Judge: Yolanda Orozco, Case: 22STCP00797, Date: 2022-10-03 Tentative Ruling

Case Number: 22STCP00797    Hearing Date: October 3, 2022    Dept: 31

PETITION TO COMPEL ARBITRATION & PAYMENT OF ARBITRATION FEES IS GRANTED

Background 

On March 8, 2022, Petitioner Darin Beffa filed this Petition to Compel Arbitration and Payment of Arbitration Fees against Respondents John Pierce, David Sergenian, Bainbridge Beck Price & Hecht LLP, formerly known as Pierce Sergenian LLP (“PS LLP”), Joseph Ashby, and Does 1 to 10. 

Respondent Joseph Ashby was dismissed as a party on July 08, 2022. 

On July 08, 2022, Respondent David Sergenian filed an Opposition to the Motion. Another opposition by Sergenian was filed on August 19, 2022; presumably in response to Petitioner filing a Memorandum of Points and Authorities in Support of Petition on August 05, 2022. 

Respondents John Pierce and Bainbridge Beck Price & Hecht LLP filed an opposition on July 15, 2022. 

No Reply has been filed. The hearing was continued to allow the parties to submit supplemental briefs. 

Legal Standard 

 California Code of Civil Procedure section 1281.98 subdivision (a) provides in relevant part: 

“(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, 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.” 

Section 1281.98 subdivision (b) provides, in relevant part: 

“(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: …

(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 provider.” 

Discussion 

Statement of Facts 

Neither Petitioner nor Respondents dispute the fact that a binding arbitration agreement (“Agreement”) exists between the parties. The dispute regarding the Agreement pertains to who should be required to pay the arbitration costs. 

Petitioner claims to have been an employee of Pierce Sergenian LLP (“PS LLP). (See Statement of the Case, attached as Ex. B to Sergenian Declaration.) The firm is now known as Bainbridge Beck Price & Hecht LLP. 

Pursuant to the Agreement, on May 03, 2019, Petitioner filed a claim before the American Arbitration Association (“AAA”) asserting claims for (1) Breach of Contract; (2) Breach of Implied Covenant of Good Faith and Fair Dealing; (3) Violations of Labor Code section 1102.5 (Retaliation); (4) Fraud; (5) Concealment; (6) False Promise; (7) Negligent Misrepresentation; (8) Intentional Interference with Contract; and (9) Wrongful Termination. (Hanafi Decl. ¶ 2.) 

Robert Hoffman was appointed the arbitrator. (Hanafi Decl. ¶ 3.) Petitioner alleges that when Respondents challenged the AAA’s imposition of payment of arbitrator fees solely to Respondents, Respondents subsequently failed to pay the arbitrator fees in the amount of $11,000.00. (Id. ¶¶ 3, 4, Ex. 2, 3.) Having received no payment for the amount due, the AAA terminated the proceeding on March 11, 2021. (Id. ¶¶ 5, 6, Ex. 4, 5.) 

Petitioner’s counsel attaches a copy of the partnership agreement between Petitioner and PS LLP that contains an Arbitration Clause. (Hanafi Decl.  Hanafi Decl. Ex. 1 [Partnership Agreement].) 

Respondent David A. Sergenian (“Sergenian”) argues that the Petitioner was not an employee and even if he was, Sergenian was not the employer of Petitioner but rather PS LLP was the employer; as alleged by Petitioner. Therefore, PS LLP should pay the arbitration fees and not Sergenian as an individual. 

John Pierce joins Sergenian’s opposition to assert that he cannot be held personally liable for the arbitration fees under California’s corporate law. PS LLP asserts that Petitioner’s claims are barred by the applicable statute of limitations. Petitioner was employed PS LLP from or around March 9, 2017, until on or around May 3, 2017. (Sergenian Decl. Ex. B “Statement of the Case”.) The petitioner filed his claim with the AAA on May 03, 2019. 

Petitioner now brings forth this Petition requiring Respondents to pay the Arbitration Fee. 

The issue before the Court is whether it has the authority to decide whether Respondents breached the arbitration agreement under the Code of Civ. Proc. section 1281.98(b) by failing to pay the arbitration fees.   

Applicability of Code Civ. Proc. § 1281.98(b) and the Court’s Ability to Amend the Arbitration Order 

Respondent Sergenian argues that under the Code of Civ. Proc. Section 1281.98 subdivision (b), any issues relating to whether there has been a breach of the arbitration agreement or arbitration rules are within the sole discretion of the Court to decide rather than the arbitrator.

The arbitration provision in question, in relevant part, provides:

“All matters pertaining to the arbitration shall be kept strictly confidential, and any party may have an interim order to that effect made by the arbitrator, or as appropriate a court having jurisdiction during the pendency of the arbitration proceeding . . . The arbitrator shall have jurisdiction to determine the arbitrability of any dispute.”

(Hanafi Decl. Ex. 1 [Partnership Agreement, § 7.6: Arbitration].)

Here, the parties availed themselves of the arbitrator’s authority when they agreed to and entered into arbitration. As provided by the arbitration clause in the Agreement, the arbitrator determined the issue of who should pay the arbitration fees. The arbitrator rendered the following order:

“The arbitrator resolved the dispute in his Decision and Order of April 9, 2020 by confirming that AAA’s decision applying its Employment Arbitration rules that require payment of the arbitrator’s compensation only by Respondents.

[. . .]

Deposits by Respondents shall be made to AAA as follows:

1) On or before April 21, 2020 a deposit to AAA in an amount set forth in an invoice or statement from AAA covering the period of his work on this matter from the initiation and demand of arbitration with AAA to and including his Decision and Order.

2) On or before September 17, 2020 a deposit to AAA in an amount set forth in an invoice or statement from AAA covering the period from April 10, 2020 to the completion of discovery on September 17, 2017, which shall also include the arbitrator’s estimate involving any dispositive motion filed no later than 14 days after the close of discovery. See para. 4 infra.

3) On or before November 3, 2020 or 14 days prior to the date of the scheduled hearing a deposit to AAA in an amount set forth in an invoice or statement from AAA covering the period from the issuance of a decision on a dispositive motion, if so filed, or the completion of discovery to and including the hearing and the arbitrator’s preparation of his decision.

[ . . .]

This order shall continue in effect unless and until amended by subsequent order of the arbitrator. SO ORDERED this 12th day of February 2020 and amended on this 9th day of April 2020.”

(Hanafi Decl. Ex. 2 [emphasis original].)

Under Code Civ. Proc. section 1281.98 subdivision (a), the Court is authorized “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.” Here, the arbitrator issued an order, and this Court is authorized to enforce it under section 1281.98.

The right to appeal is strictly statutory and “[i]n California appeals in arbitration matters are governed by section 1924, which specifies the types of order from which an appeal may be taken under the CAA.” (Judge v. Nijjar Realty, Inc. (2014) 232 Cal.App.4th 619, 629, 631.)

In refusing to strictly comply with the arbitrator’s order, Respondents are effectively taking an appeal of the order by arguing that the order was erroneously made by the arbitrator and should be corrected such that Respondents should not be liable for the arbitration fees. This is not an order that is appealable under section Code of Civ. Proc. section 1924 which states:

“An aggrieved party may appeal from:

(a) An order dismissing or denying a petition to compel arbitration.

(b) An order dismissing a petition to confirm, correct or vacate an award.

(c) An order vacating an award unless a rehearing in arbitration is ordered.

(d) A judgment entered pursuant to this title.

(e) A special order after final judgment.”

(Id.) 

Accordingly, any decision by the arbitrator is final and not appealable unless authorized by statute. As explained by the California Supreme Court: 

“This expectation of finality strongly informs the parties' choice of an arbitral forum over a judicial one. The arbitrator's decision should be the end, not the beginning, of the dispute. Expanding the availability of judicial review of such decisions ‘would tend to deprive the parties to the arbitration agreement of the very advantages the process is intended to produce.’ (Citation.) Ensuring arbitral finality thus requires that judicial intervention in the arbitration process be minimized. [Citation.] Because the decision to arbitrate grievances evinces the parties' intent to bypass the judicial system and thus avoid potential delays at the trial and appellate levels, arbitral finality is a core component of the parties' agreement to submit to arbitration. Thus, an arbitration decision is final and conclusive because the parties have agreed that it be so. By ensuring that an arbitrator's decision is final and binding, courts simply assure that the parties receive the benefit of their bargain.

Moreover, ‘arbitrators, unless specifically required to act in conformity with rules of law, may base their decision upon broad principles of justice and equity, and in doing so may expressly or impliedly reject a claim that a party might successfully have asserted in a judicial action.’ (Citation.) As early as 1852, this court recognized that, ‘The arbitrators are not bound to award on principles of dry law, but may decide on principles of equity and good conscience, and make their award ex aequo et bono [according to what is just and good].’ (Citation.)”

(Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 10- 11.) 

Therefore, the Court assumes that the arbitrator in rendering his decision that all Respondents shall pay the arbitration fees was well aware of the Respondents’ individual objections to the Order. 

The Court reminds the parties that specifically contracted for the provision that: “The obligation to arbitrate any such dispute will survive any partner’s disassociation from the Partnership.” (Hanafi Decl. Ex. 1 [Partnership Agreement, § 7.6: Arbitration].) 

As to Respondent Sergenian’s assertion that he cannot be held personally liable for the contractual obligations of former PS LLP under Corporations Code Section 16306 subdivision (c), the Indemnification provision of the Partnership Agreement covers all former partners “against any and all losses, claims, damages, and liabilities, joint or several, incurred by such partner and arising from or in connection with the conduct of the business of the Partnership.” (Hanafi Decl. Ex. 1 [Partnership Agreement, § 7.2: Indemnification].) 

To the point that any of the parties dispute the validity or applicability of the Partnership Agreement, including its arbitration provision, the Court reminds the parties that they willingly submitted themselves to the jurisdiction of the arbitrator in choosing to arbitrate this controversy and must now submit to the arbitrator’s order. 

As authorized by the Code of Civ. Proc. section 1281.98 subdivision (a), the Petition is GRANTED. 

Conclusion 

Court GRANTS Petitioner Darin Beffa’s Petition to Compel Arbitration and Payment of Arbitration Fees against Respondents John Pierce, David Sergenian, Pierce Bainbridge Beck & Hecht LLP, formerly known as Pierce Sergenian LLP (“PS LLP”), Joseph Ashby, and Does 1 to 10. 

Moving party to give notice.