California Code of Civil Procedure sections 1281.97, 1281.98 and 1281.99 obligate a company or business that drafts an arbitration agreement to pay its share of arbitration fees no later than 30 days after the date they are due, and specify that the failure to do so constitutes a “material breach of the arbitration agreement” that gives the employee or consumer, in addition to a mandatory award of attorney fees and costs related to the breach as well as other discretionary sanctions, the options of either (1) continuing in arbitration with the company or business paying attorney fees and costs related to the arbitration as a whole or (2) withdrawing from arbitration and resuming the litigation in a judicial forum.
On July 25, 2022, the California Court of Appeals for the Second Appellate District in Gallo v. Wood Ranch USA, Inc. issued its opinion as to whether these California Code of Civil Procedure provisions are preempted by the Federal Arbitration Act
(“FAA”). The Court of Appeals held they are not preempted because the procedures they prescribe further — rather than frustrate — the objectives of the FAA to honor the parties’ intent to arbitrate and to preserve arbitration as a speedy and effective alternative forum for resolving disputes.
It is imperative that employers strictly follow the statutory deadlines for employment-related arbitration, or they may lose their right to mandatory arbitration. Be sure to have your business or employment attorney review your arbitration agreements to assure compliance and potentially ameliorate the bar to arbitration
The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.
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