Judge: Armen Tamzarian, Case: 23STCV17249, Date: 2024-11-19 Tentative Ruling

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Case Number: 23STCV17249    Hearing Date: November 19, 2024    Dept: 52

Plaintiff Aaron Friedman’s Motion for Sanctions Pursuant to Code of Civil Procedure Section 1281.99

            Plaintiff Aaron Friedman moves for $112,908.50 in sanctions against defendant GR0.com, LLC under Code of Civil Procedure section 1281.99.  Section 1281.99, subdivision (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.” 

On November 30, 2023, the court denied defendant’s motion to compel arbitration of this action on the basis that defendant materially breached the arbitration agreement under Code of Civil Procedure section 1281.98 by failing to pay fees when due.  Defendant argues the court should defer ruling on this motion due to its pending appeal of that order.  The court agrees that doing so will serve the interests of justice and judicial economy.

When defendant moved to compel arbitration, it argued the Federal Arbitration Act (FAA) preempts Code of Civil Procedure section 1281.98.  At the time, binding authority held otherwise.  (See Espinoza v. Superior Court (2022) 83 Cal.App.5th 761, 779; Gallo v. Wood Ranch USA, Inc. (2022) 81 Cal.App.5th 621, 643.)  In its opposition to this motion, defendant provides new authority holding the FAA does preempt these statutes.  (Hernandez v. Sohnen Enterprises, Inc. (2024) 102 Cal.App.5th 222, 242-244, review granted August 21, 2024, No. S285696.) 

The question of preemption is pending before the California Supreme Court.  If the Court holds the FAA preempts these statutes, plaintiff would not be entitled to recover attorney fees under Code of Civil Procedure 1281.99.  Rather than imposing over $110,000 in sanctions now, the court finds it appropriate to deny the motion without prejudice.

The court does not reach the issue of whether plaintiff reasonably incurred $112,908.50 in expenses as a result of defendant’s material breach of the arbitration agreement.

            Plaintiff Aaron Friedman’s motion for sanctions under Code of Civil Procedure section 1281.99 is denied without prejudice.