99 Cal.App.5th 1319
Cal. Ct. App.2024Background
- Dana Hohenshelt filed suit against former employer Golden State Foods Corp. alleging FEHA retaliation and Labor Code violations.
- Golden State moved to compel arbitration under an arbitration agreement; court enforced the agreement and stayed litigation.
- During the JAMS arbitration, Golden State received two invoices for arbitration fees, which were not paid within 30 days of the due dates.
- Hohenshelt, citing Code of Civil Procedure §1281.98, elected to withdraw from arbitration and proceed in court due to Golden State’s untimely payment.
- The trial court denied Hohenshelt’s motion to lift the stay, finding the arbitrator’s later extension of the payment due date had cured the late payment.
- Hohenshelt filed a writ petition seeking an order to lift the litigation stay, which the Court of Appeal reviewed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Effect of late arbitration fee payment under §1281.98 | Untimely payment by Golden State is a breach allowing withdrawal from arbitration | Arbitrator's extension cured the late payment | Untimely payment is a material breach; no extension absent all parties' consent |
| Validity of arbitrator or provider's unilateral extension | Only mutual agreement can extend due date | Provider could validly set a new deadline | Extension of time is invalid without mutual consent |
| FAA preemption of §1281.98 | Statute not preempted; it furthers FAA purposes | Statute is preempted as it disfavors arbitration | Statute is not preempted; it ensures speedy/arbitration is not stalled by nonpayment |
Key Cases Cited
- Cvejic v. Skyview Capital, LLC, 92 Cal.App.5th 1073 (Cal. Ct. App. 2023) (untimely payment under §1281.98 is a material breach; arbitrator cannot cure by granting extensions)
- Gallo v. Wood Ranch USA, Inc., 81 Cal.App.5th 621 (Cal. Ct. App. 2022) (late fee payment by employer is a material breach as a matter of law under §1281.98)
- Perry v. Thomas, 482 U.S. 483 (U.S. 1987) (FAA preempts state laws that disfavor arbitration)
- AT&T Mobility v. Concepcion, 563 U.S. 333 (U.S. 2011) (California’s unconscionability rule for class waivers preempted by FAA)
- Preston v. Ferrer, 552 U.S. 346 (U.S. 2008) (FAA supersedes state laws requiring initial administrative agency jurisdiction)
- DIRECTV, Inc. v. Imburgia, 577 U.S. 47 (U.S. 2015) (state courts must adhere to FAA and federal interpretations favoring arbitration)
- Lamps Plus, Inc. v. Varela, 587 U.S. __ (U.S. 2019) (ambiguities in arbitration agreements resolved in favor of arbitration under FAA)
- Viking River Cruises, Inc. v. Moriana, 596 U.S. 639 (U.S. 2022) (state rules invalidating some arbitration waivers preempted by FAA)