Judge: Daniel S. Murphy, Case: 23STCV00552, Date: 2023-11-15 Tentative Ruling

Case Number: 23STCV00552    Hearing Date: November 15, 2023    Dept: 32

BACKGROUND

            On January 11, 2023, Plaintiff Concepcion Gonzalez-Estrada, through her guardian ad litem Jessica Estrada, filed this action against Defendants Sharon Care Center, LLC and Ma Cecilia B. Lingat stemming from Plaintiff’s care at a nursing facility. The operative First Amended Complaint was filed on March 1, 2023 and asserts causes of action for elder abuse, negligence, and violation of the Patient’s Bill of Rights. The parties initially stipulated to arbitration based on an arbitration agreement.

On October 16, 2023, Plaintiff filed the instant motion to withdraw from arbitration based on Defendants’ failure to pay arbitration fees. Defendants filed their opposition on November 1, 2023. Plaintiff filed her reply on November 7, 2023.

LEGAL STANDARD

“In an employment or consumer arbitration that requires . . . 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.” (Code Civ. Proc., § 1281.97(a)(1).) “If the drafting party materially breaches the arbitration agreement and is in default under subdivision (a), the employee or consumer may . . . [w]ithdraw the claim from arbitration and proceed in a court of appropriate jurisdiction.” (Id., subd. (b).)

DISCUSSION

            Section 1281.7 is applied strictly, and the Court may not consider any other factors or mitigating circumstances. (Espinoza v. Superior Court (2022) 83 Cal.App.5th 761, 775-76; DeLeon v. Juanita Foods (2022) 85 Cal.App.5th 740, 749.) A drafting party is in breach of the arbitration agreement simply if it does not pay the requisite fees within thirty days.

            Here, it is undisputed that Defendants did not pay the required fees within thirty days. Therefore, Plaintiff is entitled to withdraw from arbitration under Section 1281.97. However, Defendants advance several arguments against applying Section 1281.97, which the Court addresses in turn.  

I. Federal Arbitration Act

            While the FAA does not preempt Section 1281.97 (Gallo v. Wood Ranch USA, Inc. (2022) 81 Cal.App.5th 621, 642), parties may nonetheless contract to apply the procedural rules of the FAA as opposed to the CAA (Valencia v. Smyth (2010) 185 Cal.App.4th 153, 177). Because state procedural rules apply by default, and the FAA is intended to apply in federal proceedings, “the FAA’s procedural provisions do not apply in state court unless the parties expressly adopt them.” (Ibid.) Where the parties expressly agree to adopt the FAA’s procedural rules, Section 1281.97 would not apply. (See Espinoza v. Superior Court (2022) 83 Cal.App.5th 761, 785-87.)

            Here, the arbitration agreement provides that “[t]his agreement shall be construed and enforced in accordance with and governed by the Federal Arbitration Act and the procedures set forth in the Federal Arbitration Act shall govern any petition to compel arbitration.” (Moore Decl., Ex. A, § I.8.) However, agreeing to interpret the contract under the FAA, and to apply the FAA to any motion to compel arbitration, is not the same as agreeing to incorporate the procedural provisions of the FAA to the arbitration itself. (See Valencia, supra, 185 Cal.App.4th at p. 178; Espinoza, supra, 83 Cal.App.5th at pp. 786-87.)

Additionally, the stipulation to submit to arbitration provides that “[t]his stipulation to submit the entire Complaint to binding arbitration is made and enforceable pursuant to Part III, Title 9 of the Code of Civil Procedure § 1280 et seq., that governs private, contractual arbitration.” (July 5, 2023 Stipulation, § 10.) Because the parties have not expressly agreed to adopt the procedural rules of the FAA, the CAA applies by default.

II. Voluntary Stipulation

            Defendants argue that Section 1281.97 does not apply because the parties voluntarily stipulated to arbitration as opposed to being ordered by the Court. However, this was not a dispositive factor in any of the cited cases discussing withdrawal from arbitration. Defendants cite no authority for the proposition that application of Section 1281.97 depends on this factor. Plaintiff did not waive her rights under Section 1281.97 simply because she acknowledged a valid arbitration agreement and decided to avoid wasting court resources contesting a motion to compel.  

III. Consumer Arbitration

            Section 1281.97 applies “[i]n an employment or consumer arbitration.” This is clearly not an employment arbitration. However, Defendants argue that it is also not a consumer arbitration because the arbitration agreement does not identify it as such. However, Defendants cite no authority for the proposition that a consumer arbitration must be so identified in the arbitration agreement.

            Defendants next argue that this case does not match the definition of “consumer arbitration” as set forth in the California Rules of Court Ethics Standards because Plaintiff was not required to sign the arbitration agreement. This exact argument was rejected by the Court of Appeal in Williams v. West Coast Hospitals, Inc. (2022) 86 Cal.App.5th 1054, 1073-74. “The purpose for which the defined term ‘consumer arbitration’ as used in the ethical standards is to delineate the cases in which certain disclosures are required.” (Id. at p. 1074.) There is “no reason to believe that the Legislature intended to appropriate this definition of ‘consumer arbitration’ for use in section 1281.98.” (Ibid.)

“We take the ordinary meaning of ‘consumer arbitration,’ accordingly, to be arbitration involving a ‘consumer’ and a controversy arising from the consumer's transaction with the drafting party, irrespective of how the parties reached their predispute agreement to arbitrate.” (Williams, supra, 86 Cal.App.5th at p. 1073.) “‘Consumer’ means an individual who seeks, uses, or acquires, by purchase or lease, any goods or services for personal, family, or household purposes.” (Code Civ. Proc., § 1280(c).) Plaintiff is a consumer under this definition. Therefore, this is a consumer arbitration for purposes of Section 1281.97. Whether the agreement was voluntary or mandatory is immaterial.

            Because Defendants have not articulated any valid reason not to apply the CAA, Section 1281.97 applies and allows Plaintiff to withdraw from arbitration.  

CONCLUSION

            Plaintiff’s motion to withdraw from arbitration is GRANTED.