Judge: Armen Tamzarian, Case: 21STCV09539, Date: 2024-06-07 Tentative Ruling

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Case Number: 21STCV09539    Hearing Date: June 7, 2024    Dept: 52

Plaintiff Jesus Ortiz’s Motion to Lift Arbitration Stay and for Sanctions

            Plaintiff Jesus Ortiz moves to lift the stay of this action pursuant to Code of Civil Procedure section 1281.98. 

Section 1281.98, subdivision (a)(1) provides, “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.”  Subdivision (b)(1) provides, “If the drafting party materially breaches the arbitration agreement and is in default under subdivision (a), the employee or consumer may unilaterally elect to do any of the following: (1) Withdraw the claim from arbitration and proceed in a court of appropriate jurisdiction.” 

Culinary International, LLC’s Opposition

A. Grounds to Withdraw from Arbitration and Lift Stay

Defendant Culinary International, LLC (Culinary) opposes the motion on the grounds that, though it did not timely pay an invoice from AAA, it did not breach the arbitration agreement because that invoice sought a deposit for future services.  Culinary provides no authority that section 1281.98 does not apply to deposits for future services.  Culinary argues the statute only applies to “fees or costs required to continue the arbitration proceeding” (§ 1281.98(a)(1)), and therefore does not apply to deposits.  But AAA did require those fees to continue the arbitration proceeding.  (Gould Decl., Exs. B-D.)  That is how deposits work.  The deposit was not optional.  “[T]he Legislature intended courts to apply the statute’s payment deadline strictly.”  (Espinoza v. Superior Court (2022) 83 Cal.App.5th 761, 771.)  The court must strictly apply section 1281.98 to the subject invoice.  Plaintiff properly exercised his right to unilaterally withdraw his claims from arbitration.

B. Sanctions

Plaintiff moves for $4,515 in sanctions against defendants.  Code of Civil Procedure section 1281.99(a) provides, “The court shall impose a monetary sanction against a drafting party that materially breaches an arbitration agreement pursuant to subdivision (a) of Section 1281.97 or subdivision (a) of Section 1281.98, by ordering the drafting party to pay the reasonable expenses, including attorney’s fees and costs, incurred by the employee or consumer as a result of the material breach.” 

Culinary contends plaintiff engaged in gamesmanship by misleading it about a potential stipulation to withdraw this motion.  Assuming that would constitute grounds for denying sanctions, Culinary fails to show gamesmanship.  Culinary’s counsel sent the other parties an email stating, “Culinary proposes that the parties enter into a Stipulation to lift the arbitration stay and resume litigation in Court, and Ortiz would forego the sanctions [he] is seeking by way of [his] motion.”  (Hak Decl., Ex. 2, p. 6.)  Plaintiff’s counsel ultimately drafted a proposed stipulation stating, “Plaintiff’s counsel is not prevented from seeking attorney fees for breach of the agreement under California Code of Civil Procedure § 1281.98 (c)(1).”  (Id., Ex. 3, p. 3.) 

Defendants correctly note the stipulation does not include any provision that plaintiff would forego the $4,515 in sanctions he seeks in this motion.  But the stipulation does not expressly state otherwise.  This portion of the proposed stipulation refers to section 1281.98(c)(1), which provides, “The employee or consumer may bring a motion, or a separate action, to recover all attorney’s fees and all costs associated with the abandoned arbitration proceeding.  The recovery of arbitration fees, interest, and related attorney’s fees shall be without regard to any findings on the merits in the underlying action or arbitration.”  This subdivision concerns fees and costs spent conducting the arbitration before the drafting party’s breach—not fees and costs spent making this motion after the breach, which are discussed in sections 1281.98(c)(2) and 1281.99(a). 

Finally, Culinary argues plaintiff did not reasonably incur $4,515 in expenses due to Culinary’s breach of the agreement.  Plaintiff claims $4,455 for nine hours of attorney fees at $495 hourly, plus the $60 filing fee.  (Gould Decl., ¶¶ 18-24.)  This simple motion did not reasonably require nine hours of work.  Plaintiff reasonably incurred 3.5 hours of attorney fees ($1,732.50) plus the $60 filing fee. 

CitiStaff Solutions, Inc.’s Opposition

Defendant CitiStaff Solutions, Inc. (CitiStaff) opposes this motion solely as to the monetary sanctions against it.  It contends it should not be sanctioned because only co-defendant Culinary failed to timely pay its share of arbitration fees.  It is undisputed that, unlike Culinary, CitiStaff timely paid AAA pursuant to the invoice for $17,440.  (Gould Decl., Ex. A.) 

Nevertheless, CitiStaff is liable for the sanctions.  Section 1281.98, subdivision (a)(1) provides, “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.”  CitiStaff was the drafting party and was, both expressly and through application of state law, required to pay the relevant fees and costs during the pendency of the arbitration proceeding.  CitiStaff does not dispute that it is “the drafting party,” or at least one of the drafting parties. 

CitiStaff was obligated both by law (see Mercuro v. Superior Court (2002) 96 Cal.App.4th 167, 181) and contract to pay these arbitration fees.  The arbitration agreement provides it is between employees and “CitiStaff Solutions Inc. and CitiStaff Management Group, Inc, their clients, officers, employees, and agents (hereinafter ‘CitiStaff’, ‘Company’, ‘Employer’).”  (Opp., Ex. A, p. 1.)  It further provides, “CitiStaff will pay the arbitrator’s fees and expenses for the arbitration hearing, i.e., hearing time, hearing dispute or pre-arbitration discovery motion, report, investigation of the arbitration briefs, hearing evidence review, award preparation, etc.”  (Id., p. 4, ¶ 7.)  Though the reference to “CitiStaff” may include clients such as Culinary, generally, “[a]n obligation imposed upon several persons, or a right created in favor of several persons, is presumed to be joint, and not several.”  (Civ. Code, § 1431.)  That AAA agreed to CitiStaff’s request to split the invoices between the two defendants (Gould Decl., Ex. G) does not negate its status as the drafting party who was required by contract and state law to pay the arbitrator’s fees.    

Disposition

            Plaintiff Jesus Ortiz’s motion to lift arbitration stay is granted.  The court hereby lifts the stay of this action.  Under Code of Civil Procedure sections 1281.98(c)(2) and 1281.99(a), defendants CitiStaff Solutions, Inc. and Culinary International, LLC shall be jointly and severally liable to plaintiff for sanctions in the amount of $1,792.50.