85 Cal.App.5th 740
Cal. Ct. App.2022Background
- De Leon sued Aerotek and Juanita’s Foods; Aerotek moved to compel arbitration under an Aerotek–De Leon JAMS arbitration agreement that covered clients like Juanita’s Foods.
- JAMS invoiced Aerotek and Juanita’s Foods for filing and retainer fees; Aerotek paid timely, Juanita’s Foods did not pay its $5,000 retainer until more than 30 days after the due date.
- JAMS briefly indicated it might proceed despite Juanita’s Foods’s nonpayment, but suspended scheduling after De Leon filed a motion to vacate the arbitration as to Juanita’s Foods.
- De Leon moved to vacate the order compelling arbitration under Code Civ. Proc. §1281.98, arguing Juanita’s Foods’s late payment was a material breach allowing him to withdraw from arbitration and sue in court.
- The trial court ruled §1281.98’s plain language makes any failure to pay required continuation fees within 30 days a material breach; it vacated arbitration as to Juanita’s Foods and stayed litigation pending the Aerotek arbitration.
- Juanita’s Foods appealed, arguing the court should consider delay or prejudice and other factors before declaring a material breach.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a drafting party’s failure to pay fees required to continue arbitration within 30 days of the due date is a "material breach" under Code Civ. Proc. §1281.98 allowing the non‑drafting party to withdraw from arbitration | De Leon: §1281.98’s plain text makes nonpayment >30 days a material breach and permits withdrawal to proceed in court | Juanita’s Foods: Court should consider additional factors (delay, prejudice, whether payment was inadvertent or JAMS would proceed) before finding material breach | The court affirmed: §1281.98 is plain and creates a bright‑line rule — failure to pay within 30 days is a material breach; courts need not (and may not) balance prejudice/delay as part of the materiality determination |
Key Cases Cited
- Espinoza v. Superior Court, 83 Cal.App.5th 761 (Cal. Ct. App. 2022) (construing §1281.97 as an unambiguous bright‑line rule: nonpayment within 30 days = material breach)
- Gallo v. Wood Ranch USA, Inc., 81 Cal.App.5th 621 (Cal. Ct. App. 2022) (held late payment is material breach as a matter of law and addressed sanctions and FAA preemption arguments)
- Carmel Development Co., Inc. v. Anderson, 48 Cal.App.5th 492 (Cal. Ct. App. 2020) (statutory interpretation reviewed de novo)
- People v. Murphy, 25 Cal.4th 136 (Cal. 2001) (principles of statutory interpretation: plain meaning governs)
- People v. Lopez, 31 Cal.4th 1051 (Cal. 2003) (if statutory language is clear, court applies plain meaning)