Judge: Curtis A. Kin, Case: 22STCV09901, Date: 2023-03-14 Tentative Ruling

Case Number: 22STCV09901    Hearing Date: March 14, 2023    Dept: 72

MOTION TO TERMINATE ORDER TO ARBITRATE AND PROCEED IN STATE COURT

Date:               3/14/23 (8:30 AM)

Case:               Diane Canales v. Penney OpCo LLC et al. (22STCV09901)

TENTATIVE RULING:

Plaintiff Diane Canales’ Motion to Terminate Order to Arbitrate and Proceed in State Court is GRANTED.

Defendant Penney OpCo LLC’s requests for judicial notice are GRANTED, pursuant to Evidence Code § 452(c).

Plaintiff Diane Canales moves to terminate the Court’s August 18, 2022 order compelling the instant action to arbitration.

Where, as here, arbitration has been initiated (Setyan Decl. ¶¶ 9, 10 & Ex. 5 [appointment of arbitrator]; Ex. 6 [Arbitration Management Conference Order]), 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).)

On December 13, 2022, the American Arbitration Association (“AAA”) emailed defendant Penney OpCo LLC an invoice in the amount of $1,050. (Setyan Decl. ¶ 11 & Ex. 7.) In an email accompanying the invoice, AAA stated: “Please be advised the Employer has been billed the amount as itemized on the enclosed invoice, pursuant to the applicable Rules. Payment is due on upon receipt, as of the date of the invoice. As this arbitration is subject to California Code of Civil Procedure 1281.98, payment must be received 30 days from the date of this letter. Pursuant to California Code of Civil Procedure 1281.98, the AAA cannot grant any extensions to this payment deadline unless agreed upon by all parties. [¶] Payment must be received by January 12, 2023.” (Setyan Decl. ¶ 13 & Ex. 8.)

On January 13, 2023, AAA emailed the parties, including defendant, that the payment in the December 13, 2022 invoice was not received. (Setyan Decl. ¶ 13 & Ex. 8.) On January 15, 2023, pursuant to CCP § 1281.98(b)(1), plaintiff elected to withdraw the claim from arbitration and proceed in state court.

Defendant does not dispute that the amount reflected in the December 13, 2022 was not timely paid by January 12, 2023. (Mellett Decl. ¶ 6 [payment to AAA made on January 13, 2023].) Notwithstanding any lack of intent in failing to timely make payment within 30 days of the invoice, the Court is bound by the holding in Espinoza v. Superior Court (2022) 83 Cal.App.5th 761 that CCP § 1281.98 is applied strictly. “Under the plain language of the statute…the triggering event is nothing more than nonpayment of fees within the 30-day period—the statute specifies no other required findings, such as whether the nonpayment was deliberate or inadvertent, or whether the delay prejudiced the nondrafting party. The plain language therefore indicates the Legislature intended the statute to be strictly applied whenever a drafting party failed to pay by the statutory deadline.” (Espinoza, 83 Cal.App.5th at 776 [concerning similarly worded CCP § 1281.97].) Accordingly, even though the payment was made only one day after the due date, plaintiff was entitled to elect to withdraw her claims from arbitration.

Recognizing the consequences of strict application of CCP § 1281.98 here, defendant primarily argues in opposition that the Court should exercise its discretion to provide relief from the requested order pursuant to CCP § 473(b).  To begin with, any such request is premature, as the contemplated order from which defendant requests relief has not yet been entered; indeed, whether any such order shall issue is the subject of the instant motion.  Further, even if there were such an order from which defendant were to properly seek relief in accordance with CCP § 473(b), given the mandatory nature of CCP § 1281.98, it is not altogether clear that an order issued pursuant to that section is the type of “order” or “other proceeding” eligible for discretionary relief under section 473(b).  Lastly, even if, as a general matter, discretionary relief were available here under section 473(b), the Court would be hard-pressed to exercise that discretion in light of the strict and clear command that untimely payment of fees shall result in waiver of the right to arbitration under CCP § 1281.98, as found by the Court of Appeal in a decision binding on this Court.  (See Espinoza, 83 Cal.App.5th at 776.)

Accordingly, the motion is GRANTED. The August 18, 2022 order compelling the instant action to arbitration is VACATED. Case Management Conference is set for __________ at ________ in Department 72 (Stanley Mosk Courthouse).

Pursuant to CCP §§ 1291.98(c)(2) and 1281.99(a), the Court “shall” impose a monetary sanction” of “reasonable expenses, including attorney’s fees and costs, incurred by the employee or consumer as a result of the material breach.” (Cf. CCP § 1281.99(b) [providing that court “may” impose evidentiary, terminating, or contempt sanctions “unless the court finds that the one subject to the sanction  acted with substantial justification or that other circumstances make the imposition of the sanction unjust”].)

The Court imposes a total of $3,026.30 in monetary sanctions against defendant Penney OpCo LLC. The monetary sanctions are based on 2.4 hours directly related to the arbitration, 0.4 hours conducting legal research for the instant motion (instead of the 1 hour claimed), 2 hours drafting, filing, and serving the motion (instead of the 5 hours claimed), 0.7 hours drafting the reply (instead of the 1.5 hours claimed), and 0.5 hours preparing for and attending the hearing (instead of the 1.5 hours claimed), all at an hourly rate of $450 (instead of the $550 claimed by counsel), plus an arbitration initiation fee of $250, a motion filing fee of $61.65, and further efiling costs of $14.65. Monetary sanctions shall be paid to counsel for plaintiff within thirty (30) days hereof.