Mone Yvette Sanders filed a putative class and representative action against her former employer, Edward D. Jones & Co., L.P. (Edward Jones), alleging wage and hour claims under the Labor Code as well as a cause of action under the Private Attorneys General Act of 2004 (PAGA; Lab. Code, § 2698 et seq.). Edward Jones is a broker-dealer of securities operating as a Missouri limited partnership, with offices in all 50 states.

Pursuant to the parties’ arbitration agreement, the trial court granted Edward Jones’s motions to compel arbitration of Sanders’s individual Labor Code and PAGA claims and stayed the representative PAGA cause of action pending completion of the arbitration.

Sanders initiated the arbitration, and the arbitrator set an arbitration hearing date, but Edward Jones failed to pay $54,000 in fees and costs billed by the arbitrator within 30 days of the payment-due date as mandated by Code of Civil Procedure section 1281.98, subdivision (a)(1).

Sanders filed a motion in the trial court under section 1281.98, subdivision (b)(1), to vacate the order compelling arbitration and to proceed in the trial court. Subdivision (b)(1) provides with respect to an employment or consumer arbitration that upon a failure of the party that drafted the arbitration agreement (drafting party) to pay the required fees and costs under subdivision (a) within the 30-day deadline, “the employee or consumer may unilaterally elect to do any of the following,” including to “[w]ithdraw the claim from arbitration and proceed in a court of appropriate jurisdiction.”

The court denied the motion, finding section 1281.98 was preempted by the Federal Arbitration Act (FAA; 9 U.S.C. § 1 et seq.) pursuant to the Second District of the California Court of Appeal-issued decision” in Hernandez v. Sohnen Enterprises, Inc. (2024) 102 Cal.App.5th 222, review granted August 21, 2024, S285696 (Hernandez) and Belyea v. GreenSky, Inc. (N.D. Cal. 2022) 637 F.Supp.3d 745.

The Court of Appeal granted Sanders’ Petition for Writ of Mandate, and reversed the trial court in the published case of Sanders v. Super. Ct. CA2/7 – B340707 (May 2025).

The Court of Appeal agreed with the numerous Courts of Appeal that have concluded section 1281.98 furthers the goal of the FAA to require expeditious arbitration of disputes and, accordingly, the section is not preempted by the FAA.

Moreover, contrary to Edward Jones’s contention, the California Supreme Court in its recent decision in Quach v. California Commerce Club, Inc. (2024) 16 Cal.5th 562 (Quach) did not expand the scope of FAA preemption to encompass all state arbitration-specific rules, including those that favor arbitration. Rather, the court in Quach invalidated a judicially created waiver requirement that a party seeking to avoid arbitration show it was prejudiced. (Id. at p. 569.) By contrast, section 1281.98 is a procedural rule contained in the California Arbitration Act (CAA), which the parties implicitly agreed in their arbitration agreement would apply to their arbitration.

The Court of Appeal also rejected Edward Jones’s contention that under the arbitration agreement Sanders was required to submit to the arbitrator the issue whether Edward Jones was in default. The plain language of section 1281.98 vests in the employee or consumer the unilateral right upon the drafting party’s failure to timely pay fees to withdraw from the arbitration and proceed in court.