Judge Mark V. Mooney, Case 22STCV06045 2022-10-10 Tentative Ruling

Judge: Mark V. Mooney, Case: 22STCV06045, Date: 2022-10-10 Tentative Ruling

Case Number: 22STCV06045 Hearing Date: October 10, 2022 Dept: 68

CONFIDENTIAL COURT DOCUMENT - DEPT 68

LAW & MOTION JUDGE STERN HRG. DATE: 10/10/22

CAMERON STEWART v. DR. V PRODUCTIONS, INC., et al.

22STCV06045

CAMERON STEWART’S Motion for Order Lifting the Stay, Finding Defendants Dr. V Productions Inc., Venus Nicolino, and Matthew Johnson in Default of the Arbitration Agreement Pursuant to Code of Civil Procedure § 1281.98 and Awarding Sanctions

NOTICE: PROPER

BACKGROUND:

Plaintiff Cameron Stewart (“Plaintiff”) filed this employment action against Defendants Dr. V Productions, Inc. (“DVP.”), Venus Nicolino (“Nicolino”), and Matthew Johnson (“Johnson”) (collectively, “Defendants”). The Complaint alleges the following causes of action cause of action: (1) Disability Discrimination in Violation of California Fair Employment and Housing Act; (2) Failure to Accommodate a Disability in Violation of California Fair Employment and Housing Act; (3) Failure to Engage in the Interactive Process in in Violation of California Fair Employment and Housing Act; (4) Whistleblower Retaliation in Violation of California Labor Code § 6310; (5) Retaliation in in Violation of California Fair Employment and Housing Act; (6) Failure to Prevent Discrimination and Retaliation in in Violation of California Fair Employment and Housing Act; (7) Wrongful Termination in Violation of Public Policy; (8) Willful Misclassification in Violation of Labor Code § 226.8; (9) Failure to Reimburse All Necessary Expenses; (10) Violation of California Labor Code § 558; (11) Failure to Pay Minimum Wages; (12) Failure to Compensate for All Hours Worked; (13) Failure to Provide Meal Periods; (14) Failure to Provide Rest Periods; (15) Failure to Provide Accurate Wage Statements; (16) Failure to Maintain Required Records; (17) Whistleblower Retaliation in Violation of Labor Code § 1102.5; (18) Violation Under California Unfair Competition Law; (19) Waiting-Time Penalties for Unpaid Wages Under Labor Code § 203; (20) Discrimination in Violation of the California Family Rights Act; (21) Failure to Provide Personnel File in Violation of Labor Code § 1198.5; and (22) Failure to Produce Payroll Records in Violation of Labor Code § 226(c).

On April 12, 2022, the Court granted Defendants’ motion to compel arbitration and ordered a stay to the matter pending binding arbitration.

TIMELINE:

2/17/22 Complaint filed

3/2/22 Peremptory Challenge to Judicial Officer is granted, reassigning the matter to Department 68.

4/12/22 Motion to Compel Arbitration is granted.

9/1/22 Plaintiff filed the instant motion for order lifting stay and other relief.

MOVING PARTY argues:

After the matter was compelled into arbitration, Plaintiff filed a demand for arbitration with JAMS. Because Defendants also made a demand for arbitration, two arbitration matters were opened with JAMS. On May 11, 2022, JAMS transferred Defendants’ payment of the initial filing fee to arbitration matter opened by Plaintiff. (Motion at pg. 4.) Thereafter, on June 1, 2022, JAMS sent an invoice to Defendants requesting payment of an initial retainer of $8,000 for the arbitrator’s fees. (Motion at pp. 4-5.) Defendants failed to paid these initial fees within 30 days as required by Code of Civil Procedure § 1281.98(a)(1). (Motion at pg. 5.) Because of Defendants failure to timely pay the required arbitration fees, Plaintiff notified JAMS and Defendants’ counsel of his intention to withdraw from arbitration. (Motion at pg. 5.) Based on this information, Plaintiff argues that Defendants breached the arbitration agreement by failing ot pay the required arbitration fees within 30 days. (Motion at pg. 8.) Consequently, Plaintiff elects to pursue his claims before this Court. (Motion at pg. 9.) Additionally, Plaintiff requests monetary sanctions against Defendants in the amount of $16,875.

RESPONDING PARTY argues:

Defendants contend that Plaintiff’s motion lacks merit because Defendants did pay the required fees. (Opposition at pp. 3-5, 8.) The initial filing fee was transferred to the appropriate arbitration matter, which was acknowledged by JAMS. (Id.) Also, Defendants paid for the arbitrator’s retainer on September 8, 2022 and the case would be scheduled for a preliminary conference with the arbitrator. (Opposition at pg. 8.) Furthermore, Defendants argue that Plaintiff has not submitted any admissible evidence to support his arguments because the documents have not been authenticated or constitute hearsay or improper argument. (Opposition at pp. 8-9.) Lastly, Defendants argue that Plaintiff’s request for monetary sanctions should be denied, and instead, the Court should award Defendant with reasonable attorney fees and costs in the amount of $7,650 pursuant to Code of Civil Procedure § 128.7 because the instant motion is frivolous.

IN REPLY, MOVING PARTY argues:

Plaintiff argues that Defendant’s payment of the retainer was not timely, and instead, it was made more then 3 months after it was due. (Reply at pg. 3.) Further, Defendants’ reliance on McCluskey v. Henry (2020) 56 Cal.App.5th 1997 is inapplicable because this is not a case involving clerical error. Also, Defendants’ reliance on Chuc v. City Fibers lacks merit because it is an unpublished California court case and lacks persuasive authority under California Rules of Court Rule 8.1115. (Reply at pg. 4.) Moreover, Plaintiff argues that his evidence is admissible because the documents have been properly authenticated by counsel and the statements relied upon are not inadmissible hearsay. (Reply at pp. 4-5.) Thus, Defendants request for sanctions should be denied because the motion is not frivolous.

TENTATIVE RULING: RE MOTION FOR AN ORDER LIFTING THE STAY, FINDING DEFENDANTS DR. V PRODUCTIONS, INC., VENUS NICOLINO AND MATTHEW JOHNSON IN DEFAULT OF THE ARBITRATION AGREEMENT PURSUANT TO CODE OF CIVIL PROCEDURE § 1281.98, AND AWARDING SANCTIONS OF PLAINTIFF CAMERON STEWART. THE COURT RULES AS FOLLOWS:

Plaintiff’s Motion for Order Lifting the Stay, Finding Defendants in Default of the Arbitration of the Arbitration Agreement Pursuant to Code of Civil Procedure § 1281.98, and Award Sanctions is GRANTED. Plaintiff’s request for monetary sanctions is GRANTED in the reduced amount of $7,762.50 against Defendants jointly and severally. Defendants are ordered to tender payment to

Plaintiff’s counsel within thirty days of this Order. The stay due to pending arbitration is deemed lifted pursuant to Code of Civil Procedure § 1281.98.

Plaintiff Cameron Stewart (“Plaintiff”) moves for an order lifting the stay of arbitration pursuant to Code of Civil Procedure § 1281.98 based on Defendants Dr. V Productions, Inc., Venus Nicolino, and Matthew Johnson (collectively, “Defendants”) failure to pay required arbitration fees. Plaintiff additionally seeks monetary sanctions against Defendants in the amount of $16,875 pursuant to Code of Civil Procedure § 1281.99.

Evidentiary Objections

Defendants object to various portions of the Declaration of Andranik Tsarukyan and the Supplemental Declaration of Andranik Tsarukyan. These objections are overruled in their entirety on the grounds that the evidence has been properly authenticated by Plaintiff’s counsel and the statements do not constitute inadmissible hearsay. (Greenspan v. LADT, LLC (2010) 191 Cal.App.4th 486, 523; Jazayeri v. Mao (2009) 174 Cal.App 4th 301, 316; Cal. Evid. Code §§ 1220, 1271.)

Judicial Notice

On October 3, 2022, Plaintiff requests the Court to take judicial notice of Espinoza v. Superior Court, No. B314914 (Cal. Ct. App. Sep. 27, 2022), which is a published case that addresses the Legislative intent of Code of Civil Procedure § 1281.97. The Court grants judicial notice of this document pursuant to Evidence Code § 45(d).

Legal Standard

Code of Civil Procedure § 1281.98 provides:

(a) 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.

(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. If the employee or consumer withdraws the claim from arbitration and proceeds with an action in a court of appropriate jurisdiction, the statute of limitations with regard to all claims brought or that relate back to any claim brought in arbitration shall be tolled as of the date of the first filing of a claim in any court, arbitration forum, or other dispute resolution forum.

(2) Continue the arbitration proceeding, if the arbitration company agrees to continue administering the proceeding, notwithstanding the drafting party's failure to pay fees or costs. The neutral arbitrator or arbitration company may institute a collection action at the conclusion of the arbitration proceeding against the drafting party that is in default of the arbitration for payment of all fees associated with the employment or consumer arbitration proceeding, including the cost of administering any proceedings after the default.

(3) Petition 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 company.

(4) Pay the drafting party’s fees and proceed with the arbitration proceeding. As part of the award, the employee or consumer shall recover all arbitration fees paid on behalf of the drafting party without regard to any findings on the merits in the underlying arbitration.

(c) 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.

(d) If the employee or consumer continues in arbitration pursuant to paragraphs (2) through (4) of subdivision (b), inclusive, the arbitrator shall impose appropriate sanctions on the drafting party, including monetary sanctions, issue sanctions, evidence sanctions, or terminating sanctions.

Discussion

A. Failure to Pay Arbitration Fees

Here, Plaintiff argues that Defendants failed to pay all of the required arbitration fees within 30 days in order for arbitration to commence, and as a result, Defendants breached their obligation under the arbitration agreement. (Motion at pp. 4-5, 8; Tsarukyan Decl. ¶¶ 7-11, 18, Exhs. 2-4, 9.) Namely, Plaintiff asserts that Defendants was required to pay the arbitrator’s retainer fee by July 1, 2022. (Motion at pg. 5; Tsarukyan Decl. ¶ 7-9, Exhs. 2-3.) Thus, Plaintiff contends that Defendants breached the arbitration agreement by failing to pay the required fees to initiate arbitration. (Motion at pp. 8-9.) Consequently, Plaintiff withdrew from arbitration and elects to pursue his claims through this Court. (Motion at pg. 9; Tsarukyan Decl. ¶ 11, Exh. 3.)

In opposition, Defendants argue that they are not in breach of the arbitration agreement because an initial payment was made to initiate arbitration on March 3, 2022. (Opposition at pp. 5, 8; Cole Decl. ¶¶ 3-5, Exhs. 1-2; Tauler Decl. ¶¶ 3, Exh. 4.) Additionally, Defendants contend that they paid the retainer fee on September 8, 2022. (Opposition at pp. 6-7; Tauler Decl. ¶¶ 9-10, Exh. 8.) Thus, Defendants argue that the motion should be denied because did not withhold any payment and any purported failure to pay the required arbitration fees was due to clerical error. (Opposition at pp. 6-7, relying on McCluskey v. Henry (2020) 56 Cal.App. 5th 1197 and Chuc v. City Fibers, 2022 Cal.Super LEXIS 17353 (February 23, 2022, LA Superior Court.)

Upon review of the arguments, the Court finds that Plaintiff’s motion has merit. While Defendants paid the initial filing fee required to open an arbitration matter and this fee was transferred to the appropriate matter (see Cole Decl. ¶¶ 3-5, Exhs. 1-2; Tauler Decl. ¶¶ 3, Exh. 4), it is undisputed that Defendants failed to pay the arbitrator’s retainer fee within 30 days of receiving the invoice. (Tsarukyan Decl. ¶ 7-9, 18, Exhs. 2-3, 9.) Without this payment, arbitration could not continue. The Court acknowledges that Defendants eventually paid the retainer fee on September 8, 2022. (Id.; Tauler Decl. ¶¶ 9-10, Exh. 8.) However, because the invoice was provided on June 1, 2022, this payment was made several months after payment was due, and as a result, Defendants are in violation of Code of Civil Procedure § 1281.98 for failing to pay the required fees within 30 days of their receipt.

Defendants attempt to frame this payment issue as a clerical error. Namely, Defendants assert that the JAMS case manager, Karla Adams, was confused about Defendants’ payment history in the arbitration matter. (Opposition at pg. 5; Tauler Decl. ¶¶ 6-8, Exhs. 5-7.) However, this is unpersuasive because there was no confusion on Ms. Adams’ end. Based the notice of appointment of arbitrator, which is dated June 1, 2022, it states:

The paying party has been billed a preliminary deposit to cover the expense of all pre-hearing work, such as reading, drafting of orders, and conference calls. An invoice for this deposit is attached. Payment is due upon receipt. Upon receipt of payment, a Preliminary Arbitration Management Conference Call will be scheduled with the Arbitrator.

(Tsarukyan Decl., Exh. 2 at pg 1.)

In the attached invoice, Defendants were billed $8,000 for the arbitrator’s retainer fee, and in the description, it states: “Failure to pay the deposit by the due date may result in a delay in service or cancellation of the session.” (Id.at pg. 7.) In a follow-up email, Ms. Adams specifically requires about the initial retainer fee, not the initial filing fee. (Tauler Decl., Exh. 5.) In response to Defendants’ counsel’s email that the initial filing fee had already been paid, Ms. Adams continues to state that her inquiry relates to the initial retainer fee. (Tauler Decl., Exhs. 6-7.) Based on this evidence, it is clear that a clerical error had not been made. Therefore, Defendants’ reliance on McCluskey and Chuc are inapposite. Additionally, Defendants’ reliance on Chuc is improper because it is an unpublished California state court decision, which lacks persuasive authority and cannot be relied upon. (Cal. Rules of Court, Rule 8.1115.)

Defendants may argue that they substantively complied with Code of Civil Procedure § 1281.98 because they eventually paid the retainer fee on September 8, 2022. However, this is also unpersuasive because the statute does not provide an exception for substantial compliance or

unintentional payment. (See Espinoza v. Superior Court, No. B314914 (Cal. Ct. App. Sep. 27, 2022) at pp. 10-15.) Therefore, Plaintiff was within his right to withdraw from arbitration based on Defendants failure to comply with Code of Civil Procedure § 1281.98.

Accordingly, because Defendants have violated Code of Civil Procedure § 1281.98, Plaintiff’s motion for order lifting stay is granted.

B. Sanctions

Plaintiff also seeks monetary sanctions in the amount of $16,875 against Defendants pursuant to Code of Civil Procedure § 1281.99. It is noted that Defendants also seek sanctions pursuant to Code of Civil Procedure § 128.7, but because the underlying motion has merit, the Court denies Defendants’ request for monetary sanctions.

Pursuant to Code of Civil Procedure § 1281.98, an employee, who withdraws from an abandoned arbitration proceeding, may seek to recover attorney fees “associated with the abandoned arbitration proceeding.” (Code Civ. Proc. § 1281.98(c)(1).) In those circumstances, the Court must award attorney fees where the drafting party material breaches the arbitration agreement. (Code Civ. Proc. § 1281.99(a).)

The Court finds that sanctions are mandatory because Plaintiff properly withdrew from arbitration pursuant to Code of Civil Procedure § 1281.98. In support of the request for monetary sanctions, Counsel Tsarukyan attests that his hourly billing rate is $675 and that he spent 25 hours in connection with Defendants’ pursuit for arbitration. (Tsarukyan Decl. ¶ 25.) He further attests to the following breakdown of hours: (1) five hours preparing an opposition to Defendants’ motion to compel arbitration; (2) twelve hours spent drafting a new complaint in compliance with JAMS’ guidelines; (3) three hours drafting the instant motion; (4) five hours for reviewing and responding to Defendants’ opposition; and (5) one hour for preparing and attending the hearing. (Id.)

Based on this information, the Court finds that amount requested in monetary sanctions is excessive for the following reasons. First, the Court doubts that five hours were spent drafting Plaintiff’s opposition to Defendants’ motion for arbitration because the memorandum consisted of 10 pages and the declaration included was only three pages. Second, because Plaintiff has not included a copy of the amended complaint, the Court is unable to verify whether significant changes were made to the pleadings. Defendants’ opposition acknowledges that the amended complaint contained 23 causes of action, as opposed to the 22 found in the original complaint. For these reasons, the Court finds that the purported 12 hours spend amending the complaint is excessive. Third, the Court doubts that five hours were actually spent reviewing Defendants’ opposition to the instant motion and drafting a reply based on the reply papers submitted.

Based on the foregoing, the Court grants Plaintiff’s request for monetary sanctions against Defendants jointly and severally in the reduced amount of $7,762.50, consisting of an hourly rate of $675 and the following adjusted time breakdown: two hours drafting an opposition to Defendants’ motion to compel arbitration, three hours drafting an amended complaint, three hours drafting the instant motion, two-and-a-half hours reviewing and responding to Defendants’ opposition, and one hour preparing and attending the hearing. Defendants are ordered to tender payment to Plaintiff’s counsel within thirty days of this Order.

Conclusion

The stay due to pending arbitration is deemed lifted pursuant to Code of Civil Procedure § 1281.98.