108 Cal.App.5th 403
Cal. Ct. App.2025Background
- Jenny-Ashley Colon-Perez sued her former employer, Security Industry Specialists, Inc. (SIS), alleging multiple employment-related claims after her termination.
- The parties agreed to compel arbitration and stay the court proceedings.
- SIS timely paid two initial arbitration invoices, but failed to pay a third invoice ($4,000) within the 30-day statutory deadline set by California Code of Civil Procedure section 1281.98.
- Colon-Perez moved to vacate the arbitration order and stay, citing SIS's late payment as a material breach under section 1281.98. The trial court granted her motion, allowing her to proceed in court.
- SIS sought relief from this order under section 473(b), arguing excusable neglect due to counsel's personal emergency, but the trial court denied the motion.
Issues
| Issue | Plaintiff's Argument (Colon-Perez) | Defendant's Argument (SIS) | Held |
|---|---|---|---|
| Applicability of Section 1281.98 | Section 1281.98 applies; SIS breached by paying late, so she can withdraw from arbitration. | The FAA controls; section 1281.98 is inapplicable. | Section 1281.98 applies, as agreement accepts state law unless inconsistent with FAA. |
| FAA Preemption | State law can apply if consistent; section 1281.98 promotes FAA goals. | The FAA preempts section 1281.98, which deters arbitration. | FAA does not preempt section 1281.98; both can operate concurrently. |
| Contracts Clause | Statute fosters compliance, doesn't impair contract rights. | Statute rewrites key contract terms, impairing obligations. | Section 1281.98 does not violate the Contracts Clause; any impairment serves significant public purpose. |
| Relief under section 473(b) | Not available; statute sets strict, inflexible deadline. | Relief should apply for excusable neglect of counsel. | Section 473(b) (mandatory & discretionary) unavailable; strict statutory deadline controls. |
Key Cases Cited
- Cronus Invs., Inc. v. Concierge Servs., 35 Cal.4th 376 (Cal. 2005) (parties may designate FAA or state law to govern arbitration procedures; choice-of-law interpretation)
- Valencia v. Smyth, 185 Cal.App.4th 153 (Cal. Ct. App. 2010) (review of contract interpretation de novo where no extrinsic evidence)
- Espinoza v. Superior Court, 83 Cal.App.5th 761 (Cal. Ct. App. 2022) (late payment constitutes material breach under arbitration fee statutes; no excuses permitted)
- Gallo v. Wood Ranch USA, Inc., 81 Cal.App.5th 621 (Cal. Ct. App. 2022) (strict statutory material breach rule for late arbitration payments; legislative intent)
- De Leon v. Juanita’s Foods, 85 Cal.App.5th 740 (Cal. Ct. App. 2022) (strict application of section 1281.98 regardless of excuse or prejudice)
- Kindred Nursing Centers Ltd. P’ship v. Clark, 581 U.S. 246 (U.S. 2017) (FAA mandates equal treatment of arbitration contracts)
- Energy Reserves Group v. Kansas Power & Light Co., 459 U.S. 400 (U.S. 1983) (contracts clause impairment analysis, three-step test)
- Bailey v. Citibank, N.A., 66 Cal.App.5th 335 (Cal. Ct. App. 2021) (section 473(b) relief scope explained)
- Maynard v. Brandon, 36 Cal.4th 364 (Cal. 2005) (section 473(b) relief unavailable where deadline is statutory and inflexible)