Arbitration Fees Must Be Received (Not Just Paid) by Deadline – Employment Law Weekly

Arbitration Fees Must Be Received (Not Just Paid) by Deadline

Anonymously named Jane Doe sued her former employer Na Hoku, Inc. and former manager Ysmith Montoya asserting multiple claims arising from Montoya’s alleged sexual harassment and assault of Doe.

The employer successfully moved to compel arbitration, and the court ordered the case to binding arbitration. September 1, 2022 was the “due date” for real parties to pay certain arbitration fees and costs to the arbitrator.

On Friday, September 30, Na Hoku mailed a check for $23,250 to the Texas address provided. On Monday, October 3, counsel for real parties informed AAA that payment had been mailed. On October 5, AAA received real parties’ payment and applied it to the case.

Doe moved to vacate the trial court’s order compelling arbitration on the grounds that real parties had failed to pay their arbitration fees and costs within 30 days of the due date as required by statute. She argued their late payment was a material breach of the arbitration agreement and waived their right to compel arbitration.

The trial court denied the motion. It noted that that “the provider’s demand was for payment remitted by October 3,” the court ruled that real parties “indisputably complied” with the date “having remitted (i.e., sent) the sum in by that date.” The court recognized the possible “ambiguity as to whether a ‘due’ date meant the day the sum had to be remitted or received by the provider” but concluded AAA’s second communication “clarified this: The date was for the remitting of the sum.” In the trial court’s view, because real parties’ remittance of payment by October 3 “satisfied the due date imposed by the provider.”

The Court of Appeal reversed the trial court order in the published case of Doe v Superior Court (Na Hoku Inc) – A167105 (September 2023).

Doe argues the trial court misinterpreted Code of Civil Procedure section 1281.98 in allowing real parties more than 30 days to pay arbitration fees and costs.

Here, the statutory language is not clear. While some terms in the statutory scheme are defined, there is no definition for the term “paid” in the clause “if the fees or costs required to continue the arbitration proceeding are not paid within 30 days after the due date.” (§ 1281.98, subd. (a)(1).)

Webster provides a number of definitions for “pay” (including “to make due return to for services rendered or property delivered,” “to give in return for goods or service,” and “to make a disposal or transfer of (money)”) and “paid” as “marked by the receipt of pay,” or “being or having been paid or paid for.”

Black’s Law Dictionary has no separate entry for “paid” but offers multiple definitions of “pay”: “1. To give money for a good or service that one buys . . . . 2. To transfer money that one owes to a person, company, etc. . . . 3. To give (someone) money for the job that he or she does . . .”

After reviewing the statutory language and dictionary definitions it said “while we acknowledge that most service providers would not consider themselves “paid” until they received payment, the term “paid” is reasonably subject to more than one interpretation.”

Thus the Court of Appeal reviewed the legislative purpose of the statute and concluded that “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.”

Arbitration Fees Must Be Received (Not Just Paid) by Deadline

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