Judge: Elaine Lu, Case: JCCP5191, Date: 2025-05-27 Tentative Ruling

Case Number: JCCP5191    Hearing Date: May 27, 2025    Dept: 9

Superior Court of California

County of Los Angeles

Spring Street Courthouse, Department 9

Background

            These are coordinated wage and hour representative actions. Plaintiffs Joevany Cabada, Porfirio Landeros (“Landeros”), Erick Rayo (“Rayo”), and Luis Zambrano (“Zambrano”) allege that they are and were non-exempt employees of Defendants Cintas Corporation, Cintas Corporation No. 2, Cintas Corporation No. 3, and Cintas Corporation Services, Inc. (collectively “Defendants”).  Plaintiffs also allege that Defendants violated the Labor Code and relevant Industrial Welfare Commission wage orders.

            On May 18, 2020, Zambrano filed his complaint. On July 6, 2020, Rayo filed his complaint. On December 11, 2020, Landeros and Cabada filed their complaint. In each of the complaints, Plaintiffs allege a single cause of action for civil penalties under the Private Attorneys General Act (“PAGA”).

            On November 1, 2021, Plaintiffs’ three actions were coordinated.

            On November 16, 2022, the Court entered an order compelling Plaintiffs Landeros and Cabada to arbitrate their individual PAGA claims.

            On October 30, 2024, Plaintiffs Landeros and Cabada filed a motion to lift the stay of the non-individual PAGA claims and for sanctions.  On February 7, 2024, the Court – presided by the Honorable Yvette M. Palazuelos – granted the motion in part lifting the stay on Plaintiff Cabada’s non-individual PAGA claims and awarding Plaintiff Cabada sanctions under Code of Civil Procedure section 1281.99(a).  (Order 2/7/24.) 

            On June 27, 2024, Defendants filed the instant motion for reconsideration of the Court’s February 7, 2024 Order.  On May 7, 2025, Plaintiffs Landeros and Cabada filed an opposition.  On May 13, 2025, Defendants filed a reply.

Legal Standard

When an application for an order has been made to a judge, or to a court, and refused in whole or in part, or granted, or granted conditionally, or on terms, any party affected by the order may, within 10 days after service upon the party of written notice of entry of the order and based upon new or different facts, circumstances, or law, make application to the same judge or court that made the order, to reconsider the matter and modify, amend, or revoke the prior order. The party making the application shall state by affidavit what application was made before, when and to what judge, what order or decisions were made, and what new or different facts, circumstances, or law are claimed to be shown.

(CCP § 1008(a).) 

As the court in Gilberd v. AC Transit (1995) 32 Cal.App.4th 1494, 1499 stated, a court acts in excess of jurisdiction when it grants a motion to reconsider that is not based upon “new or different facts, circumstances or law.” There is a strict requirement of diligence, meaning the moving party must present a satisfactory explanation for failing to provide the evidence or different facts earlier. (Garcia v. Hejmadi (1997) 58 Cal.App.4th 674, 690.)

Discussion

The Court’s February 7, 2024 Order Findings

            Though not expressly set forth in the Court’s February 7, 2024 Order, the Court – presided by Judge Palazuelos – found that Plaintiff Cabada validly withdrew his individual PAGA claim from arbitration pursuant to either Code of Civil Procedure sections 1281.97 or 1281.98.

            Code of Civil Procedure “[s]ections 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 [or employee] 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.)

            In the February 7, 2024 Order, the Court – presided by Judge Palazuelos – made the following factual findings:

On November 16, 2022, the Court entered an order compelling Plaintiffs Landeros and Cabada (Plaintiffs) to arbitrate their individual PAGA claims.

Plaintiff Cabada filed his demand for arbitration before AAA. On December 7, 2023, the parties attended their telephonic scheduling conference with the Arbitrator’s case manager, who sent an invoice and scheduling order to all parties, including Defendant’s counsel. On January 2, 2024, the arbitrator’s case manager emailed Defendants reminding them that “the last day to receive” the $13,950 payment “would be January 8, 2024.”

Defendants did not pay the fees for Plaintiff Cabada’s claims and the arbitration was terminated.

(Order 2/7/24 at p.2.)

            The Court – presided by Judge Palazuelos – then awarded Plaintiff Cabada sanctions of $5,610 pursuant to Code of Civil Procedure section 1281.99(a).  (Order 2/7/24.)  An award of sanctions under Code of Civil Procedure section 1281.99(a) requires a finding that Defendants materially breached an arbitration agreement pursuant to either Code of Civil Procedure sections 1281.97 or 1281.98.  (CCP § 1281.99(a) [“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.”].)  Accordingly, by awarding sanctions under Code of Civil Procedure section 1281.99(a), the Court – presided by Judge Palazuelos – implicitly found that Defendants materially breached the arbitration agreement with Plaintiff Cabada pursuant to either Code of Civil Procedure sections 1281.97 or 1281.98.

            In the Court’s November 16, 2022 Order compelling Plaintiff Cabada’s individual PAGA claim to arbitration, the Court – presided by Judge Palazuelos – had found that the arbitration agreement between Defendants and Plaintiff Cabada was governed by the Federal Arbitration Act (“FAA”).  (Order 11/16/22 [“Defendants have shown that the arbitration agreements evidence a transaction involving interstate commerce, as required for the FAA to apply.”].)  Relying on Hernandez v. Sohnen Enterprises, Inc. (2024) 102 Cal.App.5th 222, Defendants contend that Code of Civil Procedures sections 1281.97-1281.99 are preempted by the FAA, and therefore, the Court – presided by Judge Palazuelos – improperly found that Plaintiff Cabada withdrew from arbitration under either Code of Civil Procedure sections 1281.97 or 1281.98 and improperly awarded sanctions under Code of Civil Procedure section 1281.99.

In Hernandez, the employee plaintiff filed a complaint against the employer defendant “for disability discrimination, Labor Code violations, and related causes of action.”  (Id. at pp.231-232.)  “[T]he parties stipulated to stay the trial court proceedings and arbitrate pursuant to their arbitration agreement, which they attached. The stipulation stated that the Federal Rules of Civil Procedure applied to the arbitration.”  (Id. at p.232.)  “The trial court entered an order in accordance with the terms of the stipulation, stating that [the employer defendant] must pay the arbitration costs on or before any deadline specified by the arbitrator.”  (Ibid.)

On April 7, 2022, the chosen arbitration provider gave notice that the initial payment was due.  (Ibid.)  Thirty-six days later on May 13, 2022, the employer defendant paid the initial arbitration fees.  (Ibid.)

The employee plaintiff moved to withdraw from arbitration under Code of Civil Procedure section 1281.97 arguing that the employer defendant materially breached the arbitration agreement – thereby waiving the right to arbitrate – by failing to pay the initial arbitration fees within thirty days of receipt.  (Ibid.)  The trial court granted the employee plaintiff’s motion to withdraw from arbitration.  (Id. at p.233.) 

In reversing the trial court’s order, the Court of Appeal first concluded that an order under section 1281.97 is appealable.  (Id. at pp.235-238.)  Second, the Court of Appeal found that the specific language of the arbitration agreement encompassed the procedural and substantive provisions of the Federal Arbitration Act (“FAA”) with no provision referring to California law.  (Id. at pp.241-242.)  Thus, Court of Appeal concluded that “[t]he parties selected the procedural provisions of the FAA and the Federal Rules of Civil Procedure, and therefore, the procedures of the CAA, including section 1281.97, do not apply.”  (Id. at p.242.)   Third, the Court of Appeal concluded “that unless the parties have expressly selected California's arbitration provisions to apply to their agreement, the FAA preempts the portion of section 1281.97 that dictates findings of material breach and waiver as a matter of law.”  (Id. at p.244.)

Hernandez appears to be the first and only California Court of Appeal opinion finding that section 1281.97 – or the nearly identical 1281.98 – is preempted by the FAA.  (Compare Gallo v. Wood Ranch USA, Inc. (2022) 81 Cal.App.5th 621, 641-643 [finding that the FAA does not preempt section 1281.97]; Espinoza v. Superior Court (2022) 83 Cal.App.5th 761, 783 [finding that the FAA does not preempt section 1281.98]; Suarez v. Superior Court of San Diego County (2024) 99 Cal.App.5th 32, 42 [finding that the FAA does not preempt section 1281.97]; Hohenshelt v. Superior Court (2024) 99 Cal.App.5th 1319 [finding that the FAA does not preempt sections 1281.97 and 1281.98]; Keeton v. Tesla, Inc. (2024) 103 Cal.App.5th 26, 34-41 [finding that the FAA does not preempt section 1281.98]; Colon-Perez v. Security Industry Specialists, Inc. (2025) 108 Cal.App.5th 403, 412 [finding that the FAA does not preempt section 1281.98]; Sanders v. Superior Court of Los Angeles County (Cal. Ct. App., May 6, 2025, No. B340707) -- Cal.Rptr.3d ---  2025 WL 1303386, [finding that the FAA does not preempt section 1281.98].)  Hernandez – and many of the cases cited above – are pending review before the California Supreme Court.  (See Hernandez v. Sohnen Enterprises (Cal. 2024) 324 Cal.Rptr.3d 318, 319.)  Based on the California Supreme Court’s docket, the Supreme Court’s review of Hernandez has been deferred pending consideration and disposition of the Supreme Court’s review of Hohenshelt, which was argued and submitted on May 21, 2025. 

Accordingly, our high court will soon resolve whether the FAA preempts Code of Civil Procedures sections 1281.97-1281.99.  The Court declines to address the merits the merits of Defendants’ instant motion while the relevant case law is pending before the California Supreme Court, and a final decision is imminent. 

CONCLUSION AND ORDER

Based on the foregoing, Defendants Cintas Corporation, Cintas Corporation No. 2, Cintas Corporation No. 3, and Cintas Corporation Services, Inc.’s motion for reconsideration and the trial setting conference are CONTINUED to September 11, 2025 at 10:00 am. 

The Parties are to file a joint statement by August 14, 2025 regarding the status of the Supreme Court’s Opinion in Hohenshelt and whether either the instant motion must be continued further.  If the parties request additional briefing not to exceed five (5) pages per party prior to the continued hearing, the parties are to file a stipulation and proposed order setting forth the proposed supplemental briefing schedule with all papers filed by no later than August 28, 2025.

Defendants are ordered to download the instant order, give formal notice to all other parties, and file proof of service of such within 5 days.

DATED: May 27, 2025                                                          _____________________________

                                                                                                  Elaine Lu

                                                                                                  Judge of the Superior Court