Judge: Curtis A. Kin, Case: 22STCV08815, Date: 2022-10-25 Tentative Ruling

Case Number: 22STCV08815    Hearing Date: October 25, 2022    Dept: 72

MOTION TO VACATE JOINT STIPULATION AND ORDER FOR BINDING ARBITRATION

Date:               10/25/22 (8:30 AM)

Case:               Chanel Thomas v.  Public Storage et al. (22STCV08815)

TENTATIVE RULING:

Plaintiff Chanel Thomas’ Motion to Vacate Joint Stipulation and Order for Binding Arbitration is CONTINUED.

Plaintiff Chanel Thomas moves to vacate the Joint Stipulation and Order Compelling Binding Arbitration and Staying the Proceedings Pending Arbitration, entered by the Court on April 28, 2022. (Koulloukian Decl. ¶ 5 & Ex. 1.)

Plaintiff contends that, on August 29, 2022, arbitration provider JAMS served a letter, entitled “Commencement of Employment Arbitration and Notice of Appointment of Arbitrator” (“Commencement Letter”), dated August 29, 2022, by email to all counsel, including defense counsel. (Koulloukian Decl. ¶ 8 & Ex. 4; Koulloukian Reply Decl. ¶ 3 & Ex. 1.) This Commencement Letter stated: “Pursuant to JAMS policy, the paying party has been billed a preliminary deposit to cover the expense of all pre-hearing work, such as reading, drafting of orders, and conference calls[.] An invoice for this deposit is attached. Payment is due upon receipt.”

According to plaintiff, the Commencement Letter had an invoice attached for a “deposit for services,” comprised of professional time, expenses, and case management fees. (Koulloukian Reply Decl. ¶ 3 & Exs. 1, 2.) The invoice was dated August 26, 2022 and addressed to defense counsel. The invoice stated: “Please make checks payable to JAMS, Inc. Payment is due upon receipt.”

Where, as here, arbitration has been initiated (see Trankiem Decl. ¶ 10 & Ex. G; Mtn. at 4:19-20), Code of Civil Procedure section 1281.98(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.” (CCP § 1281.98(a)(1).)

With respect to the due date: “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.” (CCP § 1281.98(a)(2).)

Thus, if plaintiff is correct that defendants received the August 26, 2022 invoice with the Commencement Letter on August 29, 2022, then defendants had 30 days from August 29, 2022, i.e., until September 28, 2022, to pay the fees required to continue the arbitration proceeding. Defendants did not issue and mail a check for such fees to JAMS until September 28, 2022, which JAMS confirmed was posted on October 5, 202. (Martinez Decl. ¶¶ 4, 5 & Ex. 4.)  Based on an October 5, 2022 posting date, the payment would be untimely under CCP § 1281.98(a)(1). Due to untimely payment, defendant thus would be in breach and/or default of the arbitration agreement, thereby entitling plaintiff to withdraw from arbitration and proceed in this court. (CCP §§ 1281.98(a)(1), (b)(1).)

The problem with plaintiff’s argument, however, is that the evidence of defendant’s receipt of the invoice on August 29, 2022 was submitted with plaintiff’s reply brief, which entirely deprived defendants of the ability to meaningfully respond to such potentially dispositive evidence.  Accordingly, the Court shall CONTINUE this matter to allow defendants the opportunity to be heard with respect to such newly submitted evidence.

The Court, however, notes that continuing the hearing would have little meaning if the Court were to ultimately determine that the issue of whether defendants breached or defaulted by making an untimely payment should be determined by the arbitrator, as defendants contend.  The Court thus addresses defendants’ argument that the issue of whether they waived the right to proceed with arbitration is delegated to the arbitrator.

The Arbitration Agreement states: “[T]he arbitrator shall have the exclusive authority to resolve any dispute relating to the formation, interpretation, applicability and enforceability of this Agreement, including, without limitation, all issues regarding the arbitrability of any Claim.” (Trankiem Decl. ¶ 5 & Exs. A, B.)  While the language of this Arbitration Agreement delegation clause is unquestionably broad, the Court finds ambiguous whether “interpretation,” “applicability,” “enforceability,” and “arbitrability” under the clause necessarily encompasses plaintiff’s claim of “breach” or “default” under CCP § 1281.98(b)(1).  (Cf. Dekker v. Vivint Solar, Inc. (9th Cir. 2021) 2021 WL 4958856 at *1 [finding delegation clause applicable to claim under CCP § 1281.97, where clause explicitly covered “breach, default, or termination” of the agreement].)  Here, there is no specific reference in the Arbitration Agreement to any “breach” or “default” of the arbitration agreement arising from non-payment of fees, as set forth in CCP §§ 1281.97 and 1281.98, which arguably is different from a determination of interpretation, applicability, enforceability, or arbitrability.

Indeed, there may be good reason to construe the ambiguous terms of the instant delegation clause against the drafting defendants.  If the issue of breach or default for non- or late-payment were delegated to the arbitrator, defendants could simply prevent such determination from ever being made by failing to pay the required fees, thereby circumventing CCP § 1281.98 and frustrating its purpose. (See Espinoza v. Superior Court of Los Angeles County (2022) 83 Cal.App.5th 761, citing Stats. 2019, ch. 870, § 1, subd. (c) [purpose of CCP § 1281.97, pertaining to payment of fees before arbitration can proceed, is to address “‘[a] company's strategic non-payment of fees and costs[, which] severely prejudices the ability of employees or consumers to vindicate their rights….’ [citation]”].)  Thus, given the ambiguity of the delegation clause language here, the Court declines to render an interpretation that would lead to an illogical result.

Accordingly, the matter is CONTINUED to November 17, 2022, at 9:30 a.m., in Department 72 (Stanley Mosk Courthouse).  By no later than November 7, 2022, defendants may file and serve a Sur-Reply limited to five (5) pages addressing plaintiff’s newly submitted evidence on Reply, plus any additional evidence in support thereof.  Plaintiff may file and serve a responsive brief limited to five (5) pages by no later than November 14, 2022, but only in the event defendants submit additional evidence with their Sur-Reply.