Judge Mark A. Young, Case Number: 22SMCV00322, Date: 2023-10-11 Tentative Ruling

Judge: Mark A. Young, Case: 22SMCV00322, Date: 2023-10-11 Tentative Ruling

Case Number: 22SMCV00322 Hearing Date: October 11, 2023 Dept: M

CASE NAME: Fryer, v. the Sunset Restaurant and Beach Bar LP, et al.

CASE NO.: 22SMCV00322

MOTION: Motion to Vacate Stay

HEARING DATE: 10/11/2023

Legal Standard

Code of Civil Procedure (CCP) section 1281.97(a)(1) states:

“In an employment or consumer arbitration that requires, either expressly or through application of state or federal law or the rules of the arbitration administrator, 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 section 1281.98(a) provides a similar requirement for payment and resulting material breach and waiver with respect to fees required to be paid by the drafting party “during the pendency of an arbitration proceeding.” Under both CCP sections 1281.97(b)(1) and 1281.98(b)(1), if the drafting party fails to timely pay the arbitration fees required, then a material breach and waiver have occurred the employee may “[w]ithdraw the claim from arbitration and proceed in a court of appropriate jurisdiction.”

In addition, CCP section 1281.99(a) states that the court shall impose a monetary sanction against a drafting party that materially breaches an arbitration agreement pursuant to section 1281.97(a) or section 1281.98(a), 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.

Analysis

Plaintiffs’ request for judicial notice is GRANTED. (Evid. Code § 452(c), (d).)

Plaintiff Amber Fryer moves to vacate this Court’s arbitration stay because Defendants The Sunset Restaurant and Beach Bar LP, Francesco Simplicio, Pedro Martinez and Denise McCurdy failed to timely pay the certain retainer fees in this matter. Plaintiff also requests $13,120.00 in sanctions against Defendants and their counsel of record, Tharpe & Howell, LLP, jointly and severally.

On September 29, 2022, the Court heard and granted Defendants’ Motion to Compel Arbitration and stayed any further court proceedings. On October 14, 2022, Plaintiff filed her demand for arbitration with Judicial Arbitration and Mediation Services, Inc. (“JAMS”). (Gabriel Decl., ¶¶ 3, 4) On January 13, 2023, a Notice of Appointment of Arbitrator to all parties was issued by JAMS, along with an invoice for a preliminary deposit to cover the expense of all pre-hearing work, such as reading, drafting of orders, and conference calls. (Gabriel Decl., ¶ 5, Ex. C.) According to the invoice, Defendants were required to pay an amount of $9,500.00, which was due upon receipt of the invoice. Payment was due on February 12, 2023, pursuant to CCP section 1281.98.

Defendants failed to render payment by February 12, 2023. On January 31, 2023, JAMS sent a reminder notice to counsel that fees were due upon receipt. (Gabriel Decl., Ex. C.) On February 15, 2023, after the statutory due date passed, JAMS sent a second email entitled “FEES DUE,” stating that it was a “friendly reminder” that retainer fees are “due upon receipt” and there “remains outstanding payment from RESPONDENTS SUNSET RESTAURANT AND BEACH BAR LP.” (Id.) On that same date, Plaintiff’s counsel sent an email to JAMS and Defendants’ counsel that the statutory deadline to pay for the Arbitration fee had passed, that Defendants were in material breach of the arbitration agreement, and that pursuant to De Leon v. Juanita’s Foods and CCP §§ 1281.97 and 1281.98, Plaintiff elected to withdraw the demand for arbitration and proceed in Court. (Id.) Defendants apparently made the payment on February 21, 2023.

In opposition, Defendants argue that Plaintiff unreasonably delayed in bringing this motion. The equitable defense of laches “consists of a failure on the part of a plaintiff to assert his rights in a timely fashion accompanied by a period of delay with consequent results prejudicial to the defendant . . .. A mere delay, considered alone, does not usually constitute laches; normally, to be an effective bar, the delay must be disadvantageous to a defendant, and constitute a quasi-estoppel.” (Swart v. Johnson¿(1942) 48 Cal.App.2d 829, 834.) In other words, laches is warranted where there is unreasonable delay plus prejudice to the defendant resulting from the delay. (Drake v. Pinkham (2013) 217 Cal.App.4th 400, 406.) "The existence of laches is a question of fact to be determined by a weighing of all of the applicable circumstances by the trial judge." (Rouse v. Underwood (1966) 242 Cal. App. 2d 316, 325.) Defendants point to the delay between the expiration of the time to pay in February 2023 and Plaintiff’s motion in September 2023. However, this is not the correct metric. Plaintiff did not delay in asserting this defense, as they noticed their withdrawal of their arbitration on February 15, 2023, to JAMS and Defendants, only two days after the defense became ripe. This apparently led JAMS to “pause” the arbitration. (Magnanimo Decl., Ex. B.) Further, even if the Court considers the delay between February 2023 and September 2023, Defendants point to no prejudice stemming from this delay. Defendants argue that they have a due process right to defend themselves in arbitration. However, their actions waived arbitration by failing to pay fees required by the arbitrator within the statutory framework.

Defendants argue that they did not violate section 1281.98 because they paid their initial filing fee per section 1281.97. They reason that once they paid the initial filing fee, the arbitrator selection process commenced, and Hon. Elizabeth White was appointed as arbitrator, completing all obligations under section 1281.97. (Magnanimo Decl., ¶ 3.) They further argue that they did not breach the agreement because payment of the fees was not required to “continue” the arbitration. They point out that the invoice at issue described the retainer deposit as a “preliminary deposit to cover the expense of all pre-hearing work, such as ready, drafting of orders, and conference calls” and did not reference sections 1281.98 or state the case would be closed if payment is not made. (Gabriel Decl., Ex. C, p. 1.) They note the cited cases involved notices of the initial filing fees, and invariably stated that the arbitrator would close the parties’ case if the fees were not received. They assert that the arbitrator has the power to terminate or suspend proceedings pursuant to the JAMS rules. However, Defendants do not provide authority that the arbitrator needs to inform the employer of their obligation to pay fees by directly citing the statutes. The notices sent by JAMS unambiguously stated that the invoices were to be paid by Defendants and that they were due upon receipt. The fact that JAMS could suspend or terminate the proceedings for non-payment of such fees does not change the fact that an employee may elect to withdraw if fees are not paid pursuant to CCP § 1281.98.

Defendants further argue that this Court should defer to the Arbitrator and allow the Arbitrator to decide whether Defendants are in material breach of the arbitration agreement. The Court, however, would not have the jurisdiction to consider the instant motion. The statute allows the employee to “unilaterally elect” to “[w]ithdraw the claim and proceed in a court of appropriate jurisdiction. (CCP § 1281.98.) The Court certainly has power to lift the stay on its own case and sanction Defendants where Plaintiff made this unilateral election.

As Defendants failed to pay necessary fees to continue the arbitration, and Plaintiff timely elected to withdraw the arbitration, the Court is will lift the stay.

The Court “shall impose a monetary sanction against a drafting party that materially breaches an arbitration agreement” pursuant section 1281.98 in the form of the reasonable expenses, including attorney's fees and costs, incurred by the employee due to the breach.

Plaintiff claims $12,700.00 and $420.00 in costs related to the instant arbitration efforts. (Gabriel Decl., ¶¶8-17.) Plaintiffs’ counsel claims an hourly rate of $800.00 and counsel’s “employee” (perhaps a paralegal) claims an hourly rate of $350.00. Counsel spent 2 hours drafting and submitting the demand for arbitration, and his employee spent an hour drafting, reviewing and finalizing the demand for Arbitration. Counsel spent 2 hours meeting and conferring with Defense counsel regarding the initial Arbitration Payment. Counsel spent an hour drafting the declaration, an hour on the request for judicial notice, three hours conducting research and drafting this Motion. His employee spent an hour conducting research and drafting this Motion. Counsel anticipates spending four hours reviewing Defendant’s opposition and drafting a reply brief, and two hours preparing for and attending this hearing. In total, counsel claims 15 hours and counsel’s employee claims 2 hours. The Court finds these times and rates inflated and therefore unreasonable. The Court will adjust the times and rates to be reasonable in light of counsel and employee’s time spent and experience.

Accordingly, the motion is GRANTED. The Court grants a reasonable sanction of $5,560.00 against Defendants and counsel of record, jointly and severally, inclusive of costs, to be paid to Plaintiff’s counsel within 30 days.