When parties find themselves embroiled in a legal dispute, they often face a choice between pursuing their case in court before judges and juries or seeking resolution through arbitration. While both options have their merits, arbitration has increasingly become a preferred method of dispute resolution as it offers increased efficiency and confidentiality. For this reason, many business entities routinely include arbitration provisions in contracts. Many clients also like it because it avoids the prospect of runaway verdicts or nuclear verdicts in factually troublesome matters.
A recent California decision underscores how even carefully crafted arbitration agreements can go by the wayside for failure to comply with deadlines. In Doe v. Superior Court of the City and County of San Francisco, A167105 , California’s First District Court of Appeal rejected the notion that simply mailing a check meets statutory compliance. This article explores the case, analyzes the statutory provisions, legislative intent, and recent case law that underline the need for strict adherence to payment deadlines in arbitration agreements. Procedural compliance to maintain the right to arbitrate has always been top of mind for those seeking to have matters heard in the trial court. This case highlights the critical importance of adhering to payment deadlines in arbitration agreements.
Facts of the Case at Hand
This case involved Jane Doe, an unidentified plaintiff, who filed a lawsuit against her former employer, Na Hoku, Inc., and former manager, Montoya, alleging sexual harassment and assault. The court ordered the case to be resolved through binding arbitration. However, when it came to payment deadlines for administrative fees and arbitrator compensation, the parties encountered a significant hurdle. While the initial administrative fees were paid on time, the payment for the deposit was delayed. Pursuant to CCP 1281.98(a)(1) the fees and costs had to be “paid within 30 days after the due date” aka “the 30 day grace period,” The employers opted to mail a check two days before the deadline instead of using electronic payment methods. Unfortunately, the check arrived two days after the 30-day grace period had expired. Jane Doe argued that this late payment breached the arbitration agreement and moved to vacate the order compelling arbitration, leading to the court's denial of her motion. However, the petitioner successfully sought a writ of mandate, resulting in the trial court's order being overturned and causing the matter to proceed in state court.
Interpreting the Statute: Section 1281.98 of the California Arbitration Act
To understand the court's decision, the court analyzed section1281.98 of the California Arbitration Act, which governs payment of arbitration fees and costs. The court examined the plain meaning of the statute and considered extrinsic aids such as legislative history. Section 1281.98(a)(1) specifies that failure to pay required fees or costs within 30 days after the due date constitutes a material breach of the arbitration agreement. However, the term "paid" is not explicitly defined, leading the court to consult dictionary definitions, which failed to provide a definitive answer.
The Intersection of Legislative Intent and Recent Case Law
In 2019, the California Legislature addressed the issue of companies strategically withholding payment of arbitration fees, hindering dispute resolution. Senate Bill No. 707 aimed to provide procedural options and remedies for individuals subject to mandatory arbitration. The bill established that failure to pay fees within 30 days would constitute a material breach. The legislative intent was clear: to deter employers from delaying payments and ensure timely resolution of disputes. Recent case law has consistently supported the strict enforcement of breach provisions, emphasizing that discretionary factors, such as intent or prejudice, should not influence a compliance assessment.
This case serves as a crucial reminder for lawyers and clients seeking to preserve their right to arbitration. To safeguard this preferred method of resolution, it is essential to prioritize timely payment of arbitration fees and costs. Mailing a check alone is not sufficient; payment must be made and received within the specified time frame. By being proactive and adhering strictly to payment deadlines, clients can ensure their ability to resolve disputes efficiently and confidentially through arbitration. Electronic transfers are bullet proof. For those who to prefer payment by check, early payment or delivery services with confirmation, or any other method which creates a bulletproof paper trail is key.
The recent decision in this case underscores the significance of complying with payment deadlines in arbitration agreements. It highlights the courts' commitment to interpreting statutes strictly and enforcing breach provisions without considering factors like intent or prejudice. As practitioners, it is crucial to educate clients on the importance of timely payments and the potential consequences of non-compliance. By staying vigilant and adhering to payment deadlines, clients can preserve the power of arbitration as a preferred method for resolving disputes.