Judge: Teresa A. Beaudet, Case: 20STCV18823, Date: 2023-01-12 Tentative Ruling

Case Number: 20STCV18823    Hearing Date: January 12, 2023    Dept: 50

Superior Court of California

County of Los Angeles

Department 50

            Background

On May 14, 2020, Plaintiff Georgeta Beldiman, as an Individual, On Behalf of Herself and All Others Similarly Situated and On Behalf of the General Public as Private Attorneys General (“Plaintiff”) filed this action against Defendant BHFC Operating, LLC, DBA “Bottega Louie” (“Defendant”). The Complaint asserts ten causes of action.

On November 10, 2020, the Court issued an Order pursuant to the parties’ Joint Stipulation to Binding Arbitration and Stay of Action, which indicates, inter alia, that “Plaintiff Georgeta Beldiman and Defendant BHFC Operating LLC shall submit any and all disputes between them, including the claims set forth in this Action, to binding arbitration before JAMS pursuant to its Employment Arbitration Rules and Procedures currently in effect and in accordance with the terms and conditions of the Arbitration Agreement between the parties…This Action shall be stayed pending the outcome of the binding arbitration.” (See November 10, 2020 Order.)

Plaintiff now moves for an order “under CCP § 1281.97 that the arbitration go forward, that Defendant BHFC OPERATING, LLC DBA ‘BOTTEGA LOUIE’ (hereinafter ‘Defendant’ or ‘Respondent’) forthwith pays the arbitration invoice, and that Respondent pay all of Claimant’s attorney’s fees and costs related to the arbitration.” Defendant opposes.

Request for Judicial Notice

The Court denies Defendant’s request for judicial notice.

            Discussion

            Code of Civil Procedure section 1281.97 provides as follows:

“(a)

(1) 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, 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.

(2) After an employee or consumer meets the filing requirements necessary to initiate an arbitration, the arbitration provider shall immediately provide an invoice for any fees and costs required before the arbitration can proceed to all of the parties to the arbitration. The invoice shall be provided in its entirety, shall state the full amount owed and the date that payment is due, and shall be sent to all parties by the same means on the same day. To avoid delay, 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.

(b) If the drafting party materially breaches the arbitration agreement and is in default under subdivision (a), the employee or consumer may do either of the following:

(1) Withdraw the claim from arbitration and proceed in a court of appropriate jurisdiction.

(2) Compel arbitration in which the drafting party shall pay reasonable attorney’s fees and costs related to the arbitration.”

Plaintiff indicates that after the Court ordered Plaintiff’s claims to arbitration on November 10, 2020, Plaintiff’s counsel filed a Demand for Arbitration with JAMS. (Jingozian Decl., ¶ 2.) On December 21, 2021, JAMS was informed that the parties agreed to mediate

before setting arbitration dates. (Jingozian Decl., ¶ 4.) On April 1, 2022, Plaintiff’s counsel sent an email to Aimee Hwang, the JAMS Case Manager, notifying her that the parties mediated and were not able to reach a resolution. (Jingozian Decl., ¶ 5.)

On April 11, 2022, Plaintiff received an email from Ms. Hwang notifying the parties that retainer fees must be paid in order for arbitration to proceed. (Jingozian Decl., ¶ 6.) On April 19, 2022, Ms. Hwang sent an email following up on the status of payment for the retainer fees, and on the same day, Plaintiff’s counsel received an email from counsel for Defendant stating that the payment for the retainer fees was being processed. (Jingozian Decl., ¶ 7.) On May 5, 2022, Plaintiff’s counsel received an email from Ms. Hwang informing her that their billing department still had not received payment from Defendant yet, and on that same day, counsel for Defendant indicated that “It’s paid.” (Jingozian Decl., ¶ 8.) However, on May 12, 2022, Plaintiff’s counsel received an email from Ms. Hwang that JAMS still had not received payment of the retainer fees from Defendant. (Jingozian Decl., ¶ 9.)

            As set forth above, “[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, 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.” As discussed, the parties received an email on April 11, 2022 from JAMS case manager Aimee Hwang, indicating that “[i]n order for the arbitration to proceed, we will need the attached retainer fees paid.” (Jingozian Decl., ¶ 6, Ex. D.) On May 12, 2022 (more than 30 days after April 11, 2022), Ms. Hwang indicated in an email that “[w]e currently still haven’t received payment for the retainer fees from Respondents yet.” (Jingozian Decl., ¶ 9, Ex. D.)

            Pursuant to Code of Civil Procedure section 1281.97, subdivision (b), “[i]f the drafting party materially breaches the arbitration agreement and is in default under subdivision (a), the employee or consumer may do either of the following: (1) Withdraw the claim from arbitration and proceed in a court of appropriate jurisdiction. (2) Compel arbitration in which the drafting party shall pay reasonable attorney’s fees and costs related to the arbitration.” Plaintiff indicates that she elects to proceed under Code of Civil Procedure section 1281.97, subdivision (b)(2).

            In the opposition, Defendant makes a number of arguments. First, Defendant asserts that the Federal Arbitration Act (“FAA”) preempts Code of Civil Procedure section 1281.97 under the terms of the parties’ arbitration agreement.[1] Defendant cites to Valencia v. Smyth (2010) 185 Cal.App.4th 153, 174, where the Court of Appeal noted that “the procedural provisions of the [California Arbitration Act] apply in California courts by default. There is no federal policy favoring arbitration under a certain set of procedural rules…But the parties may expressly designate that any arbitration proceeding [may] move forward under the FAA’s procedural provisions rather than under state procedural law. Absent such an express designation, however, the FAA’s procedural provisions do not apply in state court.” (Internal quotations, citations, and emphasis omitted.) Defendant notes that the parties’ arbitration agreement here provides, “[t]he arbitrability of any controversy, dispute or claim under this policy shall be determined by application of the substantive provisions of the Federal Arbitration Act (9 U.S.C. Sections 1 and 2).” (Seddigh Decl., ¶ 3, Ex. A.)

The Court notes that the arbitration agreement thus refers to the substantive provisions of the FAA, it does not provide that any arbitration proceeding may move forward under the FAA’s procedural provisions rather than under state procedural law. The Court of Appeal in Espinoza v. Superior Court (2022) 83 Cal.App.5th 761, 786 found that “[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.” The Espinoza Court noted that “section 1281.97, along with section 1281.99, define the procedures governing the date by which the party who drafted an agreement to arbitrate against an employee or consumer must pay the initial fees and costs to arbitrate, and specify the consequences of untimely payment. These provisions…are akin to other procedural statutes under the CAA…” (Id. at p. 781 [internal quotations, citation, and emphasis omitted].)

In addition, the Court notes that the issue posed by the instant motion is whether Defendant “materially breached” the arbitration agreement and is in default under Code of Civil Procedure section 1281.97, subdivision (a), not the arbitrability of the instant case. As set forth above, the arbitration agreement here provides, “[t]he arbitrability of any controversy, dispute or claim under this policy shall be determined by application of the substantive provisions of the Federal Arbitration Act (9 U.S.C. Sections 1 and 2).” (Seddigh Decl., ¶ 3, Ex. A.) The parties already stipulated to submit the claims set forth in this action to binding arbitration.

Next, Defendant appears to assert that JAMS’ Comprehensive Rules should supersede Code of Civil Procedure section 1281.97. Defendant has not provided any legal authority to support any such assertion. Defendant also contends that “[a]t no time did JAMS indicate that [Defendant’s] payment was ‘late,’ or that there was a failure to pay fees or expenses.” (Seddigh Decl., ¶ 12.) But as set forth above, Plaintiff provides evidence that on May 12, 2022 (more than 30 days after April 11, 2022), JAMS case manager Aimee Hwang indicated in an email that “[w]e currently still haven’t received payment for the retainer fees from Respondents yet.” (Jingozian Decl., ¶ 9, Ex. D.)

            Defendant also argues that if the Court intends to apply the Code of Civil Procedure, the instant motion should be decided pursuant to Code of Civil Procedure section 1281.98, subdivision (d). But Code of Civil Procedure section 1281.98, subdivision (a)(1) provides, “[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.”[2] (Emphasis added.) But in the instant motion, Plaintiff does not assert that Defendant failed to pay certain fees and costs during the pendency of any arbitration proceeding. Rather, Plaintiff asserts that Defendant failed to timely pay the requisite fees so that the arbitration could be initiated. As Plaintiff notes, JAMS Case Manager Aimee Hwang stated in an April 19, 2022 email, “[o]nce payment has been received, we will then be able to schedule the preliminary call with the arbitrator.” (Jingozian Decl., ¶ 7, Ex. D.) The Court does not find that Defendant has demonstrated that Code of Civil Procedure section 1281.98 is applicable here. 

Defendant also asserts that “[t]here were some difficulties getting the payment issued, as the invoice was directed to a litigation partner who was not involved in billing, and an assistant who was out on maternity leave.” (Seddigh Decl., ¶ 9.)[3] In addition, Defendant notes that the invoice was ultimately paid. (Seddigh Decl., ¶ 11) Defendant asserts that “the factual circumstances here do not support an award of such severity. The cases awarding relief under Sections 1281.97 and 1281.98 typically involve very straightforward factual scenarios; arbitrator issues an invoice, the defendant fails to pay the invoice (often for an extended period of time), and sanctions are issued as a result.” (Opp’n at p. 7:8-12.) But Defendant does not cite to any such cases, and in any event, Code of Civil Procedure section 1281.97 clearly provides that “[i]n an employment or consumer arbitration that requires…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.” (Emphasis added.) As Plaintiff notes, Section 1281.97 does not contain any exceptions for substantial compliance or unintentional nonpayment, and “the legislative history indicates the Legislature considered and rejected the argument that section 1281.97 would unfairly penalize drafting parties for minor errors.” (Espinoza v. Superior Court, supra, 83 Cal.App.5th at p. 777.)
            Defendant also asserts that “it was not clear exactly what the ‘due date’ of the payment was, given that the only invoice re-circulated was dated from before the parties agreed to an administrative stay of the matter.” (Opp’n at p. 8:12-14.) In the motion, Plaintiff’s counsel indicates that on April 1, 2022, she sent an email to Ms. Hwang notifying her that the parties mediated and were not able to reach a resolution, and requesting that JAMS reopen the matter and lift the administrative stay. (Jingozian Decl., ¶ 5.) On April 11, 2022, Plaintiff’s counsel sent another email to Ms. Hwang, notifying her that “[c]laimant is ready to proceed with setting arbitration dates.” (Jingozian Decl., ¶ 6, Ex. D.) As discussed, on April 11, 2022, Ms. Hwang responded, indicating in an email that “[i]n order for the arbitration to proceed, we will need the attached retainer fees paid. Once payment has been received, we will then be able to schedule the preliminary call with the arbitrator.” (Jingozian Decl., ¶ 6, Ex. D.) Defendant indicates that the invoice attached to Ms. Hwang’s April 11, 2022 email is dated April 12, 2021. (Seddigh Decl.,   ¶ 8, Ex. B.)

But as Plaintiff notes, and as is not disputed by Defendant, the invoice was recirculated on April 11, 2022. The invoice indicates that “[p]ayment is due upon receipt.” (Seddigh Decl.,    ¶ 8, Ex. B.) Defendant does not dispute the parties received an email on April 11, 2022 from   Ms. Hwang indicating that “[i]n order for the arbitration to proceed, we will need the attached retainer fees paid.” (Jingozian Decl., ¶ 6, Ex. D.) If Defendant is asserting that it is unclear as to whether payment was due 30 days after April 12, 2021 (as opposed to April 11, 2022), Defendant’s payment of the invoice would still be well over 30 days late. 

            Defendant also contends that Plaintiff has failed to provide any substantiation of what her attorneys’ fees have been to date, or any indication that they are reasonable. But Code of Civil Procedure section 1281.97 does not require that billing records be provided at this juncture. As discussed, “[i]f the drafting party materially breaches the arbitration agreement and is in default under subdivision (a), the employee or consumer may…(2) Compel arbitration in which the drafting party shall pay reasonable attorney’s fees and costs related to the arbitration.” (Code Civ. Proc., § 1281.97, subd. (b)(2).) The reasonableness of the attorney fees and costs will be determined by the arbitrator if disputed.

            Based on the foregoing, the Court finds that Plaintiff has demonstrated that Defendant

“materially breache[d] the arbitration agreement and is in default under subdivision (a)” of Code of Civil Procedure section 1281.97. The Court accordingly denies Defendant’s request for sanctions.[4]   

Conclusion

Based on the foregoing, Plaintiff’s motion is granted.

Plaintiff is ordered to provide notice of this ruling.

DATED:  January 12, 2023                           

________________________________

Hon. Teresa A. Beaudet

Judge, Los Angeles Superior Court