Judge: Alison Mackenzie, Case: 20STCV26893, Date: 2025-05-06 Tentative Ruling

Case Number: 20STCV26893    Hearing Date: May 6, 2025    Dept: 55

NATURE OF PROCEEDINGS: Hearing on Plaintiff’s Motion to Lift Stay

Plaintiff’s Motion to Lift Stay is Denied.

BACKGROUND

Plaintiff Sylvester Lewis (Plaintiff) filed this PAGA action against Simplified Labor Staffing Solutions Inc. (Simplified, Inc.), Simplified Labor Staffing Solutions, LLC (Simplified, LLC), Maersk Inc. (Maersk), Damco USA Inc. (Damco USA), and Damco Distribution Services Inc. (DDSI) (collectively, Defendants).

On March 24, 2023, at the direction of the Court of Appeal, this Court granted Simplified, Inc., and Simplified, LLC’s motion to compel arbitration and stayed the case pending arbitration.

Plaintiff filed a Motion to Lift Stay. Defendants filed an Opposition.

LEGAL STANDARD

“In an employment or consumer arbitration that requires, either expressly or through application of state or federal law or the rules of the arbitration provider, that the drafting party pay certain fees and costs during the pendency of an arbitration proceeding, if the fees or costs required to continue the arbitration proceeding are not paid within 30 days after the due date, the drafting party is in material breach of the arbitration agreement, is in default of the arbitration, and waives its right to compel the employee or consumer to proceed with that arbitration as a result of the material breach.” Code Civ. Proc., § 1281.98, subd. (a)(1).

“The arbitration provider shall provide an invoice for any fees and costs required for the arbitration proceeding to continue to all of the parties to the arbitration. The invoice shall be provided in its entirety, shall state the full amount owed and the date that payment is due, and shall be sent to all parties by the same means on the same day. To avoid delay, absent an express provision in the arbitration agreement stating the number of days in which the parties to the arbitration must pay any required fees or costs, the arbitration provider shall issue all invoices to the parties as due upon receipt. Any extension of time for the due date shall be agreed upon by all parties.” Code Civ. Proc., § 1281.98,subd. (a)(2). Thus, unless the parties expressly agree to the contrary, the drafting party’s receipt of the invoice triggers the 30-day clock under section 1281.98, subdivision (a)(1).

“If the drafting party materially breaches the arbitration agreement and is in default under subdivision (a), the employee or consumer may … [w]ithdraw the claim from arbitration and proceed in a court of appropriate jurisdiction.” Code Civ. Proc., § 1281.98 (b). “‘Drafting party’ means the company or business that included a predispute arbitration provision in a contract with a consumer or employee. The term includes any third party relying upon, or otherwise subject to the arbitration provision, other than the employee or consumer.” Code Civ. Proc., § 1280, subd. (e)

ANALYSIS

Plaintiff argues that Defendant Simplified, Inc. has paid every invoice more than thirty days after it was due and is therefore in material breach of the arbitration agreement.

In an order dated October 1, 2024, the arbitrator dismissed, with prejudice, Plaintiff’s claims against DDSI and Simplified, Inc., holding “the doctrine of res judicata precludes Claimant from pursuing her PAGA claims against DDSI and Simplified, Inc.” Mahoney Decl. ¶ 9, Ex. D at p. 5. However, in that same order, the arbitrator also held “the [prior] settlement does not preclude Claimant from pursuing PAGA claims against Maersk, Damco USA, and SSLS, LLC.”

Therefore, Plaintiff’s argument about Simplified, Inc.- since dismissed from the arbitration- is immaterial. The Court’s analysis is limited to the remaining respondents at the time of the alleged failure to pay.

I. Simplified, LLC

In their petition to compel arbitration, Simplified, Inc. and Simplified, LLC did not allege that Simplified, LLC was a third-party beneficiary of Simplified, Inc. Instead, they referred to both entities collectively as “Simplified” and stated that “in connection with his employment by Simplified plaintiff signed a written arbitration agreement (‘Arbitration Agreement’), which requires him to submit all claims and disputes related to his employment with Simplified to binding arbitration.” Petition to Compel Arbitration ¶ 5. Based on that representation, the motion to compel was ultimately granted as to both entities. Therefore, notwithstanding that the Arbitration Agreement refers only to “SIMPLIFIED STAFFING SOLUTIONS, INC.,” Simplified, LLC is estopped from now claiming that it was only third-party beneficiary of the Arbitration Agreement, and not a signatory to it. See Jackson v. County of Los Angeles (1997) 60 Cal.App.4th 171, 183 (“[J]udicial estoppel … [applies] when: (1) the same party has taken two positions; (2) the positions were taken in judicial or quasi-judicial administrative proceedings; (3) the party was successful in asserting the first position (i.e., the tribunal adopted the position or accepted it as true); (4) the two positions are totally inconsistent; and (5) the first position was not taken as a result of ignorance, fraud, or mistake.”).

The Arbitration agreement provides, “SIMPLIFIED STAFFING SOLUTIONS, INC. agrees to pay all forum fees and expenses charged or incurred by the arbitrator.” Petition to Compel Arbitration, Ex. 1. While the terms of the Arbitration Agreement make Simplified, Inc. responsible for paying the arbitration fees, because Simplified, LLC is estopped from denying that it is the same entity as Simplified, Inc., it is responsible for paying the arbitration fees. Alternatively, notwithstanding that Simplified, Inc. was dismissed from the case, it is estopped from denying that it is responsible for paying the arbitration fees incurred by Simplified, LLC.

However, the Arbitration Agreement also provides, “arbitration under this policy shall be traditional bilateral arbitration with you and the Company as the parties unless otherwise specifically agreed to in writing.” Petition to Compel Arbitration, Ex. 1. Therefore, Simplified, Inc.’s agreement to pay all arbitration fees cannot be read to include any additional fees incurred by virtue of Maersk and Damco USA being parties, nor how the fees should be allocated between the respondents.

Here, the evidence shows that on October 24, the American Arbitration Association (AAA) sent Simplified, LLC, Maersk, and Damco USA an invoice for $18,375.00, of which $9,187.50 was to be paid by Simplified, LLC. On October 28, 2025, Simplified LLC paid $9,187.50, the full amount it was billed in the invoice. However, Damco USA and Maersk failed to pay the remaining balance until December 2, 2024. Because Simplified, LLC paid the amount AAA’s invoice requested from it, within thirty days of coming due, Simplified, LLC is not in material breach of the Arbitration Agreement. Simplified, LLC was entitled to rely on AAA’s allocation of payments between respondents under the relevant rules. Accordingly, it was not required to pay the $9,187.50 invoiced to Damco USA and Maersk, and its failure to do so was not a material breach of the Arbitration Agreement.

II. Damco USA and Maersk

Defendants argue that Damco USA and Maersk are not drafting parties, and therefore, they are not subject to Code of Civil Procedure section 1281.98. The Court agrees.

Neither Damco USA nor Maersk joined Simplified LLC and Simplified Inc.’s motion to compel arbitration. Therefore, Plaintiff was not ordered arbitrate his claims against either Damco USA or Maersk. Nor is it clear, based on the Court’s reading of the Arbitration Agreement, that Damco USA or Maersk were entitled to compel arbitration, or were subject to arbitration, as third-party beneficiaries. The Court is unaware of any stipulation to arbitrate or additional arbitration agreement between Plaintiff, Damco USA, and Maersk. Therefore, it appears that Plaintiff filed unenforceable demands for arbitration against Damco Distribution Services Inc., Damco USA, and Maersk, with which they voluntarily complied, despite the absence of an arbitration agreement, stipulation, or court order compelling them to do so.

Because they are not “relying upon, or otherwise subject to the arbitration provision,” Damco USA and Maersk are not “drafting parties as that term is used in Code of Civil Procedure section 1281.98. See Code Civ. Proc., § 1280, subd. (e). Moreover, because the Court is unaware of any arbitration agreement to which Damco USA and Maersk are parties, the Court cannot find them to be in material breach of any agreement.

Because they were not included in the order compelling arbitration, if Plaintiff no longer wishes to pursue his arbitration claims against Damco USA and Maersk, he may withdraw them in compliance with AAA rules. However, in any event, the action will remain stayed pending the arbitration of Plaintiff’s claims against Simplified, LLC.

CONCLUSION

Plaintiff’s Motion to Lift Stay is denied. The Court’s order compelling Plaintiff to arbitrate its claims against Simplified, LLC, remains in effect.