102 Cal.App.5th 222
Cal. Ct. App.2024Background
- Massiel Hernandez and Sohnen Enterprises entered into an arbitration agreement in 2016 explicitly stating it would be governed by the Federal Arbitration Act (FAA).
- After Hernandez filed a state court lawsuit for employment-related claims, both parties stipulated to stay court proceedings and arbitrate under their agreement.
- Sohnen failed to pay required JAMS arbitration fees within 30 days of the invoice.
- Hernandez moved to withdraw from arbitration and proceed in court under California Code of Civil Procedure § 1281.97, which treats late payment as a material breach and waiver of the right to arbitrate.
- The trial court granted Hernandez’s motion, ruling the late payment triggered § 1281.97 and thus litigation could proceed; Sohnen appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1. Appealability of Order Under § 1281.97 | Order is the functional equivalent of denying a petition to compel arbitration, thus appealable. | Same; order is appealable. | Order is appealable as it is functionally equivalent to denial of a motion to compel arbitration. |
| 2. Applicability of § 1281.97 vs. FAA | § 1281.97 governs; FAA does not preempt state rule requiring timely arbitration fee payment. | FAA governs both substance and procedure; preempts § 1281.97 unless parties explicitly select California law. | FAA governs due to explicit agreement; § 1281.97 does not apply. |
| 3. Preemption of § 1281.97 by the FAA | § 1281.97 facilitates arbitration and is consistent with FAA goals. | § 1281.97 mandates findings that treat arbitration contracts less favorably and conflict with FAA. | FAA preempts § 1281.97's mandatory findings of breach/waiver where not expressly selected by parties. |
| 4. Violation of Court Order to Pay Arbitrator | Sohnen failed to meet payment deadline set by court; justifies vacatur. | No specific deadline in court order; late payment not sufficient for sanction. | No substantial evidence of violation; court improperly vacated stay based on payment timeline. |
Key Cases Cited
- Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468 (1989) (FAA preemption analysis and parties’ ability to choose governing arbitration law)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (FAA preempts state law that disfavors arbitration)
- Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) (FAA applies in state and federal court to contracts within its scope)
- Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265 (1995) (FAA broad application to contracts affecting commerce)
- Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008) (limiting parties’ expansion of FAA review scope)