Judge: Elaine Lu, Case: 22STCV40774, Date: 2023-10-20 Tentative Ruling

Case Number: 22STCV40774    Hearing Date: October 20, 2023    Dept: 26

Superior Court of California

County of Los Angeles

Department 26

Background

On December 29, 2022, Plaintiff Justin Oceguera (“Plaintiff”) filed the instant wrongful termination action against IGS Solutions, LLC and Ironworks Collective, Inc. dba Stiiizy (jointly “Defendants”).  The Complaint alleges eleven causes of action for (1) Gender Discrimination, (2) Hostile Work Environment Harassment, (3) Disability Discrimination, (4) Failure to Accommodate Disability in Violation of FEHA, (5) Failure to Engage in the Interactive Process, (6) Retaliation in Violation of FEHA, (7) Failure to Provide Meal Periods in Violation of Labor Code § 226.7, (8) Failure to Furnish Timely and Accurate Itemized Wage Statements in Violation of Labor Code § 226, (9) Failure to Pay Compensation Due Upon Separation in Violation of Labor Code 203, (10) Violation of Business and Professions Code § 17200, and (11) Termination in Violation of Public Policy.

            On March 23, 2023, the parties stipulated, pursuant to an executed pre-dispute arbitration agreement, to submit the instant action to arbitration.

            On June 8, 2023, Plaintiff filed the instant motion to vacate the order to arbitrate.  On September 18, 2023, Defendants filed a notice of non-opposition.  On October 13, 2023, Plaintiff filed a reply.       

Legal Standard

Pursuant to Code of Civil Procedure section 1281.97, “[i]n 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.”  (CCP § 1281.97(a)(1).)

“(b)If the drafting party materially breaches the arbitration agreement and is in default under subdivision (a), the employee or consumer may … [¶] (1) Withdraw the claim from arbitration and proceed in a court of appropriate jurisdiction.”  (CCP § 1281.97(b)(1).) 

“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.”  (CCP § 1281.97(d).)

Pursuant to Code of Civil Procedure section 1281.98, “[i]n 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.) 

“(b) If the drafting party materially breaches the arbitration agreement and is in default under subdivision (a), the employee or consumer may unilaterally elect to … [¶] (1) Withdraw the claim from arbitration and proceed in a court of appropriate jurisdiction.”  (CCP § 1281.98(b)(1).)

“(c) 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.”  (CCP § 1281.98(c).)

Discussion

            Plaintiff seeks to vacate the order compelling arbitration pursuant to Code of Civil Procedure sections 1281.97 and 1281.98.

            Code of Civil Procedure “Sections 1281.97 and 1281.98 each prescribe procedures for payment and remedies for nonpayment of arbitration fees and costs by ‘the drafting party,’ i.e., ‘the company or business that included a predispute arbitration provision in a contract with a consumer or employee’ (§ 1280, subd. (e)).”  (Williams v. West Coast Hospitals, Inc. (2022) 86 Cal.App.5th 1054, 1065.)  “Both sections provide that a drafting party who fails in its obligation to pay fees and costs required to initiate or continue the arbitration within 30 days after the due date 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.’ (§ 1281.98, subd. (a)(1); see also 1281.97, subd. (a)(1).) Consequently, even where an arbitration has commenced, ‘the employee or consumer may unilaterally elect[,]’ among other alternatives, to ‘[w]ithdraw the claim from arbitration and proceed in a court of appropriate jurisdiction.’ (§ 1281.98, subd. (b)(1), italics added.)”  (Williams, supra, 86 Cal.App.5th at p.1066.)

            The statutes require strict compliance with no exceptions, as “[u]nder 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.”  (Espinoza v. Superior Court (2022) 83 Cal.App.5th 761, 776.)

            “If the consumer [or employee] elects to proceed in court to commence or resume litigation, the consumer must, … seek vacatur of a prior order compelling arbitration and staying the litigation, or face the drafting party's motion to compel arbitration notwithstanding its nonpayment. (§ 1281.98, subd. (b)(1); see also § 1281.97, subd. (b)(1).) If the consumer [or employee] elects to proceed with the arbitration by paying the drafting party's delinquent arbitration fees, the consumer [or employee] must necessarily persuade the arbitrator that it has a right to the inclusion of the fees in the final award. (§ 1281.98, subd. (b)(4).) Similarly, if the consumer [or employee] elects to petition a court to require the drafting party to pay the arbitration fees, the consumer [or employee] must necessarily persuade the court that it is entitled to compel the drafting party to pay such fees under the statute. (§ 1281.98, subd. (b)(3); see also § 1281.97, subd. (b)(2).) Finally, if the consumer [or employee] elects to proceed with the arbitration without the payment of fees, that election is expressly conditioned on the voluntary agreement of the arbitrator, who would be granted a statutory right to a collection action against the drafting party. (§ 1281.98, subd. (b)(2).)”  (Williams, supra, 86 Cal.App.5th at pp.1066-1067.)

            As noted above, “[o]n March 1, 2023, the Parties stipulated that each and every issue, claim and/or cause of action brought by Plaintiff fall within the scope of the arbitration agreement voluntarily executed by the Parties in or around April 2021, and that they shall be submitted to binding arbitration in accordance with the arbitration-related portion of the Employment Arbitration Rules and Mediation Procedures of the American Arbitration Association (‘AAA’).”  (Romanini Decl. ¶ 2.)  On March 24, 2023, Plaintiff initiated arbitration with the AAA.  (Romanini Decl. ¶ 3.)  Plaintiff received confirmation of the demand to arbitration with the AAA on May 19, 2023.  (Romanini Decl. ¶ 4, Exh. A.)

            Defendants were required to pay the fee for arbitration by May 13, 2023.  (Romanini Decl. ¶ 5, Exh. B.)  “On May 18, 2023, a AAA case manager confirmed that Defendants did not pay the arbitration fee until four days late on May 17, 2023.”  (Romanini Decl. ¶ 6, Exh. C.)  The payment is therefore untimely and nothing more need be shown, as “[u]nder 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.”  (Espinoza, supra, 83 Cal.App.5th at p.776.)  Moreover, no opposition was filed.

            Accordingly, Plaintiff’s motion to vacate arbitration pursuant to Code of Civil Procedure section 1281.97 is GRANTED.

Sanctions

            In conjunction with the instant motion, Plaintiff seeks sanctions of $2,161.65 against Defendants.

            “In the event the drafting party does not pay the invoice within the 30 days, thus materially breaching the arbitration agreement under section 1281.97, subdivision (a)(1), the employee or consumer may ‘[w]ithdraw the claim from arbitration and proceed in a court of appropriate jurisdiction,’ or ‘[c]ompel arbitration in which the drafting party shall pay reasonable attorney's fees and costs related to the arbitration.’ (§ 1281.97, subd. (b).)”  (Espinoza, supra, 83 Cal.App.5th at p.774.) 

            “Should the employee or consumer choose to proceed in court, ‘the court shall impose sanctions on the drafting party in accordance with Section 1281.99.’ (§ 1281.97, subd. (d).) Section 1281.99, in turn, states that the court ‘shall impose a monetary sanction against a drafting party’ in the form of ‘the reasonable expenses, including attorney's fees and costs, incurred by the employee or consumer as a result of the material breach.’ (§ 1281.99, subd. (a).)”  (Espinoza, supra, 83 Cal.App.5th at pp.774-775.)  In addition to monetary sanctions, the court may also impose additional sanctions including evidentiary sanctions prohibiting discovery by the drafting party, terminating sanctions, or contempt sanctions.  (CCP § 1281.99(b).)

            Thus, the Court must impose monetary sanctions against Defendants for the reasonable expenses incurred as a result of the breach.  Accordingly, the Court turns to the reasonableness of the fees claimed.

            In determining what fees are reasonable, California courts apply the “lodestar” approach. (See, e.g., Holguin v. DISH Network LLC (2014) 229 Cal.App.4th 1310, 1332.)  This inquiry “begins with the ‘lodestar,’ i.e., the number of hours reasonably expended multiplied by the reasonable hourly rate.” (See PLCM Group v. Drexler (2000) 22 Cal.4th 1084, 1095.)  From there, the “[t]he lodestar figure may then be adjusted, based on consideration of factors specific to the case, in order to fix the fee at the fair market value for the legal services provided.” (Ibid.)  Relevant factors include: “(1) the novelty and difficulty of the questions involved, (2) the skill displayed in presenting them, (3) the extent to which the nature of the litigation precluded other employment by the attorneys, [and] (4) the contingent nature of the fee award.” (Ketchum v. Moses (2001) 24 Cal.4th 1122, 1132.)

            Plaintiff’s Counsel claims an hourly rate of $350 per hour based on her two and a half years of experience exclusively on employment law.  (Romanini Decl. ¶ 7.)  Plaintiff’s Counsel states that she spent 6 hours researching and drafting the instant motion and preparing accompanying exhibits.  (Romanini Decl. ¶ 7.)  Plaintiff Counsel also claims cost of $61.65 for filing the instant motion.  (Romanini Decl. ¶ 7.)  The Court finds that the claimed hourly rate and time spent to be reasonable.  Accordingly, sanctions are granted in the total amount of $2,161.65. 

CONCLUSION AND ORDER

Based on the foregoing, Plaintiff Justin Oceguera’s motion to withdraw from arbitration is GRANTED.

Plaintiff’s request for sanctions is GRANTED in the total amount of $2,161.65.

Defendants IGS Solutions, LLC and Ironworks Collective, Inc. dba Stiiizy are jointly and severally liable and ordered to pay monetary sanctions in the amount of $2,161.65 to Plaintiff Justin Oceguera by and through counsel, within thirty (30) days of notice of this order. 

Moving Party is to give notice and file proof of service of such.

DATED:  October ___, 2023                                                 _____________________________

                                                                                                  Elaine Lu

                                                                                                  Judge of the Superior Court