Judge Michelle Williams Court, Case 21STCV05876 2022-12-08 Tentative Ruling

Judge: Michelle Williams Court, Case: 21STCV05876, Date: 2022-12-08 Tentative Ruling

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Case Number: 21STCV05876 Hearing Date: December 8, 2022 Dept: 74

21STCV05876 GODOFREDO SOLSONA vs PROSPECT MEDICAL HOLDINGS, INC.

Plaintiff Godofredo Solsona’s Motion to Vacate Order Compelling Arbitration under C.C.P. § 1281.98; Request for Monetary Sanctions Against Defendant Prospect Medical Holdings, Inc. in the Amount of $3,135 Pursuant to C.C.P. § 1281.99

TENTATIVE RULING: Plaintiff Godofredo Solsona’s Motion to Vacate Order Compelling Arbitration under C.C.P. § 1281.98; Request for Monetary Sanctions Against Defendant Prospect Medical Holdings, Inc. in the Amount of $3,135 Pursuant to C.C.P. § 1281.99 is GRANTED. The April 19, 2021 order on the parties’ Joint Stipulation to Stay State Court Action and Submit to Binding Arbitration is vacated and the case shall proceed in this court as an unlimited civil action. Pursuant to Code of Civil Procedure section 1281.99, Defendant is ordered to pay Plaintiff $3,135.00 via his counsel of record within 60 days. The May 10, 2023 Post Arbitration Conference is taken OFF CALENDAR.

Background

On February 11, 2021, Plaintiff Godofredo Solsona filed this employment action against Defendant Prospect Medical Holdings, Inc. asserting five causes of action under FEHA and a Tameny claim.

On April 19, 2021, the Court entered the parties’ stipulated order to submit the matter to binding arbitration pursuant to the binding mutual agreement to arbitrate between the parties.

Motion

On July 13, 2022, Plaintiff filed the instant motion to vacate the order compelling arbitration pursuant to Code of Civil Procedure section 1281.98 based upon Defendant’s failure to timely pay arbitration fees and for the imposition of sanctions in the amount of $3,135.00.

Opposition

In opposition, Defendant contends the FAA preempts Code of Civil Procedure sections 1281.98 and 1281.99, parties expressly agreed to apply the Federal Arbitration Act rendering Sections 1281.98 and 1281.99 inapplicable, and Defendant has not waived its right to continue the arbitration.

Reply

In reply, Plaintiff argues the FAA does not preempt Sections 1281.98 and 1281.99, the parties did not expressly agree to apply the procedural provisions of the FAA, and the statutes must be strictly applied.

Motion

Standard

Pursuant to Code of Civil Procedure section 1281.98(a)(1), “[i]n 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.”

“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.” (Code Civ. Proc. § 1281.98(b).)

“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 Civ. Proc. § 1281.98(c).)

Code of Civil Procedure section 1281.99(a), “[t]he 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.”

Code of Civil Procedure Sections 1281.98 and 1281.99 are Not Preempted by the FAA

Defendant first argues that Code of Civil Procedure sections 1281.98 and 1281.99 are preempted by the Federal Arbitration Act based upon the “equal footing principle” and under the “obstacle test.” (Opp. at 8:22-15:12.) Defendant’s arguments have been expressly rejected twice by the California Court of Appeal. (See Gallo v. Wood Ranch USA, Inc. (2022) 81 Cal.App.5th 621, 641 (“the FAA does not preempt sections 1281.97 and 1281.99); Id. at 634 n.4 (“our analysis applies with equal force to the parallel provisions of section 1281.98.”); Espinoza v. Superior Court of Los Angeles County (2022) 83 Cal.App.5th 761 (agreeing with Gallo).) This Court is bound by those rulings and Defendant’s preemption arguments cannot prevail here.

Code of Civil Procedure Sections 1281.98 and 1281.99 Apply

Defendant also argues Code of Civil Procedure sections 1281.98 and 1281.99 are “inapplicable under the explicit terms of the Arbitration Agreement.” (Opp. at 15:15-16.) Defendant notes the parties’ arbitration agreement is different from those at issue in Gallo and Espinoza regarding the application of the California Arbitration Act. (Opp. at 15:13-16:14.)

In Gallo, the parties “signed an arbitration agreement that incorporated the ‘California Arbitration Act ... to conduct the arbitration and any pre-arbitration activities.’” (Gallo, supra, 81 Cal.App.5th at 642.) In Espinoza, the Court of Appeal noted “the arbitration agreement in the instant case differs from the arbitration agreement in Gallo in that it does not expressly incorporate the CAA [California Arbitration Act]. That distinction does not affect our holding, because we conclude the arbitration agreement in the instant case incorporates the CAA by default.” (Espinoza, supra, 83 Cal.App.5th at 785.) The court concluded “[a]lthough the arbitration agreement at issue in the instant case does not expressly incorporate the procedural provisions of the CAA, it also does not expressly incorporate the procedural provisions of another jurisdiction. Given the absence of contrary language, therefore, the parties implicitly consented to application of the CAA's procedural provisions, as much as had they expressly incorporated those provisions into their arbitration agreement.” (Id. at 786.)

Here, the parties’ arbitration agreement provides “[t]his Agreement is governed by and enforceable under the Federal Arbitration Act. If for any reason the Federal Arbitration Act is held not to apply to this Agreement or any portion of it, the Agreement shall, to that extent, be governed by and enforceable under the laws of the state in which I am or was last employed by Company.” (Kohler Decl. Ex. 1 at Ex. A.) Defendant cites Valencia v. Smyth (2010) 185 Cal.App.4th 153, which held “[a] state's procedural statutes automatically apply in state court unless the parties expressly agree otherwise.” (Id. at 179.) The agreement at issue in Valencia stated the agreement was to be “interpreted in accordance with the FAA,” and otherwise stated disputes would be “decided by neutral arbitration as provided by California law . . . [and] If you refuse to submit to arbitration after agreeing to this provision, you may be compelled to arbitrate under the authority of the California Code of Civil Procedure.” The court in Valencia determined these terms required application of the CAA. (Id. at 178 (“[T]he Agreement's references to California law and the California Code of Civil Procedure—which contains the CAA—do not expressly adopt the FAA's procedural provisions. Rather, the Agreement expressly incorporates the CAA’s procedural provisions.”).) Accordingly, Valencia does not aid Defendant here.

Defendant contends the parties’ agreement “explicitly states that the FAA governs” and the agreement “contains an explicit term that the FAA will govern.” (Opp. at 16:5-7, 11-12.) Defendant does not cite any authority holding that the phrase “[t]his Agreement is governed by and enforceable under the Federal Arbitration Act,” or a similar term, is sufficient to constitute an express adoption of the procedural provisions of the FAA. A general reference to the FAA is not sufficient. (See Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 922 (“[a]lthough the arbitration agreement in the present case provides that the arbitration is to be governed by the FAA and not California law, generally the California Arbitration Act governs arbitral procedures brought in California courts.”); Sanders v. Kinko's Inc. (2002) 99 Cal.App.4th 1106, 1113 (“the present agreement’s reference to enforcement under the FAA does not clearly reflect an intent to apply both its substantive and procedural aspects.”).) abrogated on another ground as stated in Garcia v. DIRECTV, Inc. (2004) 115 Cal.App.4th 297.)

Defendant failed to demonstrate the parties expressly agreed for the procedural provisions of the FAA to apply to the exclusion of the CAA, including Code of Civil Procedure sections 1281.98 and 1281.99. Accordingly, Code of Civil Procedure sections 1281.98 and 1281.99 apply.

Defendant Materially Breached the Arbitration Agreement and the Case Shall Proceed in Court

On April 22, 2022, JAMS issued a Deposit Request seeking payment of $112,000.00 for the parties’ arbitration with payment due upon receipt. (Riddles Decl. Ex. C.) Defendant did not pay this amount until June 7, 2022, (Riddles Decl. ¶ 9, Ex. D; Kohler Decl. ¶ 15), which is more than 30 days from the due date. Accordingly, Defendant materially breached the arbitration agreement and Plaintiff is entitled to “[w]ithdraw the claim from arbitration and proceed in a court of appropriate jurisdiction.” (Code Civ. Proc. § 1281.98(b)(1).) The statute is strictly applied. (See Espinoza, supra, 83 Cal.App.5th at 776 (“Under the plain language of the statute, then, the triggering event is nothing more than nonpayment of fees within the 30-day period—the statute specifies no other required findings, such as whether the nonpayment was deliberate or inadvertent, or whether the delay prejudiced the nondrafting party. The plain language therefore indicates the Legislature intended the statute to be strictly applied whenever a drafting party failed to pay by the statutory deadline.”).)

Accordingly, Plaintiff’s motion is GRANTED. The April 19, 2021 order on the parties’ Joint Stipulation to Stay State Court Action and Submit to Binding Arbitration is vacated and the case shall proceed in this court as an unlimited civil action. (Code Civ. Proc. § 1281.98(b)(1).)

Monetary Sanctions are Mandatory

Pursuant to Code of Civil Procedure section 1281.99(a), “[t]he 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.”

Plaintiff seeks attorneys’ fees and costs associated with the instant motion in the amount of $3,135.00 consisting of four hours of attorney time on the motion and one hour for the reply and hearing at a rate of $535.00 as well as the $60.00 filing fee and the $400.00 non-refundable arbitration deposit. (Riddles Decl. ¶ 10.) The Court finds these fees reasonable and recoverable. Pursuant to Code of Civil Procedure section 1281.99, Defendant is ordered to pay Plaintiff $3,135.00 via his counsel of record within 60 days.