‘Check in the mail’ won’t keep arbitration alive

A judge has granted a plaintiff’s motion to vacate arbitration in an employment discrimination case because the defendants did not pay the arbitrator’s fees within 30 days of receiving the invoice, as required under the law.

The plaintiff was awarded sanctions of just over $118,000, and the matter is back in trial court in Los Angeles with a case management conference scheduled for August.

The legal time limit requirement is now three years old. Senate Bill 707, which went into effect in 2020, imposed penalties on employers who fail to pay arbitration fees within the 30 days that they are due. Now part of Code of Civil Procedure Sections 1281.97 and 1281.98, the law says a company that misses the deadline is in “material breach” of its own arbitration agreement.

“It is immaterial that plaintiff has not been prejudiced or that defendants initiated payment within 30 days,” Judge Maurice A. Leiter wrote in his minute order on Wednesday. Bree Valbuena v. Birdwell California! LLC et al., 20STCV18027 (L.A. Sup. Ct., filed May 12, 2020).

That ruling follows a 2nd District Court of Appeal panel opinion last year that a defendant was in material breach despite its insistence that payment was coming. The court refused to consider any other factor, such as the defendant’s contention that the plaintiff was not prejudiced by the late payment. De Leon v. Juanita’s Foods, Inc., B315394 (Cal. App. 4th Dist., filed Nov. 23.,. 2022).

Most employers are complying with the deadlines, said Dario Higuchi, managing partner with Signature Resolution.

“The statute has given the parties a framework that sets forth clearly defined deadlines and expectations that have added clarity to the process for both sides. In short, it has helped in the successful administration of employment arbitrations,” Higuchi wrote in an email.

In last week’s case, the plaintiff, Bree Valbuena, sued her employer, Birdwell, in 2020 alleging that the surf apparel company retaliated against her, demoted her and suspended her after she went on pregnancy leave. She reached an agreement whereby Birdwell would reemploy her, “but almost immediately they induced her to sign arbitration and then they terminated her,” said Valbuena’s attorney, Mitchell E. Rosensweig of Schwimer Weinstein LLP in Santa Monica.

Birdwell filed a motion to compel arbitration in March 2021, and the parties negotiated for nearly a year. Then the plaintiff’s counsel noticed that Birdwell’s payment was late and moved to vacate the arbitration order.

“On April 21, 2023, thirty-two (32) days after defendants’ deadline to pay the required arbitration deposit, plaintiff discovered that defendants had failed to make payment by the statutorily mandated deadline. Plaintiff declined to extend the deadline set forth in C.C.P. § 1281.98(a) and, instead, notified defendants and AAA [American Arbitration Association] of her intent to withdraw the matter from arbitration and bring the instant motion,” Rosensweig wrote in his motion.

Valbuena has elected to move forward with her case in superior court, as jury trials tend to be more favorable for plaintiffs in employment matters, Rosensweig said.

“There’s more opportunity for a home-run. An arbitrator is going to be very cautious not to do an award that can be perceived as a windfall,” he said.