California Appellate Court Decision Limits Power Of Arbitrators To Cure Late Arbitration Payments

• Published date: 15 August 2023
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution, Trials & Appeals & Compensation
• Law Firm: Littler Mendelson
• Author: Benjamin Hart and Michael Nelson

On June 28, 2023, the California Second District Court of Appeal issued a decision interpreting the scope of California Code of Civil Procedure section 1281.98(a)(1), a recently amended California statute that requires employers to pay all arbitration costs and fees within 30 days of the due date, or risk being in material breach of the arbitration agreement. In Cvejic v. Skyview Capital, the court held that an arbitrator cannot cure a missed or late arbitration fee payment. Not only does this ruling reaffirm the importance of paying arbitration fees on time, but it also demonstrates the court's willingness to limit the power of an arbitrator over their own proceedings. Now, more than ever, employers must be acutely attentive to arbitration fee deadlines to avoid costly penalties for late payments.

Background

The plaintiff sued his former employer in state court after his termination from employment. The court ordered the case to arbitration pursuant to the parties' arbitration agreement. The case went before a panel of arbitrators with a final hearing on the merits scheduled for August 5, 2021. As part of the arbitration process, the defendant employer was required to pay arbitration fees by June 4, 2021; however, the company failed to do so. During a call with the arbitration case manager and plaintiff's counsel after the arbitration fee deposit deadline, defendant's counsel reported there was "no further explanation" for his clients' failure to pay the fees. The arbitrator panel also confirmed that the deadline for making the deposits had passed. The panel then set a new deadline of July 14 for fee payments. The defendant eventually paid the fees prior to the new July 14 deadline.

Despite the new fee deposit deadline, the plaintiff's counsel informed the arbitration panel that he would be withdrawing from the arbitration under California Code of Civil Procedure section 1281.98. Under the statute, if the party who compels arbitration fails to pay the costs required to continue the arbitration within 30 days of the deadline, then that party is in material breach of the underlying arbitration agreement and waives the right to compel arbitration. The arbitration panel ruled that section 1281.98 was not applicable because the defendant had paid the arbitration fees before the new July 14 deadline. The plaintiff then directly filed a 1281.98 Election to Withdraw from Arbitration with the trial court. The trial court granted the plaintiff's request to...