Employers Not Paying Fees Upfront Can Be Exposed To Further Arbitration Expenses Before the Axe Comes Down; Appellate Court Found No FAA Preemption, With This Preemption Issue Now Being Reviewed By The California Supreme Court.
Although unpublished, Costa-Fleeson v. Americor Funding, Inc., Case No. G062962 (4th Dist., Div. 3 Aug. 1, 2024) (unpublished) is a stark reminder to employers that failure to timely pay arbitration fees can result in the forfeiture of the ability to arbitrate as well as imposition of attorney’s fees and costs under Code of Civil Procedure sections 1281.98(c)(1) [covering “all attorney’s fees and costs associated with the abandoned arbitration proceeding”] and 1281.99 [with this latter statute providing for a mandatory monetary sanction to pay reasonable attorney’s fees and costs incurred by the employee as a result of the material breach of the arbitration agreement]. The appellate court affirmed five of six categories of fees and costs awarded to employee by the lower court as a result of employer’s failure to timely pay arbitration dues, with the employer likely not happy with the $176,687.96 adverse award. In doing so, it found the lower court’s order was appealable as a monetary sanction under CCP § 904.1(a)(12). The 4/3 DCA also found unpersuasive that the statutes were preempted by the Federal Arbitration Act.
BLOG UPDATE—The FAA preemption issue was recently taken up for review, on June 12, 2024, by the California Supreme Court in Hohenshelt v. Superior Court (2d Dist., Div. 8 2/27/24), where the majority found no preemption and where dissenting Justice Wiley found the arbitration payment statutes were preempted.
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