Court Opinion

ID: 9405709
Source: CourtListenerOpinion
Date Created: 2023-06-28 23:03:19.192482+00
Date Added: 2024-06-11T17:20:23.847254
License: Public Domain

Filed 6/28/23
                CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                SECOND APPELLATE DISTRICT

                        DIVISION EIGHT

MILAN CVEJIC,                          B318880

       Plaintiff and Respondent,       Los Angeles County
                                       Super. Ct. No. 19SMCV00537
       v.

SKYVIEW CAPITAL, LLC, et al.,

       Defendants and Appellants.

      APPEAL from an order of the Superior Court of
Los Angeles County, Helen Zukin, Judge. Affirmed.
      Troutman Pepper Hamilton Sanders, Jeffrey M. Goldman
and Matthew H. Ladner for Defendants and Appellants.
      Henry|Lacey, Stephen F. Henry, Mary Kay Lacey; The
Jadhavji Law Firm and Alishan A. Jadhavji for Plaintiff and
Respondent.
                      ____________________
      A statute gave Milan Cvejic the option to get out of
arbitration if Skyview was tardy in paying its arbitration fees.
Skyview was tardy in paying its arbitration fee. Cvejic was
entitled to get out. Citations are to the Code of Civil Procedure.
                                   I
       Plaintiff Cvejic worked for Defendant Skyview Capital,
LLC. He sued this entity and others in state court after his
termination. We refer to the defendants as Skyview.
       Skyview moved to compel arbitration. The trial court
granted the motion and stayed proceedings. The case went before
a panel of three arbitrators through the American Arbitration
Association under the rules for commercial cases. After at least
one continuance, the final hearing on the merits was set to begin
August 5, 2021.
       Skyview had to pay arbitration fees ahead of the hearing.
The fees were due June 4, 2021.
       On July 7, 2021, Cvejic’s counsel asked the case manager
whether Skyview had paid the deposits. On July 8, 2021, the
case manager confirmed by email that Skyview had not paid.
The manager scheduled a call to address the situation. During
the call, Skyview’s counsel reported there was “no further
explanation” for his clients’ failure to pay the fees. Cvejic
reserved his rights to proceed under the Code of Civil Procedure.
       The panel stated “[t]he Hearing fees have been requested
and the deadline for making the deposits has passed.” It set a
new deadline of July 14th for payment of the fees.
       Within about an hour of the call, Cvejic’s counsel wrote the
panel to say Cvejic was withdrawing from the arbitration under
section 1281.98. The panel chair responded that Cvejic’s request
was “premature”—presumably because the deadline was now
July 14th. Thereafter the panel ruled section 1281.98 was not in
play because Skyview “came into compliance with the Panel’s

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Orders regarding posting deposits.” Skyview ultimately paid its
fee by July 14th.
       On July 21, 2021, Cvejic filed in the trial court a section
1281.98 Election to Withdraw from Arbitration. Soon after, he
sought ex parte relief, which the court denied due to the absence
of emergency. In December 2021, Cvejic refiled his section
1281.98 election, which included a request for sanctions under
the statute and a motion to vacate the earlier order staying court
proceedings. Skyview opposed the filing. The court’s February
2022 order granted Cvejic’s request to withdraw from arbitration,
vacated the order staying proceedings, and awarded Cvejic
reasonable expenses under section 1281.99.
                                   II
       The order allowing Cvejic to withdraw from arbitration was
proper.
                                   A
       The Legislature enacted section 1281.98 in 2019 to curb a
particular arbitration abuse. The abuse was that a defendant
could force a case into arbitration but, once there, could refuse to
pay the arbitration fees, thus effectively stalling the matter and
stymying the plaintiff’s effort to obtain relief. The Legislature
called this “procedural limbo.” (Gallo v. Wood Ranch USA, Inc.
(2022) 81 Cal.App.5th 621, 634 (Gallo) [quoting legislative
history].) Our colleagues termed it a “procedural purgatory.”
(Ibid.)
       The statute begins:
       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, that the drafting party pay certain fees and

                                 3
       costs during the pendency of an arbitration
       proceeding, if 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.
(§ 1281.98, subd. (a)(1), italics added.)
       Subdivision (b) of the statute provides employees and
consumers with a choice of forum upon breach: They may elect to
“[w]ithdraw the claim from arbitration and proceed in a court of
appropriate jurisdiction” or “[c]ontinue the arbitration
proceeding” should the provider agree to continue. (§ 1281.98,
subds. (b)(1) & (2).) The statute also empowers courts to award
fees, costs, and sanctions. (§§ 1281.98, subd. (c); 1281.99.)
       The Legislature enacted section 1281.97 along with section
1281.98. The former provision concerns fees due at the initiation
of the arbitration. Otherwise, the provisions are analogous, and
courts analyze them similarly. (See Gallo, supra, 81 Cal.App.5th
at p. 633 & fn. 4.)
       After the current fee dispute arose, the Legislature
amended both sections in 2021. The amendments added a new
subdivision to section 1281.98 that compelled arbitrators to
provide invoices to all parties, specified requirements for these
invoices, and clarified the due date for fees. (Stats. 2021, ch. 222,
§ 3; § 1281.98, subd. (a)(2).) The new subdivision also includes
this new sentence: “Any extension of time for the due date shall
be agreed upon by all parties.” (§ 1281.98, subd. (a)(2).) The
amendments became effective January 1, 2022. (Id.)

                                  4
       Our review is independent because we interpret a statute
on undisputed material facts. (See De Leon v. Juanita’s Foods
(2022) 85 Cal.App.5th 740, 749–750 (De Leon).) We give
statutory words their plain meaning. (Id. at p. 750.) Our goal is
to effectuate the statute’s purpose. (Apple Inc. v. Superior Court
(2013) 56 Cal.4th 128, 135.)
                                   B
       Cvejic maintains this order is non-appealable. We stand by
our Interim Order denying Cvejic’s motion and incorporate that
order here. The trial court’s order overrode its initial decision
compelling this matter to arbitration and was functionally
equivalent to an order denying arbitration. Orders like that are
appealable. (See Lawson v. ZB, N.A. (2017) 18 Cal.App.5th 705,
714; MKJA, Inc. v. 123 Fit Franchising, LLC (2011) 191
Cal.App.4th 643, 653–656; see also Williams v. West Coast
Hospitals, Inc. (2022) 86 Cal.App.5th 1054, 1063–1065
(Williams).)
                                   C
       As the legislative history and caselaw direct, we strictly
enforce this statute. (E.g., Assem. Com. on Judiciary, Analysis of
Sen. Bill No. 707 (2019-2020 Reg. Sess.), as amended May 20,
2019, p. 9 [“the material breach and sanction provisions of this
bill would seem to be a strict yet reasonable method to ensure the
timely adjudication of employee and consumer claims that are
subject to arbitration”]; Espinoza v. Super. Ct. (2022) 83
Cal.App.5th 761, 771, 775–777 (Espinoza); Williams, supra, 86
Cal.App.5th at p. 1063.)
       The Legislature sought a clear rule for determining
whether the late payment of a fee by a drafting party constituted

                                5
a material contract breach. (De Leon, supra, 85 Cal.App.5th at p.
756.)
       The statute provides recourse when the party that pressed
for arbitration fails to pay its arbitration fee. The statute deems
this failure to be a material breach and entitles the claimant to
withdraw unilaterally from arbitration. (De Leon, supra, 85
Cal.App.5th at p. 753 [statute establishes a bright-line rule].)
       Skyview’s fees were due June 4, 2021. By July 9th,
Skyview had not paid. Skyview was in material breach of the
parties’ arbitration agreement. Section 1281.98 entitled Cvejic to
withdraw from the arbitration. It is that simple.
       The statute does not empower an arbitrator to cure a
party’s missed payment. There is no escape hatch for companies
that may have an arbitrator’s favor. Nor is there a hatch for an
arbitrator eager to keep hold of a matter. As the trial court
observed, “If . . . the drafting party were permitted numerous
continuances for failure to pay arbitration fees, therefore
delaying the proceedings, C.C.P. section 1281.98 would have no
meaning, force, or effect.” (See also De Leon, supra, 85
Cal.App.5th at p. 749 [“late payment as provided in section
1281.98 constitutes a ‘material breach’ without regard to any
additional considerations”].)
       The parties dispute whether the trial court erroneously
applied the amended statute retroactively in granting Cvejic’s
request. Because our review is independent, we need not resolve
this dispute over the trial court’s reasoning. Moreover, the
amendment is no stumbling block: this case involves setting an
entirely new fees deadline after a material breach in order to cure
the breach. It does not hinge on any “extension of time” for the

                                6
due date before a breach. The deadline came and went without a
payment.
       There was no forfeiture. Skyview incorrectly argues Cvejic
waived any challenge to the new July deadline because he
delayed in withdrawing and had acquiesced to another extension
earlier in the arbitration. The panel chair acknowledged Cvejic
reserved his rights “to proceed pursuant to the CCP” on the July
9, 2021 call. Regarding the earlier extension, the record shows
the initial fee deadline of January 28, 2021 was moved to June 4,
2021 because the final hearing was rescheduled. The arbitration
provider requested fees “60 days prior to the first day of hearing.”
The parties had agreed to continue the hearing on January 25th,
before any breach by Skyview. Cvejic did not consent to a breach.
       Leaning heavily on Greenspan v. LADT, LLC (2010) 185
Cal.App.4th 1413, Skyview argues courts must respect
arbitrators’ decisions on procedural matters and this trial court
improperly ignored the arbitrators’ procedural ruling on the fees
deadline. But the court was not reviewing a procedural decision
made by arbitrators; it was ruling on an election under section
1281.98 made in the trial court. The statute required this ruling.
       Skyview maintains the parties’ agreement entitles only
arbitrators to rule on Cvejic’s right to withdraw from arbitration,
as it provides any claim of breach of contract “shall be fully,
finally and exclusively resolved by binding arbitration . . . .” In
support, Skyview cites Dekker v. Vivint Solar, Inc. (9th Cir. Oct.
26, 2021, No. 20-16584), 2021 WL 4958856, a brief opinion the
Ninth Circuit decided not to publish. We respectfully disagree
with Dekker, which dismissed the plaintiffs’ “statutory claim
under § 1281.97” and declined to analyze or apply the statute’s
language. (Id. at *1.)

                                 7
       The statute’s intent for the trial court to decide this
statutory issue controls. (See Williams, supra, 86 Cal.App.5th at
p. 1069 [“the Legislature’s unambiguous provision for employees
and consumers covered by section 1281.98 to unilaterally
withdraw from arbitration and proceed in a court of appropriate
jurisdiction compels the conclusion that the Legislature intended
courts to exercise jurisdiction over such proceedings, as a matter
of positive law”].) Skyview makes no claim this statute is
unconstitutional. And Skyview forfeited its argument regarding
federal preemption by failing to raise the argument in its opening
brief.
       In enacting sections 1281.97 through 1281.99, the
Legislature perceived employers’ and companies’ failure to pay
arbitration fees was foiling the efficient resolution of cases. This
contravened public policy. (De Leon, supra, 85 Cal.App.5th at p.
750.) The Legislature responded by making nonpayment and
untimely payment grounds for proceeding in court and getting
sanctions. The point was to take this issue away from
arbitrators, who may be financially interested in continuing the
arbitration and in pleasing regular clients. The trial court was
right to decide this matter of statutory law.
       Skyview cites other inapposite federal and state cases.
These decisions concern respect for arbitrator authority and
decisionmaking and for the parties’ intent. These cases do not
involve this statute, which established a right to withdraw from
arbitration and go to court. (E.g., Green Tree Financial Corp. v.
Bazzle (2003) 539 U.S. 444, 452 [“the relevant question here is
what kind of arbitration proceeding the parties agreed to”—
which “does not concern a state statute or judicial procedures”];
Howsam v. Dean Witter Reynolds, Inc. (2002) 537 U.S. 79, 86

                                 8
[“parties to an arbitration contract would normally expect a
forum-based decisionmaker to decide forum-specific procedural
gateway matters”].)
       Skyview also cites the governing arbitration rules and asks
us to take judicial notice of these rules and certain legislative
history. We grant the request and Cvejic’s similar motion for
judicial notice. But none of these rules gives arbitrators
authority to cure a material breach of contract or to prevent a
non-breaching party from withdrawing from arbitration.
       On the issue of sanctions, Skyview’s opening brief does not
separately attack the sanctions award. It simply asks us to
vacate the trial court’s order in its entirety. The sanctions
remain. Skyview has not shown the award is erroneous.
                           DISPOSITION
       We affirm the trial court’s order and award costs to Cvejic.

                                           WILEY, J.

We concur:

             GRIMES, Acting P. J.

             VIRAMONTES, J.

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