When Andrew Reynosa was employed by Advanced Transportation Services on March 3, 2017, he signed the company’s Arbitration Agreement which provided in part that he would arbitrate disputes he had with his employer.
On April 26, 2019, Reynosa filed a “complaint for damages” against ATS with the superior court of Tulare County. On July 8, 2019, the parties stipulated Reynosa would submit his claims to binding arbitration pursuant to the aforementioned agreement and the court proceeding would be stayed pending completion thereof.
On September 9, 2019, Reynosa filed a demand for arbitration with arbitration provider Judicate West. Under the heading “WHAT RULES OF ARBITRATION DO YOU PREFER,” he marked the checkbox for “CCP § 1280 et se[q].” Retired judge John L. Wagner would serve as the neutral arbitrator.
Certain arbitration fees were paid by the parties, and in July 2019 the case proceeded to unsuccessful mediation, and then multiple arbitration hearings at various states of discovery. Interim invoices were prepared along the way by Judicate West, and payments were made and posted.
On March 20, 2023, Reynosa filed a “motion to terminate arbitration and request for monetary and evidentiary sanctions” with the court. In the motion, Reynosa – citing section 1281.98 – asserted ATS materially breached the arbitration agreement because (1) it was given invoices on July 21, 2021, and December 12, 2022, respectively; (2) each payment was due within 30 days after the date of receipt; and (3) each payment was rendered after the grace period elapsed. Hence, Reynosa was “statutorily entitled to unilaterally withdraw his claims from arbitration and proceed in court . . . .”
In an attached declaration, Reynosa’s attorney, Deborah P. Gutierrez, averred that on March 17, 2023, she “inquired with [Judicate West’s case manager] if ATS had timely paid the arbitration fees in this matter” and the case manager “confirmed that Defendant had . . . paid the December 12, 202[2] [invoice] on February 22, 2023 . . . .”
In a minute order, Retired Judge Wagner conceded ATS’s payments were late but noted Reynosa “did have the opportunity to request this relief before significant work was done and non-refundable arbitration fees were paid” and nonetheless “elected on numerous occasions to proceed with the arbitration process after the alleged tardy payments occurred.” Wagner stated: (1) “[t]he first tardy payment was made on September [17], 2021, more than 18 months ago,” but Reynosa “sat on his rights under § 1281.98 and did nothing”; and (2) “[t]he last tardy payment was on February 22, 2023”; during the March 7, 2023 case management conference, Reynosa “successfully resisted [ATS]’[s] request for a continuation of the present April 17, 2023, hearing date” and Wagner “shortened the refundable date for the arbitration hearing fees to March 20, 2023”; and Reynosa “waited until that very date to file [his] Motion to Terminate Arbitration and advised [Wagner] of the filing of that motion on March 24, 2023, after the shortened non-refundable period had ended,” prejudicing ATS financially. Wagner vacated the hearing dates and stayed the arbitration proceeding “pending a decision on [Reynosa]’s Motion to Terminate Arbitration by the Tulare Superior Court.”
On April 18, 2023, the superior court held a hearing on Reynosa’s withdrawal motion and it was denied. The Court of Appeal reversed in the published case of Reynosa v. Superior Court -F086342 (May 2024).
The opinion noted that the clear and unequivocal language of section 1281.98, subdivision (a)(1) “establishes a simple bright-line rule that a drafting party’s failure to pay outstanding arbitration fees within 30 days after the due date results in its material breach of the arbitration agreement.” § 1281.97 “contains no exceptions for substantial compliance,unintentional nonpayment, or absence of prejudice”
Nevertheless, the superior court concluded the parties “mutually agreed upon” the February 23, 2023 due date, emphasizing Reynosa “did not object to the extended payment deadline when proposed.”
Under section 1281.98, subdivision (a)(2), “[a]ny extension of time for the due date shall be agreed upon by all parties.” The verb “agree” – of which “agreed” is the past participle – is essentially undefined by the statute.
“In our view, the construction of ‘agreed’ in section 1281.98, subdivision (a)(2) advanced by ATS and adopted by the superior court undermines the legislative intent: by letting a claimant’s silence, failure to object, or other seemingly acquiescent conduct (not amounting to direct expression) constitute a sufficient manifestation of his or her agreement to an extension, the need for the arbitration provider or the business/employer to actively procure such consent – e.g., by having the claimant sign an acknowledgement form – is obviated.”
“Reynosa did not directly express agreement with the February 23, 2023 due date. Therefore, pursuant to section 1281.98, subdivision (a)(2), the December 12, 2022 invoice was due upon receipt. Pursuant to section 1281.98, subdivision (a)(1), ATS had until January 11, 2023, to pay the arbitration fees and costs. By submitting payment on February 22, 2023, the company materially breached the arbitration agreement.