Judge: Christopher K. Lui, Case: 22STCV37695, Date: 2023-09-01 Tentative Ruling

Case Number: 22STCV37695    Hearing Date: September 1, 2023    Dept: 76

Pursuant to California Rule of Court 3.1308(a)(1), the Court does not desire oral argument on the motion addressed herein.  Counsel must contact the staff in Department 76 to inform the Court whether they wish to submit on the tentative, or to argue the matter.  As required by Rule 3.1308(a)(2), any party seeking oral argument must notify ALL OTHER PARTIES and the staff of Department 76 of their intent to appear and argue.

Notice to Department 76 may be sent by email to smcdept76@lacourt.org or telephonically at 213-830-0776.

Per Rule of Court 3.1308, if notice of intention to appear is not given, the Court may adopt the tentative ruling as the final ruling.

            Plaintiff alleges that she suffered racial discrimination and was retaliated against for complaining about such discrimination, for complaining about wage and hour violations, and for whistleblowing.

            The parties stipulated to send the case to arbitration.

            Plaintiff moves for an order vacating order compelling this case to arbitration on the ground that Defendants have failed to timely pay arbitration fees, and requests sanctions.

TENTATIVE RULING

Plaintiff Lolita Mojica’s motion to vacate the order compelling arbitration is GRANTED. The litigation stay is hereby ordered lifted. Defendants are ordered to file a responsive pleading to the Complaint within 30 days.

Plaintiff’s request for sanctions against Defendants and their counsel of record, Asher B. Fried, jointly and severally, is GRANTED in the requested amount of $8,965.00. Sanctions are to be paid to Plaintiff’s counsel within 10 days.

ANALYSIS

Motion To Vacate Order Compelling Arbitration

Discussion 

Plaintiff moves for an order vacating order compelling this case to arbitration on the ground that Defendants have failed to timely pay arbitration fees, and requests sanctions pursuant to Civ. Proc. Code, § 1281.99.

Pursuant to Civ. Proc. Code, § 1281.97, Plaintiff moves for an order vacating the February 27, 2023 order compelling this case to arbitration on the ground that Defendants failed to pay the arbitrator’s fees within 30-days of the May 1, 2023 due date. 

In the Opposition, Defendants indicate that they had never received the invoice from JAMS, likely due to Plaintiff submitting the incorrect e-mail address for Defendants’ counsel.

Civ. Proc. Code, § 1281.97 provides:

(a)

(1) 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, 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, is in default of the arbitration, and waives its right to compel arbitration under Section 1281.2.

(2) After an employee or consumer meets the filing requirements necessary to initiate an arbitration, the arbitration provider shall immediately provide an invoice for any fees and costs required before the arbitration can proceed 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.

(b) 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.

(c) If the employee or consumer withdraws the claim from arbitration and proceeds with an action in a court of appropriate jurisdiction under paragraph (1) of subdivision (b), the statute of limitations with regard to all claims brought or that relate back to any claim brought in arbitration shall be tolled as of the date of the first filing of a claim in a court, arbitration forum, or other dispute resolution forum.

(d) If the employee or consumer proceeds with an action in a court of appropriate jurisdiction, the court shall impose sanctions on the drafting party in accordance with Section 1281.99[1].

(Civ. Proc. Code § 1281.97 [bold emphasis and underlining added].)

Defendants’ counsel indicates that on May 15, 2023, and on May 31, 2023, JAMS communicated to all parties, but used the old work email for Defendants’ counsel, indicating that Defendants had not yet paid the arbitration filing fee. (Supplemental Declaration of Asher Fried, ¶¶ 6 – 9.) (There is no indication to which email address JAMS had sent the invoice to Defendants’ counsel, but presumably it was to the misspelled e-mailed address asherfired@gmail, or the old work email. Suppl. Fried Decl., ¶ 14.)

Here, if Defendants’ counsel truly never received notice due to the invoice being sent to the incorrect email address, and Defendants’ had no notice or opportunity to pay, the Court was willing to give Defendant an opportunity to cure. However, it appears that Defendants’ counsel is engaged in delay tactics, which is a material breach as a mater of law, entitling Plaintiff to withdraw the matter from arbitration and to recover sanctions.

Defendants’ counsel admits that on June 8, 2023, Plaintiff emailed Defendants’ counsel at the proper email address, attached the instant motion to vacate. (Suppl. Fried Decl., ¶ 11.) Defendants’ counsel thus knew as of that date that the JAMS fees had not been timely paid. Defendants’ counsel states: “Had Defendants been aware of JAMS’s invoice or JAMS’s follow-up emails concerning its payment, Defendants would have timely paid the fees billed therein.” (Suppl. Fried Decl., ¶ 13.) However, it was not until July 25, 2023 that Defendants’ counsel spoke with Danielle Kim, Arbitration Practice Administrator at JAMS, learning JAMS sent the invoice and follow-up inquires via e-mail. (Suppl. Fried Decl., ¶ 14.)

Moreover, as of August 15, 2023, Defendants have made no attempts to cure the outstanding fee issue, even though they are aware of it and have not taken adequate steps to cure the nonpayment of the outstanding fee. (Suppl. Decl. of Matthew B. Perez, ¶ 12.)

This is precisely the type of conduct the Legislature intended to address in enacting Civ. Proc. Code, §§ 1281.97 and 1281.99:

In enacting sections 1281.97 and 1281.99, the California Legislature was aiming to solve a very specific problem—namely, the “‘procedural limbo and delay’” that consumers and employees face when they are “‘forced to submit to mandatory arbitration to resolve a[] … dispute,’” and the business or company that pushed the case into an arbitral forum then “‘stalls or obstructs the arbitration proceeding by refusing to pay the required fees.’” (Off. of Sen. Floor Analyses, 3d reading analysis of Sen. Bill No. 707 (2019–2020 Reg. Sess.) as amended May 20, 2019, p. 2; Sen. Bill No. 707 (2019–2020 Reg. Sess.) § 1, subds. (c) & (d).) Section 1281.97 grants deliverance from this procedural purgatory by deeming late payment to be a material breach of the arbitral agreement that gives the affected employee or consumer the choice of (1) remaining in the arbitral forum on the business's or company's dime or (2) treating the arbitration agreement as being rescinded and returning to a judicial forum, as the Ninth Circuit had previously held to be an appropriate remedy (e.g., Sink v. Aden Enterprises, Inc. (9th Cir. 2003) 352 F.3d 1197, 1200, 1201 (Sink); Brown v. Dillard's, Inc. (9th Cir. 2005) 430 F.3d 1004, 1012 (Brown)). (Sen. Bill No. 707 (2019–2020 Reg. Sess.) § 1, subd. (e); Assem. Com. on Judiciary, Analysis of Sen. Bill No. 707 (2019–2020 Reg. Sess.) as amended May 20, 2019, p. 8.)

(Gallo v. Wood Ranch USA, Inc. (2022) 81 Cal.App.5th 621, 634.)

Under the circumstances, Defendants are deemed to be in material breach of the arbitral agreement, thereby giving Plaintiff the option to rescind the agreement and return to the judicial forum, as a matter of statutory law. (Civ. Proc. Code, §1281.97, 1281.99; Gallo, supra, 81 Cal.App.5^th at 634.)

The motion to vacate the order compelling arbitration is GRANTED. The litigation stay is hereby ordered lifted. Defendants are ordered to file a responsive pleading to the Complaint within 30 days.

Plaintiff’s request for sanctions against Defendants and their counsel of record, Asher B. Fried, jointly and severally, is GRANTED in the requested amount of $8,965.00. (See Declaration of Matthew B. Perez, ¶¶ 13 – 16.) Sanctions are to be paid to Plaintiff’s counsel within 10 days.

Defendants are ordered to file a responsive pleading to the Complaint within 30 days.