Judge: Daniel S. Murphy, Case: 19STCV36296, Date: 2023-08-28 Tentative Ruling

Case Number: 19STCV36296    Hearing Date: August 28, 2023    Dept: 32

BACKGROUND

            On October 10, 2019, Plaintiff Raymond Tunyan filed this action against Defendants BMW of North America, LLC and Valencia BMW for breach of warranty under the Song-Beverly Act. The case was compelled to arbitration, which proceeded until Defendants failed to pay a JAMS invoice needed to continue the arbitration. The Court thereafter granted Plaintiff’s motion to withdraw from arbitration.

            On August 3, 2023, Plaintiff filed the instant motion for sanctions in connection with the withdrawal from arbitration. Defendants filed their opposition on August 15, 2023. Plaintiff replied on August 21, 2023.

LEGAL STANDARD

“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.” (Code Civ. Proc., § 1281.98(a)(1).) “If the drafting party materially breaches the arbitration agreement and is in default under subdivision (a), the employee or consumer may unilaterally elect to . . . [w]ithdraw the claim from arbitration and proceed in a court of appropriate jurisdiction.” (Id., subd. (b)(1).)

“If the employee or consumer withdraws the claim from arbitration and proceeds in a court of appropriate jurisdiction pursuant to paragraph (1) of subdivision (b), both of the following apply: (1) The employee or consumer may bring a motion, or a separate action, to recover all attorney’s fees and all costs associated with the abandoned arbitration proceeding. The recovery of arbitration fees, interest, and related attorney’s fees shall be without regard to any findings on the merits in the underlying action or arbitration. (2) The court shall impose sanctions on the drafting party in accordance with Section 1281.99.” (Code Civ. Proc., § 1281.98(c).)

“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.” (Code Civ. Proc., § 1281.99(a).)

DISCUSSION

I. Material Breach

            It is undisputed that Defendants materially breached the arbitration agreement by failing to pay the requisite arbitration fees within 30 days of the due date. The Court granted Plaintiff’s motion to withdraw from arbitration based on this material breach.

II. Mandatory Sanctions

            Given Defendants’ material breach, monetary sanctions are mandatory. (See Code Civ. Proc., § 1281.99(a) [“The court shall impose a monetary sanction . . .”].) Substantial justification only applies to nonmonetary sanctions. (See id., subd. (b).) Defendants cite no authority for their proposition that sanctions may be postponed until resolution of the lawsuit. Defendants’ material breach of the arbitration agreement constitutes an independent ground for sanctions regardless of what Plaintiff ultimately achieves at the end of the case. (See id., § 1281.98(c)(1) [“The recovery of arbitration fees, interest, and related attorney’s fees shall be without regard to any findings on the merits in the underlying action or arbitration”].)

III. Costs of Arbitration

            Defendants argue that Plaintiff’s claimed costs are unreasonable because Plaintiff seeks to recover all the costs of arbitration rather than only costs associated with the material breach. However, the Code expressly allows recovery of “all attorney’s fees and all costs associated with the abandoned arbitration proceeding.” (Code Civ. Proc., § 1281.98(c)(1).) Here, the arbitration was commenced by JAMS in June 2021 and lasted until it was withdrawn by the Court’s order in January 2023. Defendants compelled the matter to arbitration, leading Plaintiff to incur arbitration costs, only to breach their obligation to pay the requisite fees and cause the matter to return to court. Therefore, the statute fairly allows Plaintiff to recover the costs of the abandoned arbitration proceeding.  

            With that being said, Plaintiff claims costs from before the matter was even compelled to arbitration. (See Taylor Decl., Ex. 1.) These costs cannot be attributed to the arbitration proceeding or Defendants’ breach. Out of the 193 hours claimed in the Wirtz declaration, the Court finds that 110 hours are reasonably related to the abandoned arbitration proceeding and Defendant’s breach.

            The court finds that the reasonable hourly rate for Plaintiff’s counsel is $450.00 per hour.

In making this determination, the court found that plaintiff’s counsel inappropriately billed for some clerical tasks and that some of the billing was excessive, especially for attorneys as experienced as plaintiff’s counsel. Plaintiff had several fifteen attorneys and paralegals working on this case.  While plaintiff has the right to have multiple attorneys, the court finds that some of the attorneys’ work was duplicative and redundant. 

CONCLUSION

            Plaintiff is awarded attorney fees in the amount of $49,500.00