Duane Morris Class Action Review - 2023 - Report - Page 80
court of appeal affirmed. In doing so, the court of appeal relied heavily on EEOC v.
Waffle House, Inc., 534 U.S. 279 (2002), in which the U.S. Supreme Court held that the
EEOC could not be compelled to arbitration in a disability discrimination case even
though it sought “victim-specific” relief on behalf of Waffle House employees, who had
signed arbitration agreements. Like the EEOC in Waffle House, the City of San Diego
was not a party to the arbitration agreement with Instacart, and no individual shopper
controlled the litigation or was even involved. Even though the City of San Diego sought
some victim-specific relief (i.e., back wages for shoppers), the court of appeal reasoned
that this did not make the case “private” in nature. Instead, the recovery of monetary
relief for shoppers served an “obvious public function in deterring future violations.”
F.
Impact Of Untimely Payment Of Arbitration Fees
Recent case developments in California have placed both companies and their outside
counsel on alert that arbitration fees must be timely paid or else an arbitration
agreement is materially breached and the right to arbitration waived. California courts
have uniformly held thus far that no relief will be provided even when there is a
reasonable excuse for late payment. This can be a disastrous outcome inviting the
revival of class claims that were waived via an initially enforceable arbitration
agreement.
As background, effective January 1, 2020, the California Arbitration Act was amended
to require timely payment of arbitration fees in a consumer or employment dispute. The
new statutes, California Civil Code § 1281.9 et seq., provide that, if fees or costs “are
not paid within 30 days after the due date, the drafting party is in material breach” and
“waives” the right to arbitration. Civil Code §§ 1281.97(a)(1) and 1281.98(a)(1). The
statutes apply to fees due both at the outset of arbitration and to any invoice that issues
during the pendency of arbitration.
Upon late payment, the claimant may elect to proceed in court. If so, the new statutes
mandate the imposition of sanctions including “the reasonable expenses, including
attorney’s fees and costs, incurred by the employee or consumer as a result of the
material breach.” Civil Code § 1281.99(a). Additional sanctions, including evidentiary or
terminating sanctions, are discretionary. Civil Code § 1281.99(b).
The enactments were in response to the wave of individual arbitrations that the
plaintiffs’ bar began filing after California courts started enforcing class action waivers in
the wake of the California Supreme Court decision in Iskanian, et al. v. CLS
Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014). Some companies, flooded
with individual claims in arbitration post-class action waiver enforcement, were not
timely paying the sizeable associated arbitration fees. The California Legislature was
concerned that companies were strategically refusing to pay arbitration fees, thereby
stalling arbitration and prejudicing claimants who were stymied from pursuing their
claims.
In a series of decisions this year, courts in California have strictly construed these new
statutes and found waiver of the right to arbitration even where the respondent’s failure
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Duane Morris Class Action Review – 2023
