103 Cal.App.5th 26
Cal. Ct. App.2024Background
- Dominique Keeton sued her employer, Tesla, for workplace discrimination, harassment, and retaliation.
- Both parties agreed to binding arbitration under an agreement referencing JAMS rules, and the trial court stayed litigation pending arbitration.
- Tesla, as the drafting party, failed to pay its arbitration fees within 30 days after the due date, as required by California Code of Civil Procedure §1281.98.
- Keeton moved to vacate the trial court’s order referring the case to arbitration, arguing the late payment was a material breach of the arbitration agreement.
- The trial court found Tesla materially breached the agreement under §1281.98, lifted the litigation stay, and imposed sanctions on Tesla.
- Tesla appealed, raising issues about delegation to the arbitrator, FAA preemption, and constitutionality of §1281.98.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who decides breach/waiver under §1281.98? | Court decides; no valid delegation to arbitrator existed. | Arbitrator should decide due to delegation clause in rules. | The court decides; no clear, unmistakable delegation. |
| Does the FAA preempt §1281.98? | No preemption; §1281.98 furthers FAA goals and doesn’t undermine enforceability. | FAA preempts; §1281.98 imposes arbitration-specific, harsher rules. | No preemption; §1281.98 consistent with FAA and procedural. |
| Is §1281.98 an unconstitutional impairment of contracts? | Statute does not substantially impair contracts—facilitates compliance. | Substantial impairment by redefining breach and waiver, adding new terms. | Not unconstitutional; impairment (if any) justified by public purpose. |
| Application of §1281.98’s 30-day strict deadline | Material breach automatically triggers employee remedies. | Equity demands more flexibility, consider context of late payment. | Statute intended as strict, bright-line rule; leniency not required. |
Key Cases Cited
- Volt Info. Scis. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468 (application of California arbitration procedures is not preempted by the FAA where agreed to by contract)
- Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (heightened standard for delegation of questions of arbitrability to arbitrator)
- Kindred Nursing Ctrs. Ltd. Partnership v. Clark, 581 U.S. 246 (FAA preempts state rules that discriminate against arbitration or derive meaning from arbitration context)
- Doctor’s Assoc., Inc. v. Casarotto, 517 U.S. 681 (FAA preempts substantive state law requirements unique to arbitration contracts)
- Energy Reserves Grp., Inc. v. Kansas Power & Light Co., 459 U.S. 400 (contracts clause analysis framework for substantial impairment and justification by public purpose)