Judge: Joseph Lipner, Case: 22STCV30034, Date: 2023-08-17 Tentative Ruling

Case Number: 22STCV30034    Hearing Date: August 17, 2023    Dept: 72

Date:                                       8/17/2023                               

Case No:                                 22STCV30034                                               

Case Name:                            Bryce Noda, et al. v. Metro Auto, et al.

Plaintiffs Bryce Noda and Kay Noda (“Plaintiffs”) have moved for an order reinstating this action and to pay Plaintiffs’ attorneys’ fees of $7572 and costs of $315.70.  Though it is not in their notice of motion, Plaintiffs also request in their briefing that the Court impose discovery sanctions. 

The Court GRANTS Plaintiffs’ motion to reinstate this action, DENIES Plaintiffs’ Motion to Compel Defendant to Pay Arbitration Fees without prejudice; and DENIES Plaintiffs’ Motion for Discovery Sanctions.

FACTUAL BACKGROUND:

            On September 14, 2022, Plaintiffs Bryce Noda and Kay Noda filed a complaint against Defendants Metro Auto and Westlake Services, LLC alleging statutory violations under the Consumer Legal Remedies Act, Unfair Competition Law, and Vehicle Code section 1171 as well as claims for fraud, deceit, and negligent misrepresentation.  The Court ordered this matter to arbitration on January 30, 2023.

            On June 20, 2023, Plaintiffs filed this instant motion to reinstate and compel Defendants to pay Plaintiffs’ arbitration fees and costs.

            On August 4, 2023, Defendants filed an opposition.

            On August 10, 2023, Plaintiffs filed a reply.

ANALYSIS:

Motion to Reinstate the Action

            Plaintiffs assert that they have a right to reinstate the current action due to Defendants’ failure to pay certain fees and costs within 30 days pursuant to Code of Civil Procedure section 1281.98(a)(1). Plaintiffs state that in consumer arbitrations, a drafting party’s failure to pay the fees or costs required to continue the arbitration proceeding within 30 days of the due date constitutes a material breach of the arbitration agreement, a default of the arbitration, and a waiver of its right to complete the consumer to proceed with arbitration. (Code Civ. Proc., § 1281.98(a)(1).)

            In opposition, Defendants assert that they paid the initiation of arbitration fee and proceeded in good faith negotiations and arbitrations of Plaintiffs’ claims. Defendants state that the arbitration fees were paid and accepted by JAMS immediately after settlement discussions failed. Further, Defendants argue that JAMS that has jurisdiction over this case, and any finding that Defendants materially breached or did not breach the arbitration agreement should be made by the arbitrator appointed by JAMS. In addition, Defendants state that Plaintiffs’ actions in delaying settlement discussions, obfuscating, and then participating in the arbitration process knowing that the filing fee had not yet been submitted, should be viewed as a waiver of any material breach of the arbitration agreement and they should be estopped from so claiming.

            In reply, Plaintiffs assert that it is undisputed that Defendants failed to timely pay the arbitration fees and Defendants’ excuses for not timely paying are irrelevant.

“Perceiving that a ‘company’s failure to pay the fees of an arbitration provider’ as required by an arbitration agreement or applicable law ‘hinders the efficient resolution of disputes and contravenes public policy,’ in 2019 the California Legislature passed Senate Bill No. 707 and added sections 1281.97 and 1281.98 to the California Arbitration Act (CAA) (§ 1280 et seq.). (Stats. 2019, ch. 870, § 1(c); see also id., §§ 4 [adding section 1281.97], 5 [adding section 1281.98].) Sections 1281.97 and 1281.98 ‘largely parallel’ each other. [Citation.] Whereas section 1281.97 concerns a failure to timely pay ‘the fees or costs to initiate’ an arbitration proceeding (§ 1281.97, subd. (a)(1), italics added), section 1281.98 concerns a failure to timely pay ‘the fees or costs required to continue’ an arbitration proceeding (§ 1281.98, subd. (a)(1), italics added).” (De Leon v. Juanita’s Foods (2022) 85 Cal.App.5th 740, 750.)

“Subdivision (a)(1) of section 1281.98 provides: ‘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.’” (De Leon, supra, 85 Cal.App.5th at 750-751.)

“Subdivision (b) of section 1281.98 allows the employee or consumer to ‘unilaterally elect’ any of several options 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’ (§ 1281.98, subd. (b)(1)), ‘[c]ontinue the arbitration proceeding, if the arbitration provider agrees to continue administering the proceeding, notwithstanding the drafting party’s failure to pay fees or costs’ (§ 1281.98, subd. (b)(2)), ‘[p]etition the court for an order compelling the drafting party to pay all arbitration fees that the drafting party is obligated to pay under the arbitration agreement or the rules of the arbitration provider’ (§ 1281.98, subd. (b)(3)), or ‘[p]ay the drafting party's fees and proceed with the arbitration proceeding’ (§ 1281.98, subd. (b)(4)).” (De Leon, supra, 85 Cal.App.5th at 751.)

The parties do not dispute that Defendants failed to pay the required fees within 30 days they came due on April 14, 2023 after Plaintiffs initiated the consumer arbitration. “Section 1281.98 explicitly defines what occurs when ‘the fees or costs required to continue the arbitration proceeding are not paid within 30 days after the due date,’ namely, that ‘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.’ (§ 1281.98, subd. (a)(1).)” (De Leon, supra, 85 Cal.App.5th at 752.) The De Leon Court stated: “We find nothing in this language that is ambiguous regarding the requisite circumstances to determine the existence of a statutorily defined material breach of an arbitration agreement. To the contrary, the statute's language establishes a simple bright-line rule that a drafting party’s failure to pay outstanding arbitration fees within 30 days after the due date results in its material breach of the arbitration agreement.” (Id. at 753.) The Court finds that Defendants’ failure to pay the fees constitutes a material breach. Defendants do not provide any authority that the Court should consider other factors in determining whether their failure to timely pay constitutes a material breach. Indeed, the court in De Leon found “[t]hat section 1281.98 says nothing regarding a trial court’s discretion to consider these additional factors reinforces our conclusion that the statute's 30-day deadline establishes a clear-cut rule for determining if a drafting party is in material breach of an arbitration agreement.” (De Leon, supra, 85 Cal.App.5th at 755.)

Thus, the GRANTS Plaintiffs’ motion to withdraw the case from arbitration and proceed in this court. 

Payment of Attorney’s Fees

Code of Civil Procedure section 1281.98, subdivision (c) provides: “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.”

Code Civil Procedure section 1281.99, subdivision (a) provides: “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.” (Emphasis added.) 

Here, Plaintiffs have failed to substantiate their claim for attorney’s fees.  The Court has no way of assessing whether the billing was associated with the arbitration or any beach by Defendant.  Nor can the Court assess the reasonableness of the hours billed as Plaintiffs do not provide any descriptions.  If Plaintiffs do not wish to submit the billing statements themselves, they must still provide an adequate explanation of the work associated with those fees if they seek to recover them.   

Thus, Plaintiffs’ Motion to Compel Defendant to Pay Arbitration Fees is DENIED without prejudice. Plaintiffs may refile provided they give more adequate descriptions to ascertain the nature and reasonableness of the requested fees.

Discovery Sanctions

Code of Civil Procedure section 1281.99, subdivision (b) provides: “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.”

            The Court does not find that Plaintiffs have supported any claim for discovery sanctions here.  Moreover, Plaintiff did not seek such sanctions in their notice of motion.

            Plaintiffs to give notice.