Duane Morris Class Action Review - 2023 - Report - Page 81
to timely pay fees was seemingly justifiable, due to mistake or excusable neglect, or
only slightly tardy.
In Gallo, et al. v. Wood Ranch USA, Inc., 81 Cal. App. 5th 621 (Cal. App. 2d Dist. 2022),
the failure to timely pay arbitration fees was due to miscommunication within a law firm.
Although the invoices were sent to the partner on the case, he never forwarded them to
the associate or to the assigned law firm secretary. The fees were ultimately paid just
10 days late. Id. The trial court found that the FAA did not preempt the statute, that the
miscommunication provided no basis for relief, and imposed $2,310 in sanctions. Id. at
632. The court of appeal subsequently affirmed.
The late payment of arbitration fees in Espinoza, et al. v. Superior Court Of Los Angeles
County, 83 Cal. App. 5th 761 (Cal. App. 2d Dist. 2022), was due to a clerical order. The
respondent’s Vice President of Operations approved the invoice payment on June 15,
but the accounts payable department did not timely issue the check. Id. at 755.
Although payment was due June 30, it was not received until July 9. Id. Although the
trial court granted relief, the court of appeal, on the plaintiff’s writ petition, reversed that
order. It held that the FAA did not preempt the statute, and that there are no exceptions
for substantial compliance, unintentional non-payment, or even when the plaintiff suffers
no prejudice. Id. at 758-60. The court of appeal expressed its view that, “[a]lthough a
large company may view its failure to pay a few hundred dollars for arbitration as a
minor, immaterial mistake, that mistake may delay the hearing of an employee’s
claims.” Id. at 760.
A third unfavorable decision, De Leon, et al. v. Juanita’s Foods, 85 Cal. App. 5th 740
(Cal. App. 2d Dist. 2022), issued in November 2022. The respondents in the case were
a staffing agency and Juanita Foods, where the plaintiff had been placed on a
temporary work assignment. Although both respondents timely paid initial arbitration
fees, after an arbitrator was selected, JAMS sent the staffing company and Juanita
Foods $5,000 invoices to pay as deposits on future arbitration fees. Id. at 747. Although
the staffing agency timely paid this sum, Juanita Foods paid just over a month late,
citing the need to confer with the staffing agency about the proper allocation of fee
payment as a reason for its delay. Id. As in the earlier cases, the trial court and court of
appeal both strictly construed the new statues and found that the right to arbitration as
waived. Id. at 749-750. Thus while the claims against the staffing agency would proceed
in arbitration, the claims against Juanita Foods would proceed in court, though would be
stayed until the outcome of the arbitration proceedings. Id.
As these recent developments confirm, it is critical for both companies and their outside
counsel to careful track deadlines for payment of arbitration fees. Even when the parties
are discussing settlement, unless a settlement has actually been consummated,
arbitration fees must be timely paid or else a court in California likely will hold that the
right to arbitration has been forfeited.
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Duane Morris Class Action Review – 2023
