107 Cal.App.5th 56
Cal. Ct. App.2024Background
- Stephnie Trujillo sued her former employer, J-M Manufacturing (JMM), and four ex-colleagues for discrimination, harassment, retaliation, and failure to prevent such conduct.
- The parties reached a post-dispute stipulation to arbitrate with mutually negotiated terms, replacing an earlier, disputed pre-dispute arbitration agreement from 2012.
- The stipulation required JMM to "timely pay all arbitral fees and costs" but did not set a specific 30-day forfeiture clause for late payment.
- Arbitration began in May 2021. JMM paid previous invoices on time but paid one invoice late (after the 30-day period had lapsed).
- Trujillo moved to withdraw from arbitration under California Code of Civil Procedure § 1281.98, arguing JMM's late payment triggered her right to elect proceeding in court; the trial court granted this motion.
- The defendants appealed, arguing § 1281.98 did not apply because the arbitration stemmed from a post-dispute agreement and because they were not the statutory "drafting party."
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Applicability of § 1281.98 to post-dispute arbitration | Statute applies to all arbitration payment defaults, regardless of when agreement was made | Statute applies only to pre-dispute agreements, not post-dispute stipulations | Court held § 1281.98 applies only to pre-dispute agreements |
| Who is the "drafting party" under § 1281.98 and § 1280(e) | JMM is the drafting party as employer initiating arbitration | JMM is not the drafting party since the agreement was post-dispute and drafted by plaintiff | Court held JMM was not the drafting party as defined by statute |
| Effect of late payment under § 1281.98 | Any late payment is a material breach allowing withdrawal from arbitration | Material breach rule doesn't apply where § 1281.98 is inapplicable | Court found no statutory material breach, § 1281.98 not triggered |
| Preemption and waiver of federal arguments | Plaintiff attempted to raise FAA preemption | Defendants argued any FAA argument was waived | Court found preemption argument forfeited, as not timely raised |
Key Cases Cited
- Espinoza v. Superior Court, 83 Cal.App.5th 761 (Cal. Ct. App. 2022) (strict application of fee-payment deadlines under § 1281.98)
- De Leon v. Juanita’s Foods, 85 Cal.App.5th 740 (Cal. Ct. App. 2022) (any late payment is a material breach under the statute)
- Williams v. West Coast Hospitals, Inc., 86 Cal.App.5th 1054 (Cal. Ct. App. 2022) (intent or good faith irrelevant for § 1281.98 breaches)
- Doe v. Superior Court, 95 Cal.App.5th 346 (Cal. Ct. App. 2023) (payment occurs on receipt, not mailing, of fees under § 1281.98)
- Cvejic v. Skyview Capital, LLC, 92 Cal.App.5th 1073 (Cal. Ct. App. 2023) (arbitrator cannot cure missed payment by extending the due date)
- Reynosa v. Superior Court, 101 Cal.App.5th 967 (Cal. Ct. App. 2024) ("direct expression" required for agreed extension of deadlines)