Sanders v. Super. Ct.Sanders v. Super. Ct.
ORIGINAL PROCEEDINGS; petition for extraordinary writ. William F. Highberger, Judge. Petition granted.
Moon Law Group, Kane Moon, S. Phillip Song and Stanley J. Park for Petitioner.
No appearance for Respondent.
Venable, John S. Worden and Rudolph G. Klapper for Real Party in Interest.
Mone Yvette Sanders filed a putative class and representative action against her former employer, Edward D. Jones & Co., L.P. (Edward Jones), alleging wage and hour claims under the Labor Code as well as a cause of action under the Private Attorneys General Act of 2004 (PAGA;
Sanders initiated the arbitration, and the arbitrator set an arbitration hearing date, but Edward Jones failed to pay $54,000 in fees and costs billed by the arbitrator within 30 days of the payment-due date as mandated by
drafted the arbitration agreement (drafting
Sanders filed a petition for writ of mandate, and we issued an order to show cause. We agree with the numerous Courts of Appeal that have concluded
We also reject Edward Jones‘s contention that under the arbitration agreement Sanders was required to submit to the arbitrator the issue whether Edward Jones was in default. The plain language of
timely pay fees to withdraw from the arbitration and proceed in court.
Accordingly, the trial court erred in denying Sanders‘s motion to vacate the order compelling arbitration. We now grant the petition for writ of mandate.
FACTUAL AND PROCEDURAL BACKGROUND
A. Sanders‘s Employment and Filing of a Putative Class and Representative Action for Wage and Hour Violations
On March 5, 2020 Edward Jones hired Sanders as a non-exempt branch office administrator, and she started working for the company later that month.2 On August 6, 2020, at the start of the COVID-19 pandemic, Sanders signed a “Work At Home Agreement” that contained an “Arbitration and
agreed to a waiver of “class or collective actions,” whether brought in a court or arbitration, but the agreement did not restrict her right “to file in court a representative action under [the] California Labor Code.” The agreement provided that any arbitration would be conducted by the Financial Industry Regulatory Authority (FINRA) or JAMS before a single neutral arbitrator in accordance with the “FINRA or JAMS employment arbitration rules then in effect.”
On December 4, 2020 Edward Jones terminated Sanders‘s employment. On August 20, 2021 Sanders filed a putative class and representative action against Edward Jones. The first amended complaint alleged wage and hour causes of action under the Labor Code, a cause of action for violation of the unfair competition law (UCL;
B. Edward Jones‘s Motions To Compel Arbitration
On February 4, 2022 Edward Jones filed a motion to compel Sanders to arbitrate her individual Labor Code and UCL claims, dismiss the putative class claims, and stay the PAGA cause of action. On June 2, 2022 the trial court granted the motion, finding Sanders‘s wage and hour claims were related to her work-at-home employment and were subject to the arbitration agreement. The court ordered the non-PAGA claims to arbitration, dismissed the class claims, and stayed the PAGA cause of action.
Following the Supreme Court‘s decision in Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639, the trial court granted Edward Jones‘s second motion to compel arbitration “as to the individual PAGA claim.” The court subsequently stayed
the representative PAGA claim to allow the JAMS arbitration to proceed.
C. Edward Jones‘s Late Payment of the Arbitration Fees
On November 29, 2022 Sanders initiated the arbitration with JAMS by filing a demand. On December 15, 2022 JAMS sent Edward Jones an invoice
On March 30, 2023 the arbitrator, Judge Melinda Johnson (Ret.), sent to the parties “Scheduling Order Number One,” which described Sanders‘s claims, set an April 22, 2024 arbitration date, and set a schedule for discovery, preparation of a joint exhibit list, and filing of hearing briefs. The scheduling order stated “[t]he [a]rbitrator will apply California substantive law and JAMS Employment Rules and Procedures.” The order indicated that “[a]rbitration fees must be deposited in advance of the hearing, by the deadline which will be confirmed in correspondence from JAMS.”
Formal discovery commenced on May 8, 2023. On December 22, 2023 JAMS sent a notice of hearing to all parties stating the arbitration would be held before Judge Johnson from April 22 through April 26, 2024. The notice further stated “[a]ll fees are due upon receipt” and attached an invoice for $54,000 as a deposit for services, which likewise indicated at the bottom, “Payment is due upon receipt.” The notice advised, “All fees must be paid prior to service of an award which the Arbitrator has rendered,” followed by a highlighted cautionary note in boldface:
“Please see California Code of Civil Procedure sections 1281.97–1281.99 regarding payment of fees for this arbitration.” The attached General Fee Schedule, consistent with the notice, provided, “All fees are due and payable in advance of services rendered and by any applicable due date as stated in a hearing confirmation letter.”
On the morning of January 26, 2024 JAMS sent an email to the parties again attaching the December 22 invoice for $54,000 and stating the invoice “remains due in the above-referenced matter. Fees were due upon receipt,” and payment was required “in order to move forward with the arbitration hearing.” Three and a half hours later counsel for Sanders emailed counsel for Edward Jones stating Edward Jones was “in material breach of the pertinent arbitration agreement by failing to pay fees in the sum of $54,000 within 30 days of the due date pursuant to CCP 12[81.98]” and Sanders reserved her right under
On February 1, 2024 Sanders filed in the trial court a motion to vacate the order compelling claims to arbitration and requesting the court lift the stay, citing
[E]ven if Defendant eventually pays the arbitration fees, this late payment still constitutes a material breach and default of the arbitration agreement.” Sanders requested monetary sanctions of $5,860 pursuant to
Edward Jones argued in its opposition, among other things, that “applying section 1281.98 to avoid [Sanders‘s] agreement to arbitrate her claims in this case would violate the ‘equal treatment’ principle applicable to the FAA as articulated by the U.S. Supreme Court.”
On May 1, 2024, after oral argument and supplemental briefing, the trial court denied the motion. The court explained that while it “agrees intellectually” with the dissent in Hohenshelt v. Superior Court (2024) 99 Cal.App.5th 1319, 1326, review granted June 12, 2024, S284498 that the FAA preempted
In an unusual turn of events, however, on June 3, 2023 (before the trial court signed the order granting Sanders‘s motion), Edward Jones submitted new authority and requested the trial court reconsider its ruling. On July 15, 2024, after hearing further argument from counsel, the court vacated its May 1, 2024 ruling and denied Sanders‘s motion to vacate the order compelling arbitration, finding
review granted August 21, 2024, S285696 (Hernandez) and Belyea v. GreenSky, Inc. (N.D. Cal. 2022) 637 F.Supp.3d 745. The court certified its order under
On September 13, 2024 Sanders filed a petition for writ of mandate (amended a few days later) seeking an order directing the trial court to vacate its order denying the motion to vacate the order compelling arbitration and to enter a new order granting the motion. At our request, Edward Jones filed a preliminary opposition, and on October 15 we issued an order to show cause. Edward Jones filed a return, and Sanders filed a reply.
DISCUSSION
A. Standard of Review
“Our fundamental task in interpreting a statute is to determine the Legislature‘s intent so as to effectuate the law‘s purpose.” (Prang v. Los Angeles County Assessment Appeals Bd. (2024) 15 Cal.5th 1152, 1170; accord, McHugh v. Protective Life
Ins. Co. (2021) 12 Cal.5th 213, 227.) “We first consider the words of the statutes, as statutory language is generally the most reliable indicator of legislation‘s intended purpose.” (Prang, at p. 1170; accord, McHugh, at p. 227.) “We consider the ordinary meaning of the relevant terms, related provisions, terms used in other parts of the statute, and the structure of the statutory scheme.” (Prang, at p. 1170; accord, McHugh, at p. 227.) “If the relevant statutory language permits more than one reasonable interpretation, we look to appropriate extrinsic sources, such as the statute‘s purpose, legislative history, and public policy.” (Prang, at p. 1170; accord, McHugh, at p. 227 [“If the relevant statutory language is ambiguous, we look to appropriate extrinsic sources, including the legislative history, for further insights.“].)
Whether the FAA preempts
In 2019 the Legislature enacted Senate Bill No. 707 (2019-2020 Reg. Sess.) (Stats. 2019, ch. 870, §§ 3-5), effective January 1, 2020 (Senate Bill 707), which amended the CAA to add
subdivision (a)(1), now provides,4 “In an employment or consumer arbitration that requires, either expressly or through application of state or federal law or the rules of the arbitration provider, that the drafting party pay certain fees and costs during the pendency of an arbitration proceeding, if the fees or costs required to continue the arbitration proceeding are not paid within 30 days after the due date, the drafting party is in material breach of the arbitration agreement, is in default of the arbitration, and waives its right to compel the employee or consumer to proceed with that arbitration as a result of the material breach.”5
According to the drafters of the bill, a “concerning and troubling trend has arisen in arbitration: employers are refusing to pay required fees to initiate arbitration, effectively stymieing the ability of employees to assert their legal rights.” (Sen. Rules Com., Off. of Sen. Floor Analysis, 3d reading analysis of Sen. Bill No. 707 (2019-2020 Reg. Sess.), as amended May 20, 2019, p. 4.) Therefore, “to stop behavior that would undermine the intent of Congress” and “to move the parties to an arbitrable dispute out of court and into arbitration as quickly and easily as possible,”
Senate Bill 707 provides that a drafting party‘s failure within 30 days of the due date to pay fees or costs to commence or continue an arbitration constitutes a material breach of the agreement, waiving the drafting party‘s right to compel arbitration, and authorizing the employee or consumer to compel arbitration or proceed in court. (Id. at pp. 1 & 4; see Williams v. West Coast Hospitals, Inc. (2022) 86 Cal.App.5th 1054, 1068 (Williams) [“the purpose of the statute is to incentivize timely payment and to provide procedural redress for employees and consumers whose arbitration is delayed by the drafting party‘s nonpayment“].)
Further,
would [clarify Senate Bill 707] . . . to encourage transparency around the due date of arbitration fees in order to prevent unnecessary delays in the resolution of disputes for workers and consumers bound by forced arbitration provisions. Regrettably, we‘ve learned that since [Senate Bill] 707‘s passage, companies are still able to evade enforcement of the above protections because consumers and employees are not informed about when the fees are due, whether the due date is extended, or whether the fees are paid on time.” The Colon-Perez court continued, “By requiring arbitration providers to set a due date in writing for payments, and permitting the plaintiff to have input into potential extensions of due dates, this bill is intended to prevent arbitration providers from delaying payment in order to put off the strict 30-day deadline for payment required by [Senate Bill] 707.” (Colon-Perez, at p. 420, quoting Sen. Com. on Judiciary report on Sen. Bill No. 762, pp. 2-3.)
C. Under Section 1281.98, the Trial Court Decides Whether the Drafting Party Has Defaulted
Edward Jones contends the arbitration agreement delegates to the arbitrator whether there has been a default for failure to pay required fees under
“interpretation or scope of the agreement under which Arbitration is sought.” Edward Jones‘s contention lacks merit.
We agree with the reasoning in Williams, supra, 86 Cal.App.5th at page 1069 and Cvejic v. Skyview Capital, LLC (2023) 92 Cal.App.5th 1073 at page 1079 (Cvejic), which rejected the same argument made here—that an employee or consumer must first request the arbitrator make a determination whether there is a default under
The fact the arbitration agreement provided for the arbitrator to decide whether there has been a breach of the work at home agreement does not support a different result. As discussed,
Edward Jones urges us to follow the Ninth Circuit‘s nonpublished memorandum decision in Dekker v. Vivint Solar, Inc. (9th Cir. Oct. 26, 2021, No. 20-16584), 2021 U.S. App. LEXIS 32092, at pages *2 and *4, which held that “[b]ecause this dispute concerns whether [the employer] breached the arbitration agreements, it falls within the scope of the parties’ delegation clause” that delegated to the arbitrator issues concerning “breach, default, or termination.” But as Cvejic observed in declining to follow Dekker, the
under the doctrine of law of the case or rules of claim preclusion or issue preclusion.” (U.S. Cir. Ct. Rules (9th Cir.), rule 36-3.) We see no reason to follow Dekker instead of the well-reasoned line of California authority analyzing the language and legislative history of
Finally, nothing in JAMS rule 11 limits or overrides a trial court‘s authority to apply
D. Edward Jones Was in Default Under Section 1281.98 for Failure To Timely Pay the Arbitration Fees
Edward Jones contends that even if
JAMS rule 31(a) provides, “unless the Parties have agreed to a different allocation, each Party shall pay its pro rata share of JAMS fees and expenses as set forth in the JAMS fee schedule in effect at the time of the commencement of the Arbitration.” The JAMS general fee schedule states, in turn, “All fees are due and payable in advance of services rendered and by any applicable due date as stated in a hearing confirmation letter.”
As discussed, the notice of hearing sent by JAMS to the parties stated “[a]ll fees are due upon receipt” and attached the $54,000 deposit for
Although Edward Jones argues its failure to timely pay the fees was unintentional,7 “nothing in section 1281.98 as drafted depends on the intent or good faith of a particular drafting party in a specific case . . . . [T]he Legislature in enacting
E. The CAA Procedural Rules Apply to the Arbitration
Edward Jones contends that because it is engaged in interstate commerce, the FAA‘s procedural rules apply, and not
Accordingly, the FAA‘s procedural provisions apply in federal court proceedings related to arbitration; the CAA‘s procedural requirements apply to proceedings in California courts absent the parties’ agreement to apply federal procedural law. (Valencia v. Smyth (2010) 185 Cal.App.4th 153, 174 [“Absent such an express designation, however, the FAA‘s procedural provisions do not apply in state court.“].)
In this case, the arbitration agreement is silent as to whether the procedural provisions of the FAA or CAA apply to the arbitration agreement. Edward Jones points to the
arbitrator‘s scheduling order number one, which states “[t]he arbitrator will apply California substantive law and JAMS Employment Rules and Procedures.” And JAMS rule 4 states that where there is a conflict between the JAMS rules and “applicable law,” the applicable law will govern the conflict. Here, there is no conflict—neither the arbitration agreement nor the JAMS rules specify which procedural rules apply, and accordingly, “the parties implicitly consented to application of the CAA‘s procedural provisions, as much as had they expressly incorporated those provisions into their arbitration agreement.” (Espinoza, supra, 83 Cal.App.5th at p. 786; accord, Judge v. Nijjar Realty, Inc. (2014) 232 Cal.App.4th 619, 631 [California‘s procedural provisions apply when an arbitration agreement “does not mention the FAA or the CAA, and . . . does not include a choice-of-law provision.“]). Thus,
F. The FAA Does Not Preempt Section 1281.98
“The FAA makes arbitration agreements ‘valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.’
Kindred Nursing Centers Ltd. P’ship v. Clark (2017) 581 U.S. 246, 251; accord, Viking River Cruises, Inc. v. Moriana, supra, 596 U.S. at p. 650.)
The FAA also preempts “any rule that covertly accomplishes the same objective by disfavoring contracts that . . . have the defining features of arbitration agreements.” (Kindred Nursing, supra, 581 U.S. at p. 251; accord, Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1143 [the FAA preempts facially neutral state law rules that “disfavor arbitration as applied by imposing procedural requirements that ‘interfere[] with fundamental attributes of arbitration,’ especially its ‘lower costs, greater efficiency and speed, and the ability to choose expert adjudicators to resolve specialized disputes.‘“]; Gallo v. Wood Ranch USA, Inc. (2022) 81 Cal.App.5th 621, 637 (Gallo).) In addition, a state law will be preempted by the FAA if it “‘stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.‘” (Volt, supra, 489 U.S. at p. 477; accord, AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 343.)
As the Supreme Court emphasized in Volt, supra, 489 U.S. at page 478, however, passage of the FAA “was motivated, first and foremost, by a congressional desire to enforce agreements into which parties had entered.” Further, as our colleagues in Division Two of this district explained in Gallo, “The second fundamental attribute of arbitration is its ‘promise of quicker, more informal, and often cheaper [dispute] resolutions for everyone involved.‘” (Gallo, supra, 81 Cal.App.5th at p. 641, quoting Epic Systems Corp. v. Lewis (2018) 584 U.S. 497, 505.)
The Gallo court applied these preemption principles in rejecting an employer‘s argument that
We agree with the reasoning in Gallo, as do all but one of the appellate courts that have considered this issue. (See Colon-Perez, supra, 108 Cal.App.5th at pp. 408-409, review granted [“We recently addressed whether the FAA preempts
The only California case finding preemption is the decision of Division Five of this district in Hernandez, supra, 102 Cal.App.5th 222, review granted. In Hernandez, the employer failed to pay the initial arbitration fee within 30 days, and the trial court granted the employee‘s motion to withdraw from arbitration pursuant to
The majority opinion in Hernandez disagreed with the reasoning in Gallo and subsequent cases that found no preemption on the basis
We do not find persuasive the reasoning in Hernandez because the Legislature, in enacting
Edward Jones also contends the California Supreme Court‘s recent decision in Quach, supra, 16 Cal.5th at pages 582 to 583 supports an argument that
The court in Quach explained, “[A] court should treat the arbitration agreement as it would any other contract, without applying any special rules based on a policy favoring arbitration.” (Quach, at p. 583, citing Morgan, at p. 418.)
Contrary to Edward Jones‘s contention, Quach and Morgan did not expand the scope of preemption under the FAA. Indeed, the United States Supreme Court in Morgan, supra, 596 U.S. at page 418 quoted its nearly 50-year-old decision in Prima Paint Corp. v. Flood & Conklin Mfg. Co. (1967) 388 U.S. 395, 404, fn. 12, in stating “[t]he [FAA‘s] policy is to make ‘arbitration agreements as enforceable as other contracts, but not more so.‘” (See Cronus, supra, 35 Cal.4th at p. 384 [same].) Moreover, Morgan did not involve preemption of a state arbitration rule by the FAA. Rather, the Supreme Court “granted certiorari to decide whether the FAA authorizes federal courts to create such an arbitration-specific procedural rule” (on waiver). (Morgan, at p. 414; see Keeton, supra, 103 Cal.App.5th at p. 41, review granted [“This case is distinguishable in that Morgan involved rights asserted under federal law and therefore did not concern preemption under section 2 of the FAA.“])10
Edward Jones argues
of the arbitration agreement” and waiver of the drafting party‘s “right to compel the employee or consumer to proceed with that arbitration” does not transmute a mutually agreed-upon contract provision into a judicially created change in state contract law. Just as the parties to a contract for the sale of widgets can agree upon what constitutes a breach of the contract, parties to an arbitration agreement can agree that
Moreover,
Accordingly, although
Imposing a 30-day time limit to pay arbitration fees neither frustrates nor hinders arbitration.
G. On Remand, The Trial Court Must Consider Sanders‘s Request for Monetary Sanctions
Because the trial court denied Sanders‘s motion to vacate the order compelling arbitration, the court did not reach her request for monetary sanctions under
DISPOSITION
The petition for writ of mandate is granted. Let a peremptory writ of mandate issue directing the trial court to vacate its order denying Sanders‘s motion to withdraw from arbitration under
FEUER, J.
We concur:
MARTINEZ, P. J.
STONE, J.