92 Cal.App.5th 1073
Cal. Ct. App.2023Background
- Cvejic sued his employer Skyview after termination; the trial court compelled arbitration and stayed the action. Arbitration proceeded under AAA commercial rules.
- Arbitrators set a hearing for August 5, 2021; AAA required drafting party (Skyview) to post hearing deposits by June 4, 2021.
- By July 9, 2021 Skyview had not paid; Cvejic notified the panel and reserved his rights under CCP §1281.98. The panel later set a new payment deadline of July 14 and characterized Cvejic’s July 8 withdrawal notice as premature. Skyview paid by July 14.
- Cvejic filed an election to withdraw from arbitration under §1281.98 and sought sanctions and vacatur of the arbitration stay; the trial court granted withdrawal, vacated the stay, and awarded expenses under §1281.99.
- Skyview appealed. The Court of Appeal affirmed the trial court’s order and the sanctions award.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §1281.98 permits unilateral withdrawal when the drafting party fails to pay required arbitration fees after the due date | Cvejic: failure to pay by the deadline is a material breach entitling withdrawal | Skyview: late payment was curable by the panel; arbitrators’ procedural rulings should control | Held: §1281.98 creates a bright-line right to withdraw; Skyview’s nonpayment was a material breach and Cvejic could withdraw |
| Whether arbitrators may cure a drafting party’s missed payment or decide the withdrawal right | Cvejic: statute vests courts with authority to adjudicate the statutory election | Skyview: arbitration clause and AAA rules reserve procedural and breach disputes to arbitrators | Held: statute displaces arbitrator authority here; courts decide §1281.98 elections and arbitrators cannot cure the material breach |
| Whether the trial court’s order allowing withdrawal is appealable | Cvejic: argued the order was nonappealable | Skyview: sought reversal of the order (implying appealability) | Held: the order functionally denied arbitration and is appealable |
| Whether the sanctions/expenses award under §1281.99 was erroneous | Cvejic: sought fees and sanctions under the statute | Skyview: failed to separately contest the sanctions on appeal | Held: sanctions affirmed because Skyview did not specifically challenge them |
Key Cases Cited
- Gallo v. Wood Ranch USA, Inc., 81 Cal.App.5th 621 (discussing legislative aim to prevent "procedural limbo" from nonpayment of arbitration fees)
- De Leon v. Juanita’s Foods, 85 Cal.App.5th 740 (statute establishes bright-line rule that late payment is a material breach)
- Espinoza v. Superior Court, 83 Cal.App.5th 761 (strict enforcement of fee-payment statutes in arbitration context)
- Williams v. West Coast Hospitals, Inc., 86 Cal.App.5th 1054 (courts have jurisdiction to adjudicate §1281.98 elections)
- Lawson v. ZB, N.A., 18 Cal.App.5th 705 (orders denying arbitration are appealable)
- MKJA, Inc. v. 123 Fit Franchising, LLC, 191 Cal.App.4th 643 (appealability of rulings affecting arbitration)
- Greenspan v. LADT, LLC, 185 Cal.App.4th 1413 (respect for arbitrator procedural authority — distinguished here)
- Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (parties’ agreed arbitration procedures inform scope of arbitrator authority)
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (forum-specific procedural gateway issues are ordinarily for arbitrators)