers defenders of Section 1799.208 two useful tools. First, it demonstrates the California Supreme Court’s willingness to construe SB 940 provisions in a manner that avoids constitutional doubt. Second, the court’s methodology of reading arbitration statutes within the broader context of California contract law, rather than in isolation, could support characterizing Section 1799.208 as a specific application of general principles protecting California consumers.

But the analogy has real limits. The Hohenshelt court saved Section 1281.98 by narrowing its reach, reading in an excusable-delay exception that the statute’s text did not expressly provide. It is unclear what comparable narrowing construction could rescue Section 1799.208, which states a categorical prohibition rather than a consequences-based trigger susceptible to equitable tempering. And the structural problem remains: Section 1799.208 by its terms regulates only arbitration provisions, leaving identical litigation forum-selection clauses untouched. This is precisely the arbitration-specific burden the Supreme Court’s preemption doctrine is designed to catch.¹³

As of this writing, no court has directly ruled on whether Section 1799.208 is preempted.¹⁴ Arbitrators should be aware that the California Supreme Court has signaled a strong preference for construing SB 940 provisions to survive FAA challenges, but that preference may not extend to a provision that, unlike the fee-payment statute, exclusively targets arbitration and resists a narrowing construction.

Pre-2025 Contracts: The Restatement Framework

For contracts formed before January 1, 2025, Section 1799.208 does not apply. Arbitrators must resolve choice-of-law disputes under the Restatement (Second) of Conflict of Laws, which California courts have adopted.¹⁵

Under Restatement Section 187(2), a contractual choice-of-law provision will not be enforced if the chosen state’s law would be “contrary to a fundamental policy” of a state with a materially greater interest in the issue, a state that would supply the governing law absent the contractual provision.¹⁶ This “fundamental policy” exception is the mechanism most frequently invoked in consumer privacy disputes.

When evaluating whether CIPA represents a fundamental California policy that overrides the contractual designation, arbitrators should focus on three questions:

Does the designated state provide comparable protections? If the contractually chosen state has an analogous privacy statute with comparable remedies, the fundamental policy argument weakens considerably. If the chosen state provides no statutory remedy for the alleged conduct, the argument for applying California law is at its strongest.

How significant are California’s contacts? The exception requires that the state with the fundamental policy have a “materially greater interest.” Factors supporting California’s interest include the claimant’s residence, the location of the alleged interception, the respondent’s marketing to California consumers, and any California-specific business activities.

How strong is the asserted policy? CIPA’s criminal penalties and substantial civil damages suggest a strong legislative commitment to privacy protection. But arbitrators should be cautious about treating any state law preference as a “fundamental policy” that overrides party autonomy. The exception is narrow and should not be applied merely because California law is more favorable to the claimant.

Tort claims are analyzed separately. Under Restatement Section 145, the law of the state with the most significant relationship to the occurrence governs.¹⁷ In website tracking cases, the place of injury is typically the claimant’s location when their communications were intercepted. Courts have generally focused on where the effect of the conduct was felt rather than where the tracking code was hosted, which usually supports application of the consumer’s home state law.

What Arbitrators Should Do First

When a consumer arbitration involves potential choice-of-law disputes, the following steps early in the proceeding can save significant time and sharpen the issues:

Determine the contract date. If the contract was entered into, modified, or extended on or after January 1, 2025, Section 1799.208 may apply. Request documentation establishing the date if it is not apparent from the pleadings.

Separate the claims by governing law. Federal Wiretap Act claims are not subject to contractual choice-of-law provisions. The dispute may be relevant only to the state statutory and common law claims. Framing this early in the process can help narrow the contested issues.

Consider bifurcation. In complex cases, resolving the choice-of-law question before proceeding to the merits provides clarity to the parties and may facilitate settlement discussions.

Request briefing on substantive differences. A fundamental policy analysis requires understanding what protections the claimant would lose under the designated state’s law. The parties should identify specific statutory provisions and remedies at stake.

Assess your authority over preemption. Where a party raises FAA preemption as a defense to Section 1799.208, consider whether the arbitration agreement’s delegation clause confers authority to resolve the preemption question, or whether judicial resolution is more appropriate. In light of Hohenshelt’s nuanced treatment of SB 940 preemption issues, arbitrators should expect evolving guidance from the courts.

Document your reasoning. Given the novelty of these issues, a well-reasoned written ruling serves the parties, creates a record for any post-arbitration judicial review, and contributes to the developing body of guidance in this emerging area. The AAA Consumer Due Process Protocol requires that arbitrators be “empowered to grant whatever relief would be available in court under law or in equity,”¹⁸ keep this standard in mind when evaluating whether enforcing an out-of-state choice-of-law provision would deprive the claimant of statutory remedies available in a judicial forum.

What Next?

The key principles for arbitrators navigating these disputes can be stated concisely. Federal claims are governed by federal law regardless of what the contract says. For post-2025 contracts, California consumers have a statutory right to void out-of-state choice-of-law provisions, but this right may become subject to the unresolved preemption question. For pre-2025 contracts, the Restatement framework applies, with particular attention to whether California’s fundamental privacy policy would be undermined by applying the designated state’s law. And common law tort claims typically favor the consumer’s home state.

Hohenshelt has clarified the California Supreme Court’s approach to FAA preemption of SB 940 provisions, but the decision’s logic may not fully extend to Section 1799.208’s arbitration-specific restrictions. Until a court rules directly on that question, arbitrators occupy a critical interpretive role. Rigorous analysis, procedural fairness, and thorough documentation of reasoning will help ensure that consumer arbitration remains a legitimate forum for resolving these rapidly evolving privacy claims.

ENDNOTES

1. Cal. Penal Code § 637.2 (providing for statutory damages of $5,000 per violation).
2. Hohenshelt v. Superior Court of Los Angeles County (Golden State Foods Corp.), S284498 (Cal. Aug. 11, 2025).
3. Cal. Penal Code §§ 631(a), 638.51.
4. 18 U.S.C. §§ 2511(1), 2520.
5. Restatement (Second) of Conflict of Laws § 145 (Am. L. Inst. 1971).
6. Cal. Civ. Code § 1799.208(a), enacted by S.B. 940, 2023–2024 Reg. Sess. (Cal. 2024).
7. Cal. Civ. Code § 1799.208(b), (c).
8. AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 341 (2011).
9. See S.B. 940, as introduced Feb. 2024 (using “adjudicate”); S.B. 940, as amended June 12, 2024 (narrowing to “arbitrate”).
10. Zhang v. Superior Court of Los Angeles County, 85 Cal. App. 5th 167 (2022) (addressing Cal. Lab. Code § 925).
11. Hohenshelt, S284498, slip op. at 18–22 (relying on Code of Civ. Proc. §§ 473, 3275 and Civ. Code § 3275). See also Holmes v Natures Image Inc., B340262 (Cal App Dec 11 2025) (applying the Hohenshelt standard).
12. Hohenshelt, S284498 (Groban, J., concurring).
13. Notably, subdivision (d) of Section 1799.208 provides that “adjudication includes litigation and arbitration.” However, this clarifies the scope of the remedy—not the scope of the prohibition, which by its terms applies only to arbitration provisions. See Cal. Civ. Code § 1799.208(a), (d).
14. See Kennen D. Hagen, California’s SB 940 and the Evolving Strategic Landscape of Mass Arbitration, FedArb (Dec. 11, 2025) (observing that as of December 2025, no reported decisions have addressed Section 1799.208’s enforceability).
15. Restatement (Second) of Conflict of Laws § 187 (Am. L. Inst. 1971).
16. Restatement (Second) of Conflict of Laws § 187(2)(b).
17. Restatement (Second) of Conflict of Laws § 145(2).
18. AAA Consumer Due Process Protocol, Principle 14 (Am. Arb. Ass’n 2024).