Judge: Jon R. Takasugi, Case: 21STCV01175, Date: 2023-02-07 Tentative Ruling

Case Number: 21STCV01175    Hearing Date: February 7, 2023    Dept: 17

Superior Court of California

County of Los Angeles

DEPARTMENT 17

TENTATIVE RULING

Plaintiff’s motion to vacate the order to arbitrate is DENIED.

            On 1/12/2021, Plaintiff Stephanie Trujillo (Plaintiff) filed suit against J-M Manufacturing Company, Inc. dba J-M Eagle and J-M Pipe Manufacturing Company, David Moore, Chuck Clark, David Christian, David Merritt, alleging: (1) gender discrimination; (2) sexual/gender harassment; (3) failure to prevent sexual/gender discrimination, harassment, and retaliation; (4) retaliation for opposing forbidden practices; and (5) injunctive relief.

Now, Plaintiff moves to vacate the order to arbitrate.

Discussion

            CCP section 1281.98 provides:

(a)(1) 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.

(2) The arbitration provider shall provide an invoice for any fees and costs required for the arbitration proceeding to continue to all of the parties to the arbitration. The invoice shall be provided in its entirety, shall state the full amount owed and the date that payment is due, and shall be sent to all parties by the same means on the same day. To avoid delay, absent an express provision in the arbitration agreement stating the number of days in which the parties to the arbitration must pay any required fees or costs, the arbitration provider shall issue all invoices to the parties as due upon receipt. Any extension of time for the due date shall be agreed upon by all parties.

(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 do any of the following:

(1)  Withdraw the claim from arbitration and proceed in a court of appropriate jurisdiction….

(emphasis added.)

Plaintiff submitted evidence that the parties stipulated to submit to arbitration and stay the court proceedings, choosing the Hon. Michelle Rosenblatt (Ret.) of ADR Services, Inc., as the arbitrator. (Oliver Decl., Exh. 3.) On 7/13/2022, ADR issued an invoice in the amount of $15,000.00 for service rendered with respect to a discovery dispute between the parties. The invoice stated that the due date to pay the invoice was 9/12/2022. Accordingly, 30 days after the due date was 10/12/2022. (Oliver Decl., Exh. 4). On 10/18/2022, Alex Kim of ADR sent Plaintiff’s counsel an email informing him that Defendant J-MM had not timely paid the invoice within 30 days after the due date on the invoice of 9/122022. As a result, Plaintiff argues that Defendants are in material breach, and she is entitled to withdraw her claim from arbitration pursuant to CCP section 1281.98, subdivision (2)(b)(1). 

In opposition, Defendants argue that: (1) the parties stipulated to arbitration, and thus Defendants are not the “drafting parties” within the meaning of the statute; and (2) CCP section 1281.98 is inapplicable because the failure to timely pay did not prevent arbitration from continuing.

The Court disagrees with Defendants’ first contention. “Drafting party,” as used in section 1281.98, is defined by section 1280(e) as “the company or business that included a predispute arbitration provision in a contract with a consumer or employee...”

Here, it is undisputed that Defendant J-MM is the only “company or business” in this case that “included a predispute arbitration provision in a contract with a consumer or employee.” As such, the fact that Plaintiff drafted the stipulation which merely opted to conserve judicial resources and not litigate the enforceability of that predispute arbitration provision does not make Plaintiff the drafting party.

Under Defendants’ theory, parties that stipulate to arbitration are not arbitrating pursuant to the predispute arbitration provision, and thus the protections of CCP section 1281.98 are not available. To accept this theory would penalize non-drafting parties who agree to stipulate to arbitration rather than unnecessarily use judicial resources to litigate the enforceability of the provision, and would greatly disincentive parties from stipulating to arbitration. The Court has no basis to conclude that the law intends such a result.  

Similarly, each of the Individual Defendants is a “third party relying upon, or otherwise subject to the arbitration provision, other than the employee or consumer,” included in the statutory definition of “drafting party.” (CCP § 1280(e).) As such, Individual Defendants are expressly contemplated within the meaning of “drafting party.”  

However, the Court agrees with Defendants’ second contention, i.e., that there is an insufficient basis to conclude that Defendants’ conduct was a material breach under CCP section 1281.98. As set forth above, the “drafting party” of a predispute arbitration agreement violates CCP section 1281.98 when it fails to make payments required to continue the arbitration proceeding within the 30 days after the due date. Here, Plaintiff argues in a conclusory fashion that Defendants’ conduct satisfies the statute because “[o]bviously, defendant J-M[M] failed to make a payment necessary for the arbitration process to proceed.” (Motion, 3: 14-25.) However, Plaintiff does not provide any indication that payment of the discovery invoice “was required to continue the arbitration proceeding.” (Rosen Decl., ¶¶ 15 & 16.)

As noted by Defendants, at no time did ADR terminate the arbitration proceedings or inform the parties of its intent to do so because of J-MM’s unpaid invoice. Moreover, despite the lack of timely payment, the arbitrator “issued tentative rulings on the Discovery Motions in advance of the October 11 and 12 hearings, and the hearings proceeded accordingly on October 11 and 12.” (Rosen Decl., ¶¶ 15 & 16.) Then, on October 18, 2022, ADR informed the parties that the rulings on the Discovery Motions would be released upon payment of the Discovery Invoice. (Id., ¶ 17.] Defendant immediately paid the outstanding Discovery Invoice that same day. (Rosen Decl., Exh. L.)

The purpose of CCP section 1281.98 is not to serve as a “gotcha” provision. Under Plaintiff’s theory, presumably any failure at any time to pay an invoice no matter the subject or stage in the proceeding could allow Plaintiff to withdraw from arbitrate and initiate a judicial proceeding. Plaintiff has not provided any support for this broad interpretation. Rather, the only reasonable interpretation of section 1281.98 is that it is meant to apply to failures to pay that materially prevent arbitration from continuing. Here, there is no evidence that, as a result of the delayed discovery dispute payment, the arbitrator was at any time unable or unwilling to move forward with all pretrial proceedings and the arbitration hearing. As such, it cannot be said that Defendants failed to pay “fees or costs required to continue arbitration.” (CCP § 1281.98, subd. (e).)

            Based on the foregoing, Plaintiff’s motion to vacate the order to arbitrate is denied.

It is so ordered.

Dated:  February    , 2023

   Hon. Jon R. Takasugi
   Judge of the Superior Court

Parties who intend to submit on this tentative must send an email to the court at smcdept17@lacourt.org by 4 p.m. the day prior as directed by the instructions provided on the court website at www.lacourt.org.  If a party submits on the tentative, the party’s email must include the case number and must identify the party submitting on the tentative.  If all parties to a motion submit, the court will adopt this tentative as the final order.  If the department does not receive an email indicating the parties are submitting on the tentative and there are no appearances at the hearing, the motion may be placed off calendar. 

            Due to Covid-19, the court is strongly discouraging in-person appearances.  Parties, counsel, and court reporters present are subject to temperature checks and health inquiries, and will be denied entry if admission could create a public health risk.  The court encourages the parties wishing to argue to appear via L.A. Court Connect.  For more information, please contact the court clerk at (213) 633-0517.  Your understanding during these difficult times is appreciated.