Judge: Armen Tamzarian, Case: 24STCP00031, Date: 2024-03-04 Tentative Ruling

Case Number: 24STCP00031    Hearing Date: March 7, 2024    Dept: 52

Petitioner Edward A. Klein’s Petition to Compel Arbitration and Payment of Fees and Costs

Petitioner Edward A. Klein petitions under Code of Civil Procedure section 1281.97 for an order compelling arbitration and requiring respondent Pathward, N.A. to pay fees and costs of arbitration.  Klein also seeks an award of $8,895 for his expenses incurred making this petition.  Respondent opposes this petition only as to paying the fees and costs petitioner incurred in making this petition.

Klein is entitled to an order that respondent shall pay his reasonable expenses incurred for this petition.  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.” 

Respondent materially breached an arbitration agreement pursuant to section 1281.97(a).  Section 1281.97(a)(1) provides, “In an employer or consumer arbitration that requires, either expressly or through application of state or federal law or the rules of the arbitration provider, the drafting party to pay certain fees and costs before the arbitration can proceed, if the fees or costs to initiate an arbitration proceeding are not paid within 30 days after the due date the drafting party is in material breach of the arbitration agreement.”  If the drafting party breaches the arbitration agreement, the consumer may “[c]ompel arbitration in which the drafting party shall pay reasonable attorney’s fees and costs related to the arbitration.”  (CCP § 1281.97(b)(2).) 

Respondent materially breached the arbitration agreement because it did not pay initiation fees within 30 days of the due date.  Respondent’s counsel states, “[O]n December 11, 2023, Respondent received an invoice for payment from JAMS dated December 4, 2023.  The invoice did not specify any particular due date, merely that it was ‘due upon receipt.’ ”  (Delgado Decl., ¶ 5, Ex. 1.)  Respondent concedes it did not pay within 30 days of receiving that invoice. 

Due upon receipt means what it says.  “[T]he Legislature intended courts to apply the statute’s payment deadline strictly.”  (Espinoza v. Superior Court (2022) 83 Cal.App.5th 761, 771.)  Even sending payment within 30 days may not suffice because the payment “must be received by the arbitrator within 30 days after the due date.”  (Doe v. Superior Court (2023) 95 Cal.App.5th 346, 350.)  Respondent received the invoice on December 11, 2023.  Respondent had to pay within 30 days, by January 10, 2024.  Failing to do so constituted a material breach of the arbitration agreement under Code of Civil Procedure section 1281.97(a)(1).  Respondent did not pay until February 1.  (Delgado Decl., ¶ 7.)   

Respondent argues it did not materially breach the agreement because JAMS extended the deadline.  Respondent’s counsel states, “[O]n January 22, 2024, Respondent received a letter from JAMS dated January 8, 2024, indicating payment was still outstanding and requesting payment within thirty days.”  (Delgado Decl., ¶ 6, Ex. 2.)  Respondent characterizes this letter as “extend[ing] Respondent’s deadline to make payment.”  (Opp., p. 3.)  But the letter states: “If the non-refundable Filing Fee of $1,750 is not received within 30 days, JAMS will close the file.  This date is not intended to and does not extend the due date for payment of the outstanding invoice(s).  The outstanding invoice(s) was due upon receipt.”  (Delgado Decl., Ex. 2.) 

The letter concerns when JAMS would close its file—not when respondent had to pay the invoice before its delay constituted a material breach of the arbitration agreement.  The arbitrator closing the file and the drafting party breaching the agreement are two different things.  A material breach by the drafting party does not require the arbitrator to terminate the proceeding.  Instead, section 1281.97(b) requires the employee or consumer to act to enforce the statute: “If the drafting party materially breaches the arbitration agreement and is in default under subdivision (a), the employee or consumer may do either of the following: (1) Withdraw the claim from arbitration and proceed in a court of appropriate jurisdiction.  (2) Compel arbitration in which the drafting party shall pay reasonable attorney’s fees and costs related to the arbitration.”  JAMS’s letter in January 2024 did not extend respondent’s deadline to pay under Code of Civil Procedure section 1281.97.   

Respondent relies on an unpublished federal case, Miller v. Plex, Inc. (N.D. Cal., Jan. 30, 2024, No. 22-CV-05015-SVK) 2024 WL 348820, at *3.  That case is not binding authority.  The court does not find it persuasive.  Miller v. Plex, Inc. relies in part on the conclusion that “the FAA preempt[ed]” Code of Civil Procedure sections 1281.97 and 1281.98 in the “narrow” circumstances presented.  (Id. at p. *6.)  Binding authority from the Court of Appeal holds the FAA does not preempt these statutes.  (Hohenshelt v. Superior Court (Feb. 27, 2024, No. B327524) ___Cal.App.5th___ [2024 Cal.App. LEXIS 127, at *8]; Gallo v. Wood Ranch USA, Inc. (2022) 81 Cal.App.5th 621, 643 [“the FAA does not preempt section 1281.97 or section 1281.99”].)

The court must order respondent “to pay the reasonable expenses, including attorney’s fees and costs, incurred by” petitioner “as a result of the material breach.”  (CCP § 1281.99(a).)  The court finds petitioner did not reasonably incur $8,895 in expenses as a result of respondent’s breach.  Petitioner claims 12 hours of attorney fees at $700 hourly.  (Rosen Decl., ¶¶ 2-3.)  The relatively simple petition and reply brief did not reasonably require 12 hours of work.  The court will therefore reduce the award by $2,100 to represent 9 hours of attorney fees instead of 12. 

Petitioner Edward A. Klein’s petition to compel arbitration and payment of fees and costs is granted.  Under Code of Civil Procedure section 1281.99(a), petitioner shall recover $6,795 in reasonable expenses, including attorney’s fees and costs, from respondent Pathward, N.A.