Judge: Gregory Keosian, Case: 21STCV47314, Date: 2023-03-02 Tentative Ruling

Case Number: 21STCV47314    Hearing Date: March 2, 2023    Dept: 61

Plaintiff Sara Cisneros’s Motion to Withdraw from Arbitration is GRANTED. Monetary sanctions are awarded against Defendant BaronHR, West, Inc. in the amount of $15,025.55.

Plaintiff  to give notice.

I.                   MOTION TO WITHDRAW ARBITRATION

Code of Civil Procedure §§ 1281.97 and 1281.98 state that in any consumer or employment arbitration where the “drafting party” is required “to pay certain fees and costs” before or during the pendency of an arbitration proceeding, the failure to pay such fees “within 30 days after the due date” constitutes a “material breach of the arbitration agreement” by the drafting party and a waiver of the right to compel or continue arbitration. (Code Civ. Proc. §§ 1281.97, subd. (a)(1); 1281.98, subd. (a)(1).)

If the breach is in regards to the fees to initiate arbitration, the employee or consumer may choose either to withdraw the claim from arbitration and proceed in court, or to compel arbitration and obtain “reasonable attorney fees and costs related to the arbitration” from the drafting party.” (Code Civ. Proc. § 1281.97, subd. (b)(1)–(2).) If the breach is in regards to fees and costs owed “during the pendency of an arbitration proceeding,” the empmloyee or consumer may withdraw from arbitration and proceed in court, or continue the arbitration without paying costs if the arbitration provider permits, or seek an order compelling the drafting party to pay all arbitration fees, or to pay all owed fees themselves in the expectation of later reimbursement for same in the arbitration award. (Code Civ. Proc. § 1281.98, subd. (b)(1)–(4).)

Plaintiff Sara Cisneros (Plaintiff) argues that following this court’s order granting Defendant Bella+Canvas, LLC’s (BC) motion to compel arbitration on July 5, 2022, BC and Defendant BaronHR West, Inc. (BaronHR) have failed to pay the invoices demanded by the arbitration provider, Signature Resolution. Specifically, BaronHR failed to timely pay a $19,000 invoice for the retainer of an arbitrator due on October 10, 2022. (Villareal Decl. Exhs. J, K.) Plaintiff accordingly notified the parties that she was electing to withdraw from arbitration under Code of Civil Procedure § 1281.98. (Villareal Decl. Exh. L.)

Plaintiff seeks mandatory sanctions under Code of Civil Procedure § 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.

(b) In addition to the monetary sanction described in subdivision (a), the court may order any of the following sanctions 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, 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.

(1) An evidence sanction by an order prohibiting the drafting party from conducting discovery in the civil action.

(2) A terminating sanction by one of the following orders:

(A) An order striking out the pleadings or parts of the pleadings of the drafting party.

(B) An order rendering a judgment by default against the drafting party.

(3) A contempt sanction by an order treating the drafting party as in contempt of court.

Plaintiff also seeks a sanction under Code of Civil Procedure § 1281.98, subd. (c), which provides, if an employee elects to withdraw from arbitration and resume the action in court, they 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.” (Code Civ. Proc. § 1281.98, subd. (c)(1).)

Plaintiff seeks a monetary sanction amounting to $15,025.55, representing 6.12 hours spent preparing the present motion, plus 31.77 hours spent opposing the motion to compel arbitration and going through the arbitration process, at a rate of $395 per hour — plus a $60 filing fee.(Villareal Decl. ¶¶ 15–18.) ,

Defendant BaronHR, the party who agreed to bear responsibility for the payment of arbitration fees, has filed no opposition to the present motion. (Villareal Decl. Exh. A.) Defendant BC has filed a limited opposition, however, stating that it was not the “drafting party” of the arbitration agreement at issue within the meaning of the above statutes, and it was not responsible for the payment of the arbitration fees, meaning that it should not be subject to sanctions. (Opposition at pp. 2–3.) In BC’s prior motion to compel arbitration, BC argued that it was not a party to the arbitration agreement, but a third-party beneficiary entitled to enforce it. (See 6/8/2022 Motion at pp. 5–6.) Accordingly, BC is not a “drafting party” subject to sanctions under the above statutes.

The motion to withdraw from arbitration is GRANTED. Sanctions are awarded against Defendant BaronHR in the amount of $15,025.55.