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Court of Appeal:
Payment of Arbitration Fees Is Made When Check Received
Opinion Says Fees Are ‘Due’ Upon Sending of the Invoice; Arbitration Is Waived, Under CCP §1281.98, If Payment Is Not Received Within the 30-Day ‘Grace Period’ Following the Due-Date
By a MetNews Staff Writer
Div. One of the First District Court of Appeal held Friday that the defendants in a sexual assault/harassment action lost their right to an arbitration of the dispute because they chose to send a check by mail to cover the fees and the check arrived two days late, rejecting the contention that payment was made upon mailing.
The opinion by Justice Ioana Petrou directs the issuance of a writ of mandate directing the San Francisco Superior Court to vacate its order compelling arbitration of the dispute between plaintiff “Jane Doe” and defendants Na Hoku, Inc., her former employer, and Ysmith Montoya, a manager.
After the defendants’ motion to compel arbitration was granted, the American Arbitration Association (“AAA”) on Sept. 1, 2021, sent the parties a letter saying, in part:
“Payment in the amount of $22,500 is due upon receipt of this notice for preliminary matters....As this arbitration is subject to California Code of Civil Procedure 1281.98, payment must be received 30 days from the date of this letter to avoid closure of the parties’ case.”
The emphasis was in the original.
Wording of Statute
Sec. 1281.98(a)(1) says:
“[I]f the fees or costs required to continue the arbitration proceeding are not paid within 30 days after the due date, the drafting party is in material breach of the arbitration agreement, is in default of the arbitration, and waives its right to compel the employee or consumer to proceed with that arbitration as a result of the material breach.”
A check was mailed on Friday, Sept. 30; it was due on Monday, Oct. 3; it arrived on Oct. 5. Doe moved for an order bringing the case back into court which San Francisco Superior Court Judge Curtis Karnow denied.
Writ Granted
Petrou wrote:
“In this writ proceeding, we strictly enforce the 30-day grace period in section 1281.98(a)(1) and conclude fees and costs owed for a pending proceeding must be received by the arbitrator within 30 days after the due date. We do not find that the proverbial check in the mail constitutes payment and agree with petitioner that real parties’ payment, received more than 30 days after the due date established by the arbitrator, was untimely. We therefore grant the writ petition.”
In rejecting the defendants’ contention that the fees were “paid” when the envelope containing the check was mailed, the jurist said that while the word “paid” is ambiguous, the legislative history discloses an intent “to establish a clear and unambiguous rule for determining a breach based on nonpayment as well as strict enforcement of the statute.”
Bright-Line Rule
She continued:
“Here, the construction offered by petitioner, i.e., payment made and received within 30 days of the due date, best effectuates this legislative purpose….This construction provides a clear, bright-line rule for determining compliance with the 30-day statutory grace period as the arbitrator can readily and definitively determine whether funds have been received to satisfy any outstanding fees or costs owed for a pending arbitration. If such fees are not received by the conclusion of the statutory grace period, an employee may immediately elect to pursue options for relief.
“The alternative construction endorsed by real parties, i.e., sending funds within 30 days of the due date satisfies the deadline, risks delay and uncertainty as to the timeliness of payment given possible delays and the need to allow for an appropriate period for delivery. It therefore precisely invites the types of issues the Legislature sought to avoid with a bright-line rule.”
AAA’s Email
The AAA on Sept. 28, 2021, sent the parties a reminder email, reciting that “The last day to remit payment is October 3rd.”
Payment was remitted on Sept 30, the defendants argued.
Petrou responded:
“When AAA emailed its September 28 courtesy reminder, it ha[d] no authority to adjust the statutory 30-day grace period….
“[E]ven if the final sentence in AAA’s courtesy reminder noting that ‘the last day to remit payment [was] October 3rd’ created some unfortunate confusion as to whether payment had to be received or could simply be sent by that date, there is no basis for this instruction to have controlled how payment must be made or to have superseded AAA’s earlier instructions which clearly notified real parties payment needed to be ‘received.’ Real parties identify no provision in the statute which allows the arbitration provider to set terms, including how payment is made, which alter payment deadlines.”
The case is Doe v. Superior Court of the City and County of San Francisco, A167105.
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