Filed 9/27/22

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION ONE

ROSA M. QUINCOZA ESPINOZA,

Petitioner,

v.

THE SUPERIOR COURT OF LOS 

ANGELES COUNTY,

Respondent;

CENTINELA SKILLED NURSING 

& WELLNESS CENTRE WEST, 

LLC,

Real Party in Interest.

 B314914

 (Los Angeles County

 Super. Ct. No. 20STCV34704)

 OPINION AND ORDER 

 GRANTING

 PETITION FOR 

 WRIT OF MANDATE

ORIGINAL PROCEEDING; petition for writ of mandate. 

Richard L. Fruin, Judge. Petition is granted.
2

Pairavi Law, Edwin Pairavi and Joshua M. Mohrsaz for 

Petitioner.

No appearance by Respondent.

Fisher & Phillips, Grace Y. Horoupian, Hassan A. Aburish 

and Megan E. Walker for Real Party in Interest.

Rob Bonta, Attorney General, Nicklas A. Akers, Assistant 

Attorney General, Michele Van Gelderen and Rachel A. 

Foodman, Deputy Attorneys General, for Attorney General as

Amicus Curiae.

____________________________

Plaintiff and petitioner Rosa M. Quincoza Espinoza filed 

claims for discrimination and retaliation against her former 

employer, defendant and real party in interest Centinela Skilled 

Nursing & Wellness Centre West, LLC. The trial court granted 

defendant’s motion to stay litigation and compel the parties to 

proceed in arbitration. When defendant failed to pay its 

arbitration fees by a statutory deadline, plaintiff moved the trial 

court to lift the stay of litigation and allow her to proceed in 

court. The trial court denied the motion, and plaintiff filed the 

instant petition for a writ of mandate directing the trial court to 

reverse that denial. 

Plaintiff’s motion to lift the litigation stay contended that 

defendant had failed to pay the arbitration provider’s initial 

invoice within 30 days of the due date for payment, and thus 

under Code of Civil Procedure1 section 1281.97, subdivision (a)(1)

was in default and material breach of the arbitration agreement. 

Under those circumstances, section 1281.97 entitled her to 

1 Unspecified statutory citations are to the Code of Civil 

Procedure.
3

proceed with her claims in court. Defendant opposed the motion 

and provided evidence that it had since made the necessary 

payment, and the delay was inadvertent and due to a clerical 

error.

The trial court found that defendant was not in material 

breach because it had substantially complied with its payment 

obligations and the delay did not prejudice plaintiff. Plaintiff

filed the instant writ petition, contending that section 1281.97 

must be applied strictly when payment is not made within 

30 days, with no exceptions for substantial compliance or lack of 

prejudice. Defendant argues in opposition that strict application 

of section 1281.97 is contrary to legislative intent. Alternatively, 

defendant argues section 1281.97 is preempted by the Federal 

Arbitration Act (FAA) (9 U.S.C. § 1 et seq.), which the trial court 

found applies to the arbitration agreement between defendant

and plaintiff. Defendant did not raise this preemption argument

below, and thus the trial court did not address it.

We agree with plaintiff that, based on the plain language 

as well as the legislative history of section 1281.97, the 

Legislature intended courts to apply the statute’s payment 

deadline strictly. Thus, under section 1281.97, subdivision (a)(1), 

defendant was in material breach of the arbitration agreement

even though, as the trial court found, the delay in payment was

inadvertent, brief, and did not prejudice plaintiff. 

We reject defendant’s argument that the FAA preempts 

section 1281.97. The FAA preempts state laws that prohibit or 

discourage the formation or enforcement of arbitration 

agreements, or that interfere with fundamental attributes of 

arbitration. As our colleagues in Division Two recently held in 

Gallo v. Wood Ranch USA, Inc. (2022) 81 Cal.App.5th 621
4

(Gallo), section 1281.97 does none of this. Rather, the statute set 

forth procedural requirements to ensure timely payment of 

arbitration fees, thus “ further[ing]—rather than frustrat[ing]—

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.” (Gallo, at p. 630.) 

Accordingly, we grant the petition.

PROCEDURAL BACKGROUND

On September 10, 2020, plaintiff filed a complaint against 

defendant in the trial court, asserting claims for disability 

discrimination, retaliation, and other causes of action arising 

from her employment with defendant. 

On April 1, 2021, defendant moved to compel arbitration 

pursuant to an agreement plaintiff signed when she began her 

employment. The trial court granted the motion to compel and 

stayed further litigation pending the arbitration. In granting the 

motion, the court found that “the FAA governs the terms of the 

parties’ agreement.” 

On May 19, 2021, plaintiff’s counsel e-mailed the 

arbitration provider, stating, “We are initiating arbitration,” and 

providing copies of the complaint, arbitration agreement, and the 

trial court order compelling arbitration. Plaintiff’s counsel sent 

the e-mail to defendant’s counsel as well. On May 24, 2021, the 

arbitration provider sent the parties an initial invoice for an 

administrative fee and telephonic arbitration management 

conference, with a due date of May 31, 2021. 

On July 1, 2021, the arbitration provider confirmed to 

plaintiff’s counsel that it had yet to receive payment from 

defendant. Plaintiff then filed a motion in the trial court under 

sections 1281.97 and 1281.98 contending defendant had 
5

materially breached the arbitration agreement by failing to pay 

the invoice within 30 days of the due date for payment. Plaintiff

sought an order lifting the litigation stay, allowing her claims to 

proceed in court, and imposing monetary and evidentiary 

sanctions on defendant under section 1281.99. 

Defendant opposed plaintiff’s motion, arguing that plaintiff

had never served a demand for arbitration on defendant, and 

thus under the arbitration provider’s rules, arbitration could not 

have commenced even had defendant timely paid the invoice. 

Defendant also provided declarations averring that defendant’s 

vice president of operations had approved payment of the invoice 

on June 15, 2021, but “[d]ue to a clerical error, the request for 

cash flow was delayed and this prevented the accounts payable 

department from issuing a check for payment of the invoice.” 

Defendant learned on July 1, 2021 that the invoice was unpaid, 

and the arbitration provider confirmed receipt of defendant’s 

payment on July 9, 2021. 

Defendant’s counsel further averred that he communicated 

with plaintiff’s counsel on other matters, including settlement 

negotiations, on June 15 and 24, 2021, during which plaintiff’s 

counsel “made no mention of any delay in the commencement of 

the arbitration.” 

Following a hearing, the trial court issued an order denying 

plaintiff’s motion to lift the litigation stay and impose sanctions.

The court found defendant was “in substantial[ ] compliance with 

the arbitration provision and not in material breach . . . .” The 

court noted defendant’s declaration establishing that defendant’s 

“vice president approved payment of the invoice on June 15 and 

forwarded the invoice for payment but . . . the invoice was not 

paid then due to ‘clerical error.’ ” The court further found 
6

plaintiff “suffered no material prejudice” from the delay, as 

evidenced by plaintiff’s counsel “engag[ing] in settlement 

discussions . . . without . . . expressing concern that the invoice 

was not by then paid.” 

Plaintiff then filed the instant writ petition challenging the 

trial court’s order. A majority of a panel of this court issued an 

alternative writ directing the trial court to reverse its order, with 

one justice dissenting. The trial court declined to reverse its 

order, and we issued an order to show cause.2

DISCUSSION

A. Code of Civil Procedure Section 1281.97

Section 1281.97 was enacted as part of Senate Bill No. 707 

(2019–2020 Reg. Sess.) (Senate Bill No. 707) (Stats. 2019, ch. 870, 

§ 4). In the enacting legislation, the Legislature expressed 

2 Writ review is appropriate when “(1) ‘the remedy by 

appeal would be inadequate’ [citation] or (2) the writ presents a 

‘significant issue of law’ or an issue of ‘widespread’ or ‘public 

interest’ [citations].” (California Dept. of Tax & Fee 

Administration v. Superior Court (2020) 48 Cal.App.5th 922, 

929.) Writ review is appropriate here. Because, as we conclude,

the trial court’s order was improper, requiring plaintiff to proceed 

through an arbitration before she can challenge the order on 

appeal would be a waste of time and resources, for which the 

appeal would be an inadequate remedy. (See Medeiros v. 

Superior Court (2007) 146 Cal.App.4th 1008, 1014, fn. 7 [“Writ 

review is the appropriate way to review the challenged order and 

avoid having parties try a case in a forum where they do not 

belong, only to have to do it all over again in the appropriate 

forum.”].) Further, the interpretation and enforceability of 

section 1281.97 presents significant issues of law.
7

concern that “[a] company’s failure to pay the fees of an 

arbitration service provider in accordance with its obligations 

contained within an arbitration agreement or through application 

of state or federal law or the rules of the arbitration provider 

hinders the efficient resolution of disputes and contravenes public 

policy.” (Stats. 2019, ch. 870, § 1, subd. (c).) Further, “[a]

company’s strategic non-payment of fees and costs severely 

prejudices the ability of employees or consumers to vindicate 

their rights. This practice is particularly problematic and unfair 

when the party failing or refusing to pay those fees and costs is 

the party that imposed the obligation to arbitrate disputes.” (Id., 

§ 1, subd. (d).) 

The enacting legislation cited two opinions by the Ninth 

Circuit Court of Appeals, Brown v. Dillard’s, Inc. (2005) 430 F.3d 

1004 and Sink v. Aden Enterprises, Inc. (2003) 352 F.3d 1197, 

characterizing them as holding that “an employer’s refusal to 

participate in arbitration” or “an employer’s failure to pay 

arbitration fees” constituted “a material breach” of the 

arbitration agreement. (Stats. 2019, ch. 870, § 1, subd. (e).)

The legislation also quoted Armendariz v. Foundation 

Health Psychcare Services, Inc. (2000) 24 Cal.4th 83 for the 

proposition that “ ‘when an employer imposes mandatory 

arbitration as a condition of employment, the arbitration 

agreement or arbitration process cannot generally require the 

employee to bear any type of expense that the employee would 

not be required to bear if he or she were free to bring the action 

in court.’ ” (Stats. 2019, ch. 870, § 1, subd. (b).) Senate Bill 

No. 707 was intended to “affirm” these three court decisions and 

establish “that a company’s failure to pay arbitration fees 

pursuant to a mandatory arbitration provision constitutes a 
8

breach of the arbitration agreement and allows the nonbreaching party to bring a claim in court.” (Id., § 1, subd. (f).)

Section 1281.97, subdivision (a)(1) provides, “In an 

employment or consumer arbitration that requires, either 

expressly or through application of state or federal law or the 

rules of the arbitration provider, the drafting party[3] to pay 

certain fees and costs before the arbitration can proceed, if the 

fees or costs to initiate an 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 arbitration 

under Section 1281.2.”

4 

Section 1281.97 further requires that the arbitration 

provider “immediately provide an invoice for any fees and costs,” 

which is “due upon receipt” “absent an express provision in the 

arbitration agreement stating the number of days in which the 

parties to the arbitration must pay any required fees or costs.” 

(§ 1281.97, subd. (a)(2).)5 Thus, unless the parties expressly 

3 The “ ‘drafting party’ ” is “the company or business that 

included a predispute arbitration provision in a contract with a 

consumer or employee,” or “any third party relying upon, or 

otherwise subject to the arbitration provision, other than the 

employee or consumer.” (§ 1280, subd. (e).)

4 Section 1281.2 requires a court to order parties to 

arbitration “if it determines that an agreement to arbitrate the 

controversy exists,” subject to specified exceptions, including that 

“[t]he right to compel arbitration has been waived by the 

petitioner,” or “[g]rounds exist for rescission of the agreement.” 

(§ 1281.2, subds. (a)–(b).)

5 This subdivision was a later amendment to section 

1281.97. (See Stats. 2021, ch. 222, § 2.)
9

agree to the contrary, the drafting party’s receipt of the invoice 

triggers the 30-day clock under section 1281.97, 

subdivision (a)(1).6

In the event the drafting party does not pay the invoice 

within the 30 days, thus materially breaching the arbitration 

agreement under section 1281.97, subdivision (a)(1), the 

employee or consumer may “[w]ithdraw the claim from 

arbitration and proceed in a court of appropriate jurisdiction,” or 

“[c]ompel arbitration in which the drafting party shall pay 

reasonable attorney’s fees and costs related to the arbitration.” 

(§ 1281.97, subd. (b).) 

Should the employee or consumer choose to proceed in 

court, “the court shall impose sanctions on the drafting party in 

accordance with Section 1281.99.” (§ 1281.97, subd. (d).) 

Section 1281.99, in turn, states that the court “shall impose a 

monetary sanction against a drafting party” in the form of “the 

reasonable expenses, including attorney’s fees and costs, incurred 

by the employee or consumer as a result of the material breach.” 

(§ 1281.99, subd. (a).) 

The court “may” impose additional specified sanctions 

“unless the court finds that the one subject to the sanction acted 

with substantial justification or that other circumstances make 

the imposition of the sanction unjust.” (§ 1281.99, subd. (b).) The 

additional sanctions include “[a]n evidence sanction . . . 

prohibiting the drafting party from conducting discovery in the 

civil action,” “[a] terminating sanction” either “striking out the 

6 The invoice in the instant case, issued May 24, did not 

state it was due upon receipt, but rather listed a due date of 

May 31. The parties do not take issue with that due date, and 

we do not address it further. 
10

pleadings or parts of the pleadings of the drafting party,” or 

“rendering a judgment by default against the drafting party,” or 

“[a] contempt sanction.” (Id., subd. (b)(1)–(3).)

Section 1281.98, also enacted under Senate Bill No. 707 

(Stats. 2019, ch. 870, § 5), is similar to section 1281.97, but 

applies when the drafting party fails to make payments required 

to continue an arbitration already in progress. (§ 1281.98, 

subd. (a)(1).) Although plaintiff brought her motion to lift the 

arbitration stay under both sections 1281.97 and 1281.98, 

defendant failed to pay within 30 days the initial invoice from the 

arbitration provider, not a subsequent invoice during the 

pendency of the proceedings. Thus, section 1281.97 applies to the 

instant case, and that statute is the focus of our analysis.

B. Section 1281.97 Contains No Exceptions for 

Substantial Compliance, Unintentional Nonpayment, 

or Absence of Prejudice

The parties do not dispute that defendant did not pay the 

arbitration provider’s invoice within 30 days of the due date for 

payment. The trial court nonetheless denied plaintiff’s motion 

under section 1281.97, finding defendant was in “substantial[ ] 

compliance” with the arbitration agreement and “not in material 

breach,” because the delayed payment was due to “ ‘clerical 

error,’ ” and the delay did not prejudice plaintiff. Plaintiff does 

not contest the findings that the delay was due to clerical error 

and she suffered no prejudice. Rather, she argues section 

1281.97 “provide[s] no such exceptions,” and requires strict 

enforcement. We agree with plaintiff’s interpretation of the 

statute.

“ ‘ “ ‘When we interpret a statute, “[o]ur fundamental 

task . . . is to determine the Legislature’s intent so as to 
11

effectuate the law’s purpose. We first examine the statutory 

language, giving it a plain and commonsense meaning. We 

do not examine that language in isolation, but in the context of 

the statutory framework as a whole in order to determine its 

scope and purpose and to harmonize the various parts of the 

enactment. If the language is clear, courts must generally follow 

its plain meaning unless a literal interpretation would result in 

absurd consequences the Legislature did not intend. If the 

statutory language permits more than one reasonable 

interpretation, courts may consider other aids, such as the 

statute’s purpose, legislative history, and public policy.”

[Citation.] “Furthermore, we consider portions of a statute in the 

context of the entire statute and the statutory scheme of which it 

is a part, giving significance to every word, phrase, sentence, and 

part of an act in pursuance of the legislative purpose.” ’ ” ’ 

[Citation.]” (Smith v. LoanMe, Inc. (2021) 11 Cal.5th 183, 190.) 

Interpretation of a statute is a question of law we review de novo. 

(Ibid.)

The language of section 1281.97 is unambiguous. It 

provides that the drafting party is in “material breach,” and the 

nondrafting party is entitled to the remedies under the statute,

“if the fees or costs to initiate an arbitration proceeding are not 

paid within 30 days after the due date . . . .” (§ 1281.97, 

subd. (a)(1).) Under the plain language of the statute, then, the 

triggering event is nothing more than nonpayment of fees within 

the 30-day period—the statute specifies no other required

findings, such as whether the nonpayment was deliberate or 

inadvertent, or whether the delay prejudiced the nondrafting 

party. The plain language therefore indicates the Legislature 
12

intended the statute to be strictly applied whenever a drafting 

party failed to pay by the statutory deadline.

Supporting our conclusion is that elsewhere in the 

statutory scheme enacted under Senate Bill No. 707, the 

Legislature expressly granted the trial court discretion whether 

to order certain remedies for nonpayment. Section 1281.99 states 

that the court “shall impose a monetary sanction” in the event of 

a material breach under section 1281.97 (§ 1281.99, subd. (a), 

italics added), but the court “may order” additional nonmonetary 

sanctions “unless the court finds that the one subject to the 

sanction acted with substantial justification or that other 

circumstances make the imposition of the sanction unjust” (id., 

subd. (b), italics added). 

Given the Legislature’s express grant of discretion as to 

imposition of nonmonetary sanctions, we may presume the 

Legislature did not intend implicitly to grant that same

discretion on the issues of material breach and imposition of 

monetary sanctions. (Jarman v. HCR ManorCare, Inc. (2020) 

10 Cal.5th 375, 385 [“ ‘When one part of a statute contains a term 

or provision, the omission of that term or provision from another 

part of the statute indicates the Legislature intended to convey a 

different meaning.’ ”]; People v. Buycks (2018) 5 Cal.5th 857, 880 

[“ ‘When the Legislature “has employed a term or phrase in one 

place and excluded it in another, it should not be implied where 

excluded.” ’ ”].)

Defendant argues the legislative history of Senate Bill 

No. 707 indicates the Legislature’s intent was to discourage

drafting parties from deliberately delaying payment of fees, 

“not to punish innocent parties who unintentionally delayed” 

payment. Defendant contends to apply the remedies of section 
13

1281.97 in the present circumstance, in which defendant’s delay 

in payment was inadvertent and due to a clerical error, would be 

an “absurd consequence[ ].” 

It is certainly true that “strategic non-payment of fees” was 

a motivating concern behind Senate Bill No. 707. (Stats. 2019, 

ch. 870, § 1, subd. (d).) Had the Legislature intended to limit the 

reach of the statute to that circumstance, it could have done so, 

including by adding a provision to section 1281.97 similar to that 

in section 1281.99, subdivision (b), giving trial courts discretion 

not to apply the statute if the delay in payment was inadvertent 

or otherwise excusable. The Legislature chose not to include such 

a provision, however, which indicates an intent to apply the 

statute to any circumstance in which a drafting party fails timely 

to pay, and not just when the drafting party does so deliberately.

We do not agree that applying the statute strictly, even 

when nonpayment is inadvertent, leads to absurd consequences. 

Although strict application may in some cases impose costs on 

drafting parties for innocent mistakes, the Legislature could have 

concluded a brightline rule is preferable to requiring the 

nondrafting party to incur further delay and expense establishing 

the nonpayment was intentional and prejudicial. The Legislature 

also reasonably could have decided that whatever the reason for a 

delay in payment, the drafting party should bear the 

consequences of that delay rather than the nondrafting party.

Indeed, the legislative history indicates the Legislature 

considered and rejected the argument that section 1281.97 would 

unfairly penalize drafting parties for minor errors. Groups 

opposing Senate Bill No. 707, including the California Chamber 

of Commerce, objected that under the proposed law a drafting 

party would be subject to sanctions “even if[ ] ‘the drafting party 
14

paid a majority of the fees and costs, but yet a small, minor 

portion was not paid.’ ” (Assem. Com. on Judiciary, Analysis of 

Senate Bill No. 707 (2019–2020 Reg. Sess.) as amended May 20, 

2019, p. 8.) An analysis by the Assembly Committee on Judiciary 

acknowledged “that a failure to pay the required costs and fees in 

full would expose a company to significant monetary penalties 

and potentially serious evidentiary sanctions or a contempt 

holding. However, this risk should also be viewed in light of the 

harm that the drafting party’s breach of contract could impose on 

employees or consumers who are in limbo, with no avenue to 

pursue their legal rights. Particularly in employment matters, 

the plaintiff’s livelihood may be the subject of the adjudication. 

Although a large company may view its failure to pay a few 

hundred dollars for arbitration as a minor, immaterial, mistake, 

that mistake may delay the hearing of an employee’s claims. 

While immaterial to the drafting party, the ensuing delay 

associated with this minor error could be significant to the 

employee, who may not be able to pay bills, rent or other 

expenses that could result in the loss of their residence, or

damage to their credit rating, while the dispute remains 

unresolved.” (Id. at pp. 8–9.) 

Defendant argues that Sink, the Ninth Circuit case cited in 

the legislation enacting section 1281.97, does not support a 

finding of material breach in the instant case. Were the relevant 

language of section 1281.97 ambiguous, arguably we would look 

to Sink to assist us in interpreting it. As we have explained, the 

language is not ambiguous. We will not read implied terms into 

an unambiguous statute merely because the enacting legislation 

invoked a prior court decision. 
15

In sum, the trial court erred in denying plaintiff’s motion 

on the basis that defendant substantially complied with 

section 1281.97, subdivision (a)(1), its delayed payment was 

inadvertent, and plaintiff suffered no prejudice.

C. The FAA Does Not Preempt Section 1281.97

Our conclusion that section 1281.97 must be applied 

strictly does not end our inquiry, because defendant further 

argues the statute, if strictly applied, conflicts with the FAA and 

therefore is preempted. Because “federal preemption presents a 

pure question of law,” our review is de novo. (Farm Raised 

Salmon Cases (2008) 42 Cal.4th 1077, 1089, fn. 10.)7

“The FAA makes arbitration agreements ‘valid, irrevocable, 

and enforceable, save upon such grounds as exist at law or in 

equity for the revocation of any contract.’ 9 U.S.C. § 2. That 

statutory provision establishes an equal-treatment principle: A 

court may invalidate an arbitration agreement based on 

7 Plaintiff argues that defendant forfeited its preemption 

argument by failing to raise it in the trial court. We reject this 

argument. Courts have held that “a party may raise a 

constitutional issue, like preemption, for the first time 

on appeal.” (ReadyLink Healthcare, Inc. v. Jones (2012) 

210 Cal.App.4th 1166, 1175.) It is well settled, moreover, that “a 

judgment or order will be affirmed if it is correct on any theory, 

regardless of the trial court’s reasons; thus, a respondent may 

assert a new theory to establish that an order was correct on that 

theory ‘unless doing so would unfairly prejudice [petitioner] by 

depriving him or her of the opportunity to litigate an issue of 

fact.’ [Citation.]” (Bailon v. Appellate Division (2002) 

98 Cal.App.4th 1331, 1339, italics omitted.) Defendant’s 

preemption argument does not raise any issues of fact, and 

plaintiff does not contend otherwise. 
16

‘generally applicable contract defenses’ like fraud or 

unconscionability, but not on legal rules that ‘apply only to 

arbitration or that derive their meaning from the fact that an 

agreement to arbitrate is at issue.’ [Citation.] The FAA 

thus preempts any state rule discriminating on its face against 

arbitration—for example, a ‘law prohibit[ing] outright the 

arbitration of a particular type of claim.’ [Citation.]” (Kindred 

Nursing Centers Ltd. v. Clark (2017) 137 S.Ct. 1421, 1426. 

The FAA also preempts facially neutral state-law rules that 

“disfavor arbitration as applied by imposing procedural 

requirements that ‘interfere[ ] with fundamental attributes of 

arbitration,’ especially its ‘ “lower costs, greater efficiency and 

speed, and the ability to choose expert adjudicators to resolve 

specialized disputes.” [Citation.]’ [Citation.]” (Sonic-Calabasas 

A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1143 (Sonic), quoting 

AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 344, 348 

(Concepcion).)

Defendant argues section 1281.97 violates the FAA’s equaltreatment principle because it “creates a definition of ‘material 

breach’ and ‘waiver’ ” exclusive to arbitration agreements and 

inconsistent with “general principles of breach of contract and 

waiver in other contexts.” Defendant contends that under 

generally applicable California contract law, a finding of waiver 

or material breach involves a fact-specific, factor-based inquiry by 

the trier of fact. Section 1281.97 “displaces ordinary factfinding,” instead mandating that any failure to pay arbitration 

fees within the 30-day statutory period, even briefly and 

unintentionally, constitutes a material breach and waiver of the 

right to arbitration. Section 1281.97’s rule, moreover, 

asymmetrically applies only to drafting parties. Defendant 
17

contends section 1281.97 therefore singles out arbitration 

agreements for disfavored treatment, in violation of the FAA. 

After completion of briefing and oral argument in the 

instant case, our colleagues in Division Two issued their decision 

in Gallo, supra, 81 Cal.App.5th 621, upholding the validity of 

section 1281.97 in the face of a preemption argument similar to 

the one advanced by defendant here. We invited the parties to 

submit supplemental briefing addressing Gallo, which they did. 

Having reviewed that briefing, we agree with the holding and 

reasoning of Gallo, and apply it here. We begin by summarizing 

Gallo.

1. Gallo

In Gallo, the defendant failed to pay its arbitration fees 

within 30 days of the deadline set by the arbitration provider,

apparently due to miscommunications within the law firm 

representing the defendant. (Gallo, supra, 81 Cal.App.5th at 

pp. 631–632.) The defendant ultimately paid its fees 10 days past 

the 30-day cutoff. (Id. at p. 632.) The trial court granted the 

plaintiff’s motion under section 1281.97 to return the matter to 

court, finding the defendant “had no viable excuse for its late 

payment,” and rejecting the defendant’s argument that the FAA 

preempted section 1281.97. (Gallo, at p. 632.)

The Court of Appeal affirmed the trial court. (Gallo, supra, 

81 Cal.App.5th at p. 647.) The appellate court acknowledged that 

section 1281.97 “undeniably single[s] out arbitration insofar as 

[it] define[s] procedures that apply only to arbitrated disputes.” 

(Gallo, at p. 641.) The court further acknowledged that the 

statute “departs from the usual rule” that material breach is “an 

issue of fact for the trier of fact to determine.” (Id. at p. 644.) 
18

The court disagreed with the defendant, however, that this 

required a finding of preemption.

Analyzing precedent, the Gallo court observed that the 

mere fact that a law applies solely to arbitration is insufficient to 

preempt it under the FAA. (Gallo, supra, 81 Cal.App.5th at 

p. 638.) Rather, the FAA preempts state laws that “single[ ] out 

one or more types of arbitration agreements in order to ‘outright’

‘prohibit[ ]’ their formation or enforcement,” such as laws 

prohibiting arbitration of certain categories of claims. (Id. at 

pp. 637–638.) The FAA also preempts state laws that, while not 

outright barring arbitration of certain claims, “ ‘more subtly’ 

discourage” the formation or enforcement of arbitration 

agreements, for example by imposing heightened notice 

requirements for arbitration agreements, limiting the ability of 

representatives with power of attorney to sign arbitration 

agreements, or prohibiting waivers of class arbitration. (Id. at 

p. 638.)

In contrast, Gallo noted state laws “that define the 

standard rules ‘governing the conduct of arbitration,” such as 

provisions within the California Arbitration Act (CAA) (§ 1280 

et seq.), “have been upheld as not preempted by the FAA, even 

though those provisions are necessarily arbitration specific.” 

(Gallo, supra, 81 Cal.App.5th at p. 639.) This is because “ ‘[t]here 

is no federal policy favoring arbitration under a certain set of

procedural rules” [citation] so ‘the FAA leaves room for states to 

enact some rules affecting arbitration’ that the parties may 

choose to adopt [citation].” (Ibid.) As examples of valid 

arbitration-specific state rules, Gallo cited section 1281.2, which 

permits trial courts under certain circumstances to stay 

arbitration or deny it altogether if there is risk of a conflicting 
19

ruling in a parallel judicial action, and section 1286.2, which 

narrows the scope of judicial review of arbitration awards. 

(Gallo, at pp. 639–640.)

Applying these principles, the Gallo court concluded that, 

although section 1281.97 is an arbitration specific statute, it 

does not “commit the additional—and . . . necessary for 

preemption—sin of outright prohibiting arbitration or more 

subtly discouraging arbitration.” (Gallo, supra, 81 Cal.App.5th at 

p. 641.) Rather, stated the court, section 1281.97, along with

section 1281.99, “define the procedures governing the date by 

which the party who drafted an agreement to arbitrate against 

an employee or consumer must pay the initial fees and costs to 

arbitrate, and specify the consequences of untimely payment.” 

(Ibid.) These provisions, the court reasoned, are akin to other 

procedural statutes under the CAA, such as sections 1281.2 and 

1281.6, “that have been repeatedly found not to be preempted by 

the FAA, at least where . . . the parties have agreed to 

incorporate the CAA into their agreement to arbitrate.” (Gallo, 

at p. 642.) 

The court also concluded sections 1281.97 and 1281.99

“do not disfavor arbitration because the consequences of blowing 

the payment limitations period they erect do not necessarily end 

the nascent arbitration: Section 1281.97 gives the employee or 

consumer the option of continuing in arbitration or returning to a 

judicial forum.” (Gallo, supra, 81 Cal.App.5th at p. 642.)

The court further held that section 1281.97 does not 

interfere with fundamental attributes of arbitration, the other 

basis upon which courts have found state laws affecting 

arbitration preempted. (Gallo, supra, 81 Cal.App.5th at pp. 640, 

642.) Because the arbitration agreement at issue in Gallo
20

expressly incorporated the CAA, applying the CAA’s procedural 

rules did not “interfere with the FAA’s first goal of honoring the 

parties’ intent.” (Id. at p. 642.) Also, applying section 1281.97 “is 

fully consistent with the parties’ more general intent to arbitrate 

because the parties’ agreement was to arbitrate the dispute, not 

let it die on the vine and languish in limbo while the party who 

demanded arbitration thereafter stalls it by not paying the 

necessary costs in a timely fashion.” (Gallo, at p. 643.)

As for the FAA’s “goal of safeguarding arbitration as an 

expedited and cost-efficient vehicle for resolving disputes,” the 

Gallo court concluded section 1281.97 actually “facilitate[s]

arbitration by preventing parties from insisting that a dispute be 

resolved through arbitration and then sabotaging that arbitration 

by refusing to pay the fees necessary to move forward in 

arbitration.” (Gallo, supra, 81 Cal.App.5th at p. 643.)

The Gallo court rejected the defendant’s argument, similar 

to defendant’s argument in this case, that section 1281.97 

disfavored arbitration because it allowed a finding of material 

breach without a showing that the defendant “was to blame for 

the late payment or that plaintiff was prejudiced by it.” (Gallo,

supra, 81 Cal.App.5th at p. 644.) The court concluded that the 

Legislature “had a good reason for declaring untimely payment 

[of arbitration fees] a material breach as a matter of law”: 

“Employees and consumers were facing either the complete 

denial of any relief or delays in obtaining relief by virtue of the 

‘ “perverse incentive” ’ companies and businesses had to push 

claims into arbitration and then to refuse to pay the resulting 

arbitration fees; in such circumstances and to combat those 

incentives, the Legislature reasoned, no breach was immaterial 

to the stranded employee or consumer.” (Ibid.)
21

The court further noted that all arbitration-specific rules 

alter rights the parties otherwise would have under generally 

applicable litigation principles—for example, the rules limiting 

judicial review of arbitration awards deprive the losing party of 

the full right to appeal available in litigation. (Gallo, supra, 

81 Cal.App.5th at p. 644.) Yet, noted the court, many such rules 

have not been held preempted. (Id. at p. 645.) The court 

explained: “[S]ection 1281.97 is one of several statutes that are 

part of the CAA, which defines the very procedures by which 

arbitration is to be conducted under California law. These 

statutes, by definition, set up different procedures from those 

governing litigation in the California courts. In any given case 

(and thus in every single case), one of the parties to an arbitration 

will be able to show that it was harmed by being subject to those 

arbitration-specific procedures: A party who might have obtained 

a reversal due to legal or factual error in the trial court will be 

denied that reversal under the more limited review provisions 

of section 1286.2, just as [the defendant] is now arguing that 

it might not have been found in material breach of the 

arbitration agreement had it been in court (and not subject to

§ 1281.97), where it could have advanced its counsel’s 

inattentiveness as a possible excuse for its 36-day-late payment. 

If that showing were enough to justify preemption under the 

FAA, then preemption would be found in every case and the CAA 

would cease to exist. This is contrary to the law, explained above, 

which has repeatedly rejected FAA preemption challenges to the 

CAA’s provisions defining how arbitration is to proceed.” (Id. at 

pp. 644–645.) 

Addressing other arguments the defendant in Gallo raised, 

the court concluded the fact that section 1281.97 “had the effect 
22

of ending the arbitration in this case” did not “frustrate[ ] the 

FAA’s objective of honoring the parties’ intent,” because the 

parties agreed to be bound by the CAA and its payment 

requirements, and “did not agree to let [the defendant] 

commit . . . violations of section 1281.97 with impunity.” 

(Gallo, supra, 81 Cal.App.5th at p. 645.) The court rejected the 

defendant’s contention that canceling an arbitration because of a 

slight delay in payment thwarted the FAA’s objective of speedy 

and efficient dispute resolution, stating that “section 1281.97’s 

procedures putting a business’s feet to the fire to pay on time 

facilitates the resolution of disputes with alacrity.” (Ibid.) 

Similarly, the court disagreed section 1281.97 was “ ‘hostile’ ” to 

arbitration when the statute, if incorporated into the parties’ 

agreement, “honors the parties’ intent and results in a faster 

proceeding.” (Ibid.) 

Gallo noted that federal district courts uniformly had 

rejected arguments the FAA preempted section 1281.97. (Gallo, 

supra, 81 Cal.App.5th at p. 643, citing Postmates Inc. v. 10,356 

Individuals (C.D.Cal., Jan. 19, 2021, No. CV-20-2783-PSG

(JEMx), 2021 WL 540155, 2021 U.S.Dist. Lexis 28554, pp. *21–

*22; Agerkop v. Sisyphian LLC (C.D.Cal., Apr. 13, 2021, 

No. CV-19-10414-CBM-(JPRx), 2021 WL 1940456, 2021 U.S.Dist. 

Lexis 93905, pp. *11–*13.)

2. Analysis

a. Under Gallo’s reasoning, defendant’s 

preemption argument fails

We agree with Gallo that section 1281.97 is not analogous 

to state laws preempted by the FAA in other cases. Section 

1281.97 does not prohibit or discourage the formation or 
23

enforcement of arbitration agreements, either by barring certain 

claims from arbitration or imposing obstacles that make it 

difficult to enter into arbitration agreements. Indeed, in the 

instant case, as in Gallo, the defendant successfully moved the 

trial court to enforce the arbitration agreement at issue.

Once a court has enforced an arbitration agreement, 

however (or the parties have agreed to arbitrate under it), section 

1281.97 sets forth certain procedural requirements to achieve the 

FAA’s goal of “safeguarding arbitration as an expedited and 

cost-efficient vehicle for resolving disputes.” (Gallo, supra, 

81 Cal.App.5th at p. 643.) Specifically, drafting parties must 

timely pay their required fees to ensure the arbitration does not 

“die on the vine and languish in limbo.” (Ibid.) Far from 

imposing an obstacle to arbitration, section 1281.97 facilitates an 

expeditious resolution of the dispute, thus furthering the goals of 

the FAA. As Gallo observed, this is akin to section 1286.2, which 

also facilitates expeditious resolution by narrowing the scope of 

judicial review of arbitration awards. (Gallo, at p. 640; Marsch v. 

Williams (1994) 23 Cal.App.4th 238, 243 [“To ensure that an 

arbitrator’s decision is, indeed, the end of a dispute, arbitration 

judgments are subject to extremely narrow judicial review.”].)

Further distinguishing section 1281.97 from invalid state 

laws prohibiting or discouraging arbitration, section 1281.97 

does not automatically invalidate arbitration agreements if the 

drafting party fails to meet is procedural obligations. Rather, as 

Gallo noted, it “gives the employee or consumer the option of 

continuing in arbitration or returning to a judicial forum.” 

(Gallo, supra, 81 Cal.App.5th at p. 642.) In other words, even 

when triggered, the remedies under section 1281.97 are not an 

absolute bar to arbitration.
24

Also compelling is Gallo’s reasoning that the mere fact an 

arbitration specific rule alters the rights the parties would have 

in ordinary litigation does not necessarily mean the rule conflicts 

with the FAA’s equal treatment principle. As Gallo explained, 

courts have upheld the CAA’s limitations on judicial review of 

arbitration awards, despite those rules depriving the parties of 

their full appellate rights. (Gallo, supra, 81 Cal.App.5th at 

pp. 644–645.) Similarly, section 1281.97, for the sake of ensuring 

expeditious resolution of disputes, limits the arguments a 

drafting party may raise when it fails timely to pay its required 

fees, for example barring arguments that the failure was 

excusable or nonprejudicial. We agree with Gallo that this 

limitation does not violate the FAA.

Defendant argues Gallo is inapposite because the court in 

that case “was not presented with the issue of whether strict 

application of [section 1281.97] is required or whether such strict 

application—without regard to general contract principles—

would be preempted by the FAA.” Defendant contends “the 

superior court in Gallo had considered general contract principles 

in finding that the defendant had ‘no viable excuse for its late 

payment’ [citation], so there was no conflict between the statute’s

requirements and the superior court’s contract analysis.” In the 

instant case, in contrast, the trial court applied generally 

applicable contract principles of substantial compliance to deny 

plaintiff’s section 1281.97 motion.

Nothing in Gallo suggests its holding depends on the trial 

court’s ruling under section 1281.97 also being correct under 

ordinary contract principles. Gallo specifically acknowledged 

section 1281.97 applies a different rule for material breach than 

applies under generally applicable contract law, and concluded 
25

the rule was valid under the FAA without reference to the 

trial court’s particular ruling in that case. (Gallo, supra, 

81 Cal.App.5th at pp. 644–645.) Indeed, apart from the summary 

of the case background, Gallo never discusses the trial court’s 

particular ruling. We reject defendant’s suggestion that Gallo’s 

preemption analysis would differ had the trial court in that case, 

as in the instant case, denied the section 1281.97 motion under 

generally applicable contract principles. 

Defendant further argues 1281.97 conflicts with the FAA 

because its penalties for delays in payment, namely the monetary 

and other sanctions under section 1281.99, will discourage 

companies from entering into arbitration agreements. We 

disagree. The statute’s 30-day deadline is generous enough that 

a party exercising reasonable diligence reliably can meet it, and 

we think it unlikely employers and others would forego the 

advantages of arbitration for fear of missing that deadline. 

Rather, particularly in light of Gallo and this opinion, we expect 

drafting parties will take extra care timely to pay their 

arbitration invoices, thus expediting resolution of disputes and 

fulfilling the goals of section 1281.97.

b. The arbitration agreement at issue 

incorporated the CAA by default

As we explain below, the arbitration agreement in the 

instant case differs from the arbitration agreement in Gallo in 

that it does not expressly incorporate the CAA. That distinction 

does not affect our holding, because we conclude the arbitration 

agreement in the instant case incorporates the CAA by default.

The arbitration agreement in Gallo stated that the 

arbitrator was “to look to the ‘California Arbitration Act . . . to 

conduct the arbitration and any pre-arbitration activities.’ ” 
26

(Gallo, supra, 81 Cal.App.5th at p. 630].) The Gallo court 

emphasized this express agreement to incorporate the CAA, 

which now includes section 1281.97, when concluding that section 

1281.97 did not “frustrate[ ] the FAA’s goals of honoring the 

parties’ intent” by imposing terms to which the parties did not 

agree. (Gallo, at p. 643; see id. at p. 642 [referring to sections of 

the CAA “that have been repeatedly found not to be preempted by 

the FAA, at least where . . . the parties have agreed to 

incorporate the CAA into their agreement to arbitrate”].)

The arbitration agreement at issue in the instant case 

does not include express language broadly incorporating the 

CAA. On the subject of governing law, the agreement states, 

“The arbitrator shall be bound by the provisions and procedures 

set forth in the Employment Arbitration Rules and Mediation 

Procedures of the [American Arbitration Association]. The 

applicable substantive law shall be the law of the state in which 

[the employee] provide[s] services or federal law. If both federal 

and state law speak to a cause of action, the party commencing 

the action shall have the right to elect his/her choice of law.”

The agreement also provides that discovery is governed by 

“the civil discovery statutes of the state in which [the employee] 

provide[s] services.” The agreement further states, “Following 

the issuance of the arbitrator’s decision, any party may petition a 

court to confirm, enforce, correct or vacate the arbitrator’s 

opinion and award under the Federal Arbitration Act, 9 U.S.C. 

§§ 1–16, if applicable, and/or applicable state law.” 

This language lacks the broad express incorporation of the 

CAA’s procedures present in Gallo—rather, the agreement

expressly refers to state law procedures only in the context of 
27

discovery and any steps “to confirm, enforce, correct or vacate the 

arbitrator’s opinion and award.”

We need not, and do not, decide whether Gallo’s holding 

depends on the arbitration agreement at issue incorporating the 

CAA, because we conclude that requirement is satisfied here, 

despite the lack of express incorporation. As this court held in 

Valencia v. Smyth (2010) 185 Cal.App.4th 153 (Valencia), “the 

procedural provisions of the CAA apply in California courts by 

default.” (Id. at p. 174, italics omitted.) 

In Valencia, we confronted whether the arbitration 

agreement at issue was governed by the procedural provisions of 

the CAA or the FAA. As we explained, “parties may ‘expressly 

designate that any arbitration proceeding [may] move forward 

under the FAA’s procedural provisions rather than under state 

procedural law.’ [Citation.] Absent such an express designation, 

however, the FAA’s procedural provisions do not apply in state 

court.” (Valencia, supra, 185 Cal.App.4th at p. 174; accord, 

Nixon v. AmeriHome Mortgage Co., LLC (2021) 67 Cal.App.5th 

934, 945; see Mave Enterprises, Inc. v. Travelers Indemnity 

Co. (2013) 219 Cal.App.4th 1408, 1429 [“the procedural 

provisions of the CAA” apply in California courts “absent a 

choice-of-law provision expressly mandating the application of 

the procedural law of another jurisdiction”].)

Although the arbitration agreement at issue in the instant 

case does not expressly incorporate the procedural provisions of 

the CAA, it also does not expressly incorporate the procedural 

provisions of another jurisdiction. Given the absence of contrary 

language, therefore, the parties implicitly consented to 

application of the CAA’s procedural provisions, as much as had 

they expressly incorporated those provisions into their 
28

arbitration agreement. (See Judge v. Nijjar Realty, Inc. (2014) 

232 Cal.App.4th 619, 631 [when arbitration agreement “does not 

mention the FAA or the CAA, and . . . does not include a 

choice-of-law provision,” California procedural law applies]; 

Valencia, supra, 185 Cal.App.4th at p. 179 [“Assuming the 

parties failed to incorporate the CAA’s procedural provisions, 

that failure was of no consequence: A state’s procedural statutes 

automatically apply in state court unless the parties expressly 

agree otherwise,” italics omitted].) Thus, as in Gallo, application 

of the provisions does not conflict with the FAA’s goal of honoring 

the parties’ intent.

We acknowledge that the trial court, in granting 

defendant’s motion to compel arbitration, ruled that “the FAA 

governs the terms of the parties’ agreement,” a ruling plaintiff 

does not challenge. The trial court made that finding, however, 

solely in the context of compelling arbitration in the first place, 

concluding that under the FAA its “analysis is limited . . . to 

whether there is an enforceable agreement between the parties 

and whether Plaintiff’s claims fall within the ambit of that 

agreement.” The question of what procedures governed the 

arbitration itself was not before the trial court, and defendant 

never raised its preemption argument in the trial court. We 

interpret the trial court’s ruling on the applicability of the FAA, 

therefore, to be narrow, and plaintiff’s lack of challenge to that 

ruling does not preclude our conclusion that section 1281.97 

applies to the agreement before us. 

In its supplemental briefing, defendant argues the 

arbitration agreement is not silent as to which procedural rules 

apply, because it expressly incorporates the Employment 

Arbitration Rules and Mediation Procedures of the American 
29

Arbitration Association (AAA rules).8 Rule 47 of those rules, 

entitled “Suspension for Non-Payment,” provides “If arbitrator 

compensation or administrative charges have not been paid in 

full, the AAA may so inform the parties in order that one of them 

may advance the required payment. If such payments are not 

made, the arbitrator may order the suspension or termination of 

the proceedings. If no arbitrator has yet been appointed, the 

AAA may suspend or terminate the proceedings.” 

Defendant argues AAA rule 47 “do[es] not require that the 

[arbitration] be immediately terminated if payment is not 

received within 30 days of the invoice.” Rather, the arbitrator 

has “the discretion to suspend or terminate the arbitration 

proceedings upon non-payment.”

Assuming arguendo parties contractually may waive the 

provisions of section 1281.97, we disagree with defendant that 

incorporation of the AAA rules constitutes waiver. AAA rule 47 

concerns the actions the arbitrator or arbitration provider may 

take in the event of nonpayment. Section 1281.97, in contrast, 

concerns the actions the trial court may take upon nonpayment, 

including lifting the litigation stay so the matter may proceed in 

court and imposing sanctions.9 Nothing in the AAA rules 

purports to limit or modify the trial court’s powers in that regard, 

8 We grant defendant’s request to take judicial notice of 

the AAA rules. (Evid. Code, §§ 452, subd. (h), 459.) We also take 

judicial notice of the declaration of Mohsen Mobasser in support 

of the motion to compel arbitration and stay proceedings pending 

arbitration, which was filed in the trial court and attaches the 

parties’ arbitration agreement. (Id., §§ 452, subd. (d), 459.)

9 We express no opinion if and to what extent section 

1281.97 governs the actions of arbitrators, an issue not before us.
30

and plaintiff’s agreement to abide by the AAA rules therefore 

cannot constitute a waiver of her right to invoke those powers. 

D. On Remand, the Trial Court Shall Consider 

Plaintiff’s Sanctions Request

Because the trial court denied plaintiff’s motion under 

section 1281.97 upon a finding of defendant’s substantial 

compliance, a ruling we hold to be in error, the trial court did not 

reach plaintiff’s motion for sanctions under section 1281.99. 

We direct the trial court to address plaintiff’s sanctions motion on 

remand. We express no opinion as to how the trial court should 

rule on that motion.

DISPOSITION

The petition for writ of mandate is granted. Let a 

peremptory writ of mandate issue directing the trial court to 

(1) vacate its order denying plaintiff’s motion under Code of Civil 

Procedure sections 1281.97 and 1281.99; (2) enter an order lifting 

the stay of litigation and allowing plaintiff to bring her claims in 

court; and (3) conduct further proceedings, consistent with this 

opinion, on plaintiff’s motion for sanctions under section 1281.99.

Petitioner shall recover her costs with regard to this writ 

proceeding.

CERTIFIED FOR PUBLICATION.

BENDIX, J.

We concur:

ROTHSCHILD, P. J. CHANEY, J.