Judge: Armen Tamzarian, Case: 22STCV29580, Date: 2024-05-29 Tentative Ruling

Case Number: 22STCV29580    Hearing Date: May 29, 2024    Dept: 52

Plaintiff Antonietta Violante’s Motion to Lift Stay Pending Appeal

Plaintiff Antonietta Violante moves to lift the stay of this action pending appeal.  On April 18, 2023, the court granted plaintiff’s motion to withdraw the action from arbitration pursuant to Code of Civil Procedure section 1281.97(b)(1).  Defendants Shippers Transport Express, Inc. and Kevin Baddeley appealed that order.

Before this year, appealing an order denying a motion to compel arbitration automatically stayed the action.  As of January 1, 2024, Civil Procedure section 1294(a) provides, “Notwithstanding Section 916, the perfecting of such an appeal shall not automatically stay any proceedings in the trial court during the pendency of the appeal.” 

Preemption

Defendants argue the Federal Arbitration Act (FAA) preempts section 1294(a).  It does not.  Staying an action pending appeal is a procedural rule of state court proceedings.  “ ‘[T]he FAA’s procedural provisions [citation] do not apply unless the contract contains a choice-of-law clause expressly incorporating them.’ ”  (Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 345.)  “[T]he procedural provisions of the CAA apply in California courts by default.”  (Valencia v. Smyth (2010) 185 Cal.App.4th 153, 174.) 

The parties’ arbitration agreement does not incorporate the FAA’s procedural rules.  To the contrary, it provides, “The arbitration proceedings shall be conducted in the city in which the Employee is employed and in accordance with the provisions of that state’s arbitration statute, if any, in effect at the time a demand for arbitration is made.  If the state does not have an arbitration statute, the Federal Arbitration Act shall apply.”  (McMullen Decl., Ex. A.)  California has an arbitration statute.  The parties therefore agreed the California Arbitration Act applies instead of the FAA.

Defendants’ reliance on Coinbase, Inc. v. Bielski (2023) 599 U.S. 736 is misplaced.  That case does not concern federal preemption of state law under the FAA.  It only concerns procedural rules in federal court.  The Supreme Court stated, “When a federal district court denies a motion to compel arbitration, the losing party has a statutory right to an interlocutory appeal.  [Citation.]  The sole question here is whether the district court must stay its pre-trial and trial proceedings while the interlocutory appeal is ongoing.  The answer is yes.”  (Id. at p. 738.)  Its holding only applies to federal court proceedings.

Retroactivity

Defendants contend the amendment to section 1294(a) does not apply because the stay occurred before the new law took effect.  There is a “presumption that statutes operate prospectively absent a clear indication the voters or the Legislature intended otherwise.”  (Californians for Disability Rights v. Mervyn’s, LLC (2006) 39 Cal.4th 223, 230 (CDR).)  But “a statute that establishes rules for the conduct of pending litigation without changing the legal consequences of past conduct is not made retroactive merely because it draws upon facts existing prior to its enactment... .  [Instead,] [t]he effect of such statutes is actually prospective in nature since they relate to the procedure to be followed in the future.”  (Id. at p. 231, internal quotes omitted.) 

The “legal consequences of past conduct” generally refers to matters such as expanding “liability for past conduct by imposing broader duties,” imposing liability for something previously protected at the time by “an immunity statute,” or increasing criminal punishments or defining new conduct as criminal.  (CDR, supra, 39 Cal.4th at p. 231.)  In this context, past conduct typically means the underlying events giving rise to the litigation—not what happened earlier in the litigation.    

Statutes regarding an automatic stay pending appeal are rules for the conduct of pending litigation.  Undoing an automatic stay does not change the legal consequences of defendants’ past conduct.  The new statute leaves “entirely unchanged the substantive rules governing” the right to arbitrate and the legal rights giving rise to plaintiff’s action against defendants.  (CDR, supra, 39 Cal.4th at p. 232.)  Moreover, applying Code of Civil Procedure section 1294(a) now does not retrospectively deprive defendants of the benefits of the former law.  This case has been stayed pending the appeal.  Lifting that stay now, pursuant to plaintiff’s noticed motion, does not retrospectively undo the prior stay.  Lifting the stay “affect[s] only future conduct—the future conduct of” this action.  (Elsner v. Uveges (2004) 34 Cal.4th 915, 936.)    

Discretion to Stay Action

Defendants’ opposition also argues that, even if the court has the power to lift the stay, it should not do so.  The court finds good cause to lift the stay.  The purpose of the amendment to Code of Civil Procedure section 1294(a) was to “give[] courts the discretion to prevent corporations from using a common delay tactic against workers and consumers.”  (Assem. Com. on Appr., Analysis of Sen. Bill No. 365 (2023-2024 Reg. Sess.) July 12, 2023, p. 1.)  The court granted plaintiff’s motion to withdraw the case from arbitration because defendant materially breached the arbitration agreement under Code of Civil Procedure section 1281.97.  Declining to lift the stay and further delaying this proceeding would undermine the purpose of both section 1281.97 and the amendment to section 1294(a).

Disposition

Plaintiff Antonietta Violante’s motion to lift stay pending appeal is granted.  The court hereby lifts the stay of this action.