Judge: Michael Shultz, Case: 20CMCV00314, Date: 2023-09-14 Tentative Ruling

INSTRUCTIONS: If the parties wish to submit on the tentative ruling and avoid a court appearance on the matter, the moving party must:

1. Contact the opposing party and all other parties who have appeared in the action and confirm that each will submit on the tentative ruling.

2. No later than 4:00 p.m. on the court day before the hearing, call the Courtroom (310-761-4302) advising that all parties will submit on the tentative ruling and waive hearing; and

3. Serve notice of the Court's ruling on all parties entitled to receive service.

If this procedure is followed, when the case is called the Court will enter its ruling on the motion in accordance with its tentative ruling. If any party declines to submit on the tentative ruling, then no telephone call is necessary, and all parties should appear at the hearing. If there is neither a telephone call nor an appearance, then the matter may either be taken off calendar or ruled on. 

TENTATIVE RULINGS -- http://www.lacourt.org/tentativeRulingNet/ui/main.aspx?casetype=civil

Case Number: 20CMCV00314    Hearing Date: November 14, 2023    Dept: A

20CMCV00314 Anthony Wilson, Jr. v. Tap Worldwide LLC, et al.

Tuesday, November 14, 2023, at 8:30 a.m.

[TENTATIVE] ORDER DENYING DEFENDANTS’ MOTION FOR RELIEF FROM THE COURT’S SEPTEMBER 14, 2023, ORDER

I.        BACKGROUND

       Plaintiff alleges that Defendants subjected Plaintiff to discrimination and harassment during the course of Plaintiff’s employment. Plaintiff alleges 17 causes of action for discrimination, failure to accommodate, harassment, retaliation, and other employment-related claims.

II.      ARGUMENTS

       Defendants request relief from the Court’s order of September 14, 2023, that vacated the prior order compelling this matter to arbitration. Because of defense counsel’s mistake of law, the arbitrator did not receive the arbitration payment by the due date of July 7, 2023. Counsel believed that payment was timely when made, not received by the arbitrator under Civil Procedure section 1281.98. Defendants are entitled to mandatory and discretionary relief since defense counsel made an honest mistake.

       Plaintiff argues that Defendants previously asked for discretionary relief when they opposed Plaintiff’s motion to vacate the order compelling arbitration. Defendants did not seek timely reconsideration. Defendants are not entitled to relief because the statute at issue does not permit inquiries into the reasons for nonpayment.

       In reply, Defendants argue that this is not a motion for reconsideration since Defendants did not previously move for relief under Civil Procedure section 473 (b). The meaning of “paid” for purposes of the statute remains debatable and unclear.

III.    DISCUSSION

       On September 14, 2023, the Court ordered this matter returned from arbitration as Defendants materially breached the arbitration agreement and waived their right to compel it. (Decl. of Brandon C. Fernald, Ex. 5.) The Court imposed sanctions of $1,750, against Defendants. (Id.)

       An “application” for discretionary or mandatory relief under Civil Procedure section 473 is construed as a “motion” made with notice and service upon other parties. (Arambula v. Union Carbide Corp. (2005) 128 Cal.App.4th 333, 341.) As Defendants did not previously and separately move for relief, the motion at bar cannot be construed as one for reconsideration.  

Defendants did not previously file an “application” for relief which the Court subsequently denied. (Code Civ. Proc., § 1008[1] [permits reconsideration “when an application for an order has been made to a judge or court.”].)

       Defendants have not established that they are entitled to relief under Section 473(b) for their failure to timely pay arbitration fees. If arbitration fees or costs due during the pendency of 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 (Code Civ. Proc., § 1281.98.)  The California Legislature chose not to require nor permit an inquiry into a drafting party’s nonpayment. (Williams v. West Coast Hospitals, Inc. (2022) 86 Cal.App.5th 1054, 1075.) The material breach and sanction provisions are “strict and unforgiving.” (Id.) Accordingly, relief under Section 473 based on a party’s mistake, inadvertence, surprise, or excusable neglect is not permitted. The statute "says nothing regarding a trial court's discretion to consider these additional factors” which reinforced the court’s conclusion that the statute's 30-day deadline “establishe[d] a clear-cut rule for determining if a drafting party is in material breach of an arbitration agreement.” (De Leon v. Juanita's Foods (2022) 85 Cal.App.5th 740, 755.)

       Defendants’ cited authority underscores that mandatory relief under Section 473 (b) "narrowly covers only default judgments and defaults that will result in the entry of judgments." (Even Zohar Construction & Remodeling, Inc. v. Bellaire Townhouses, LLC (2015) 61 Cal.4th 830, 838.) Section 1281.89 provides that material breach results in a waiver of the right to arbitrate; the waiver does not result in entry of judgment. Therefore, Defendants’ contention that the Court’s ruling to vacate the arbitration is the “functional equivalent of a dismissal” is not supported. (Mot., 5:12-13.) Accordingly, mandatory relief is not an available remedy.

       Defendants contend that arbitration fees “not paid within 30 days after the due date” has “multiple interpretations” and that it was not until after Defendants’ late payment did the Court of Appeal construe “paid” to mean “received.” (Code Civ. Proc., § 1281.98; Doe v. Superior Court of City and County of San Francisco (2023) 95 Cal.App.5th 346, 350–351.) Given the Doe court’s acknowledgment that the meaning of “paid” was unclear, defense counsel contends that his construction of the statute to mean that “paid” means “sent” was a reasonable and honest mistake. However, the Doe court’s opinion construed the language in part based on the general principle that depositing a check in the mail does not constitute payment. (Cornwell v. Bank of America (1990) 224 Cal.App.3d 995, 999 ["the payment sent by mail or through a public carrier does not become operative until it gets into the hands of the creditor, … .”].)

       Additionally, the express language of the statute provides that “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.” (Code Civ. Proc., § 1281.98 (a)(2).) The evidence previously provided to the Court does not support an interpretation other than that payment was due upon receipt.

       The arbitrator’s June 7, 2023, email unambiguously states that the amount of $2,000 was due upon receipt. (Decl. of Lee Franck, Ex. 1, filed 7/6/23.) Payments must be “received within 30 days from the invoice date” as required by statute (Id.) On July 10, 2023, the arbitrator advised by email that payment was not received. (Id. Ex. 3.) As the time for payment was clearly stated, Defendants’ contention that it was reasonable to construe “payment” to mean the date payment was initiated is not supported.

[TENTATIVE] ORDER GRANTING DEFENDANTS’ MOTION TO TAX COSTS IN PART

I.        ARGUMENTS

       On September 19, 2023, Plaintiff filed his Cost Memorandum requesting costs of $9,634.95 incurred to prepare the motion to unilaterally withdraw this matter from arbitration given Defendants’ material breach of the agreement. The statute permits recovery of attorney’s fees and costs.

       Defendant moves to tax certain items from the Cost Memorandum because Plaintiff improperly seeks reimbursement of every cost expended since the lawsuit was filed. Plaintiff is entitled to fees “associated” with the arbitration. Costs must be reasonably incurred and cannot constitute a windfall.

       In opposition, Plaintiff withdraws some items that do not fall within the scope of the statute. Otherwise, Plaintiff argues that the remaining costs requested are authorized by law and were reasonably incurred or otherwise permitted at the court’s discretion.

       Defendants argue in reply that the statute is limiting. Plaintiff is not entitled to all litigation costs.

II.      LEGAL STANDARDS

       Plaintiff is entitled to fees and costs under two separate provisions of the statute. Where the employee withdraws the claim from arbitration because of a material breach and proceeds in court, the plaintiff may bring a motion or separate action “to recover all attorney’s fees and all costs associated with the abandoned arbitration proceeding.”(Code Civ. Proc., § 1281.98 (c).) Additionally, the court “shall” impose a monetary sanction against the drafting party under section 1281.99, for attorney’s fees and costs incurred by the employee “as a result of the material breach.” (Code Civ. Proc., § 1281.99 (a).)

       Because of Defendants’ failure to timely pay arbitration fees, Plaintiff incurred filing fees associated with his motion to vacate, notice of ruling thereof, memorandum of costs, and for the opposition to the motion to tax costs. Defendants do not object. (Mot. 6:22-25.)

       However, the parties dispute the meaning of fees and costs “associated with the abandoned arbitration proceeding.” (Code Civ. Proc., § 1281.98(c).) Defendants argue that the scope of recoverable fees and costs should not include that incurred for taking depositions and subpoenaing witnesses while the arbitration was pending; rather, Defendants contend that the court should exercise its discretion and permit reasonable fees and costs “that would not have been expended but for the arbitration.” (Mot. 6:19-22.) Since Plaintiff will inevitably use the same depositions, discovery, and investigation information at trial, awarding Plaintiff fees and all costs incurred will result in a “windfall.”

       Plaintiff argues that the broad scope of the statute permits recovery of all costs and fees incurred in preparation for arbitration, including discovery and investigation. (Opp. 3:26-28.)

III.    DISCUSSION

       As section 1281.98 became effective January 1, 2022, there is a dearth of published opinions construing the language at issue. Therefore, the Court construes the statute using general construction principles. Statutory construction requires the court to determine the statute’s intent to effectuate its purpose. (People v. Adams (2018) 28 Cal.App.5^th 170, 181.) The court begins with the statute’s actual words, assigning them their usual and ordinary meaning, and construing the words in that context. (Id.) If the statute is not ambiguous, then its plain meaning governs. (Id.) If the language allows more than one reasonable construction, the court may consider the legislative history and the consequences of a particular interpretation, including the impact on public policy. (Wells v. One2One Learning Foundation (2006) 39 Cal.4^th 1164, 1190.)

       The statute permits “all costs associated with the abandoned arbitration proceeding,” not all litigation costs incurred to date, as Plaintiff’s interpretation suggests. The Legislature could have included the word “litigation” if the scope of recoverable costs were intended to be all encompassing. Rather the Legislature limited the scope of recoverable costs by permitting only that associated with the abandoned proceeding. A reasonable inference of the word “abandoned” is that any work in preparation for the arbitration no longer has any futility. In that context, Plaintiff would have suffered harm by needlessly incurring fees and costs peculiar to the now-abandoned arbitration. However, the “litigation” has not been abandoned; litigation costs incurred for discovery and investigation are not unnecessarily incurred. Given the statute’s limiting language, Plaintiff’s argument that he is entitled to all litigation fees and costs incurred since the matter was compelled to arbitration is not a reasonable interpretation.

       The Court denies both parties’ request for judicial notice of other trial court rulings on this issue as they are not citable nor published and have no precedential value. (Santa Ana Hospital Medical Center v. Belshe (1997) 56 Cal.App.4th 819, 831.)   

IV.    CONCLUSION

       Accordingly, Defendants’ Motion to Tax Costs is GRANTED in part and DENIED in part. Plaintiff withdraws the following pre-arbitration costs:

       The Court GRANTS the motion and strikes costs incurred for litigation expenses not associated with the abandoned arbitration proceeding: (Decl. of Andrew Butzen; Code Civ. Proc., §1281.98(c).)

The Court DENIES Defendants’ motion with respect to costs associated with the abandoned arbitration proceeding (filing fees). (Code Civ. Proc., § 1281.98(c).

The Court DENIES Defendants’ motion with respect to costs imposed as a sanction as a result of Defendants’ material breach (Code Civ. Proc., §1281.99.)

Based on the foregoing, the Court permits recovery of costs totaling $470.28 ($372.33 + $97.95.)

* Attorney fees and additional costs associated with Plaintiff’s Motion for Attorney’s Fees and Costs are addressed in the following ruling.

[TENTATIVE ORDER GRANTING PLAINTIFF’S MOTION FOR ATTORNEY’S FEES AND COSTS IN PART PURSUANT TO C.C.P. 1281.98(C)(1)

I.        ARGUMENTS

       Plaintiff requests an award of attorney’s fees of $329,730.00, expert fees of $1,800 and costs of $8,892.35 (amended to exclude costs Plaintiff has since withdrawn). Plaintiff argues that fees and costs were reasonably incurred and associated with Defendants’ abandonment of the arbitration proceeding. Plaintiff does not seek fees and costs incurred prior to the issuance of this matter to arbitration. Plaintiff asks for a lodestar multiplier of 2.          

       In opposition, Defendants argue that “top dollar” ($1,000 per hour) rates are unreasonable, and the Court should find that $300 per hour is reasonable. The expert fees incurred prior to filing this action should be excluded. The bulk of the fees incurred would have been incurred regardless of the forum. Fees to complete discovery are not associated with the “abandoned“ arbitration proceeding. The Court should limit the reasonable time spent to 26 hours. 

       In reply, Plaintiff argues that all fees requested are “associated” with the arbitration proceeding. The statute does not contain an “arbitration-specific” limitation.

II.      DISCUSSION

       Preliminarily, Plaintiff’s request for an award of costs is GRANTED in part as modified for the reasons expressed in the Court’s order GRANTING IN PART Defendants’ Motion to Tax Costs. To reiterate, the Court awards costs of $372.33 permitted under section 1281.98(c) and $97.95 as a sanction pursuant to section 1281.99, for a total of $470.28.

       The statute permitting costs also permits recovery “of all attorney’s fees … associated with the abandoned arbitration proceeding.”(Code Civ. Proc., § 1281.98 (c).) Additionally, the court “shall” impose a monetary sanction against the drafting party under section 1281.99, for attorney’s fees and costs incurred by the employee “as a result of the material breach.” (Code Civ. Proc., § 1281.99 (a).)

       To determine whether fees are reasonable, the court begins with the lodestar, which is the number of hours reasonably spent multiplied by the reasonable hourly rate. (PLCM Group v. Drexler (2000) 22 Cal.4th 1084, 1095.) The court considers a number of factors including "the nature of the litigation, its difficulty, the amount involved, the skill required in its handling, the skill employed, the attention given, the success or failure, and other circumstances in the case.’” (PLCM Group at 1096.) The lodestar figure can be adjusted based on the factors specific to the case. (Id.)

       To determine a reasonable market rate, "the courts will look to equally difficult or complex types of litigation.” (Syers Properties III, Inc. v. Rankin (2014) 226 Cal.App.4th 691, 700.) The “market rate” is generally based on the rates prevalent in the community where the court is located. (Id.) The trial court is in the best position to value the services rendered by the attorneys in his or her courtroom for the type of litigation at issue. The prevailing party is entitled to “’compensation for all the hours reasonably spent‘ in litigating the action to a successful conclusion. (Ibid., italics in original.) ‘Reasonably spent’ means that time spent ‘in the form of inefficient or duplicative efforts is not subject to compensation. (Horsford v. Board of Trustees of California State University (2005) 132 Cal.App.4th 359, 394.)

       The Court has reviewed all the declarations in support of the fee request, the billing records, and other evidence supporting a reasonable hourly rate. The Court overrules Defendants’ objections to Plaintiff’s request for judicial notice of various articles and the Laffey Matrix proffered to support Plaintiff’s claim that $1,000 per hour is reasonable.

       Plaintiff requests litigation fees incurred for tasks within the same broad scope articulated in Plaintiff’s opposition to Defendant’s motion to tax. For the same reasons discussed previously, the Court limits the fee award to tasks associated with the abandoned arbitration proceeding, not fees for all litigation conducted to date. Accordingly, the Court declines to award fees incurred for litigation investigation and review and preparing and responding to discovery. The Court has excluded fees sought by Scott Cummings (except for time to review the fee motion) and Jorge Lopez, for hours expended for general litigation meetings, discovery, and depositions not related to the abandonment of the arbitration proceeding. Mr. Franck’s request for all hours spent on litigation tasks performed is reduced from 165 hours to 16.4 hours, reflecting fees that fall within the scope of the statute. 

       Mr. Butzen has been practicing law since 2021. The Court finds that $275 per hour is reasonable for this fee motion. Mr. Butzen requests four and a half hours to prepare and file a joint stipulation, which is unreasonable. Mr. Butzen’s total fee request of 4.8 hours is reduced to 1 hour for time spent sending emails and preparing a joint stipulation.  

       The arbitrator considered and ruled on a number of discovery issues. (Decl. of Mishelle R. Moeller, Ex. A.) The Court finds that these fees were incurred for general litigation purposes. While the arbitrator conducted the IDC and made rulings, the abandoned arbitration proceeding resulting from Defendants’ material breach does not diminish the usefulness and value of having discovery disputes promptly resolved to advance the litigation as a whole.

       Plaintiff has not established that he is again entitled to fees incurred to prepare the motion to vacate the order compelling arbitration. The Court granted the motion and imposed sanctions for fees and costs resulting from Defendants’ material breach. (Code Civ. Proc., § 1281.99.) Plaintiff seeks a double recovery by claiming the same motion to vacate was associated with the abandoned arbitration proceeding under section 1281.98(c)(1), which is not reasonable. Accordingly, the court excludes fees sought by Mr. Franck incurred from 7/12/2023 through 9/6/2023.

       The Court also excludes fees incurred for time spent preparing for mediation. While this work was done after the Court compelled the matter to arbitration, like discovery, the work performed has not lost its utility and is not “associated” with the abandoned arbitration proceeding.

       The Court permits fees incurred to prepare this motion for attorney’s fees.  The Court previously determined that $350 per hour for Mr. Franck is reasonable. Mr. Franck seeks 43.3 hours in fees for this fee motion alone, increased by 1.2 hours for review by Mr. Cummings. Mr. Cummings has been an attorney for four years more than Mr. Franck. The Court finds that $350 per hour is also a reasonable fee for Mr. Cummings. The Court finds that eight hours is a reasonable time spent on this fee motion. The Court also finds that 15 hours to oppose Defendant’s motion to tax is unreasonable. The Court reduces that amount to five hours to oppose the motion and to appear.

       The Court declines to reimburse fees incurred by Plaintiff’s expert totaling $1,800.00 pursuant to the Government Code. Expert and other fees may be awarded at the court’s discretion to a plaintiff prevailing in a civil action. (Gov. Code, § 12965.) This action is not concluded.

III.    CONCLUSION

       Based on the foregoing, the court awards the following fees:

       The Court DECLINES the request for a 2.0 enhancement.