Williams v. West Coast Hospitals, Inc. ( 2022 )

Filed 12/22/22
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
ANN WILLIAMS et al., H049177
(Santa Cruz County
Plaintiffs and Respondents, Super. Ct. No. 20CV01064)
v.
WEST COAST HOSPITALS, INC.,
Defendant and Appellant.
Code of Civil Procedure sections 1281.97 and 1281.981 provide that a company or
business pursuing arbitration of a dispute under a predispute arbitration agreement is in
material breach and default of that agreement—thereby waiving its right to arbitrate—if it
fails to timely pay its share of arbitration fees. Among the consumer’s potential remedies
for this material breach is to eschew arbitration and litigate. This appeal by defendant
West Coast Hospitals, Inc. (West Coast), calls for us to decide (1) whether
sections 1281.97 or 1281.98 required plaintiffs Ann Williams, John Williams, and Paul
Williams to first obtain an arbitrator’s determination of West Coast’s default before
returning to the trial court; and (2) whether these statutory provisions apply only to
mandatory predispute arbitration agreements.2 Because nothing in the statute authorizes
1
Undesignated statutory references are to the Code of Civil Procedure.
2
Because plaintiffs share a surname, we refer to them individually using their first
names.
the restrictive interpretation that West Coast posits, we affirm the trial court’s order
permitting the resumption of litigation.
I. BACKGROUND
West Coast does business as Valley Convalescent Hospital, which admitted Ann
as a resident in November 2018 to recover from a hip surgery. The following February,
Valley Convalescent discharged Ann to an assisted living facility, where she died five
days later.
John, Ann’s son, initiated the present action against West Coast in his individual
capacity and in his representative capacity as Ann’s successor in interest and as his
brother Paul’s guardian ad litem. Plaintiffs alleged that Ann, unable due to dementia to
communicate her need for nutrition or hydration, lost nearly forty pounds and became
severely dehydrated at Valley Convalescent, resulting in acute and ultimately fatal renal
failure. Plaintiffs alleged that West Coast “watch[ed] [Ann] waste away,” “bill[ing] her
Medicare A plan until her eligibility expired and then, when profitability was no longer
available, . . . dumped her on the doorstep of a non-medical Assisted Living Facility,
misrepresenting to the family and facility that [Ann] was stable and healthy enough to be
suitable for the transfer.” Plaintiffs alleged five causes of action against West Coast:
(1) elder abuse; (2) violation of the Patient’s Bill of Rights; (3) constructive fraud;
(4) fraud by concealment; and (5) wrongful death.
West Coast moved to compel arbitration. In support of its motion, West Coast
submitted an arbitration agreement that John had signed on Ann’s behalf. According to
its caption, the arbitration agreement was “Not Part of Admission Agreement,” and
residents were “not . . . required to sign [it] as a condition of admission.”
The trial court granted the motion in part, compelling arbitration of Ann and
John’s claims but not Paul’s claims, which the court stayed. The next day, the court
entered a stipulated order submitting the entire action to arbitration.
2
Defense counsel contacted the arbitration provider to open the arbitration
proceeding. The arbitration provider later notified the parties that the filing fee remained
outstanding and set a deadline for payment. Plaintiffs timely paid their portion of the
filing fee. West Coast did not timely pay the balance.
More than 30 days after the deadline, citing section 1281.98, plaintiffs filed in the
trial court a motion to vacate the stay and an election to withdraw from arbitration on the
ground that West Coast had to that point failed to pay the arbitration fees. West Coast
belatedly paid its share of the arbitration fees that same day. The trial court granted
plaintiffs’ motion. West Coast timely appealed.
II. DISCUSSION
In West Coast’s view, a consumer seeking relief from a predispute arbitration
agreement under section 1281.98 must first submit to the arbitrator the question of
whether the drafting party has defaulted within the meaning of the statute. West Coast
posits that the trial court lacked jurisdiction to act on any contrary interpretation.
Alternatively, West Coast asserts that the statutory default provisions apply only to
mandatory arbitration clauses. Independent of these questions of law, West Coast also
asserts for the first time on appeal that the parties agreed to be bound by an enforceable
delegation clause, likewise requiring the arbitrator to decide the application of
section 1281.98 in the first instance.3 As a matter of appellate process, we reject
plaintiffs’ contention that the order at issue is not appealable, but we decline to reach
West Coast’s forfeited claim as to the enforceability of any delegation clause. On the
3
West Coast did not raise federal preemption on appeal. (Compare Gallo v. Wood
Ranch USA, Inc. (2022) 81 Cal.App.5th 621, 635-646 (Gallo) [rejecting preemption
challenge]; with Belyea v. GreenSky, Inc. (N.D. Cal. Oct. 26, 2022) ___ F.Supp.3d ___,
2022 WL 14965532, at pp. *6-*9, 2022 U.S. Dist. LEXIS 195077, at pp. *13-*23
[sustaining preemption challenge].) Accordingly, we do not address the issue. (See, e.g.,
Swain v. LaserAway Medical Group, Inc. (2020) 57 Cal.App.5th 69, 72; Tiernan v.
Trustees of Cal. State University & Colleges (1982) 33 Cal.3d 211, 216, fn. 4.)
3
merits of West Coast’s preserved claims, we conclude that the statute empowers a
consumer otherwise subject to a voluntary predispute arbitration agreement to unilaterally
withdraw from the arbitration upon the drafting party’s failure to pay contractually
required arbitration fees.
A. Appealability
Dispensing first with plaintiffs’ contention that the trial court’s order is not
appealable, we conclude that it is, notwithstanding our recognition of the Legislature’s
intention to secure prompt dispute resolution, whether in arbitration or in litigation.4
“The right to appeal is wholly statutory.” (Dana Point Safe Harbor Collective v.
Superior Court (2010) 51 Cal.4th 1, 5.) As relevant here, “[a]n aggrieved party may
appeal from” “[a]n order dismissing or denying a petition to compel arbitration.”
(§ 1294, subd. (a).) Although the trial court’s order does not fall neatly within the plain
language of section 1294, subdivision (a), courts have permitted appeals from orders that
are the “functional equivalent” of orders denying a petition to compel arbitration. (Henry
v. Alcove Investment, Inc. (1991) 233 Cal.App.3d 94, 99-100 (Henry) [order staying
arbitration is appealable, as a functional equivalent of an order denying a petition to
compel arbitration]; MKJA, Inc. v. 123 Fit Franchising, LLC (2011) 191 Cal.App.4th
643, 655 (MKJA) [an order declaring arbitration provisions unenforceable was the
functional equivalent of an order denying a petition to compel arbitration].) “[A]n order
vacating an order compelling arbitration is the functional equivalent of an order denying
a petition to compel arbitration in the first place because both divert a case into court
4
As Plaintiffs concede, even if we were to determine that the trial court’s order is
not appealable, we may treat West Coast’s appeal as a petition for writ of mandate.
(Angell v. Superior Court (1999) 73 Cal.App.4th 691, 698 [“A purported appeal from a
nonappealable order may be considered to be a petition for an extraordinary writ if (1) the
briefs and record . . . contain in substance all the elements [required] for an original
mandate proceeding and (2) there are extraordinary circumstances justifying the exercise
of discretionary power”].)
4
rather than arbitration.” (Gallo, supra, 81 Cal.App.5th at p. 633 [holding that this
functional equivalency supports reviewing the former under the de novo standard
applicable to the latter].)
Against this conclusion, plaintiffs rely on Wells Fargo Bank, N.A. v. The Best
Service Co., Inc. (2014) 232 Cal.App.4th 650 (Wells Fargo) and Gastelum v. Remax
Internat., Inc. (2016) 244 Cal.App.4th 1016 (Gastelum). Both cases are distinguishable.
In Wells Fargo, the defendants had not made “any effort . . . to compel plaintiff to
arbitrate his claims,” and had repeatedly claimed that its motion to stay litigation pending
mediation and arbitration was not a petition or motion to compel arbitration. (Wells
Fargo, supra, 232 Cal.App.4th at pp. 652, 654-655.) In Gastelum, the trial court denied
the defendant supervisor’s motion to compel arbitration but stayed the litigation of the
plaintiff employee’s claims against the supervisor in view of the plaintiff’s agreement
that her claims against defendant Remax, her employer, were subject to a predispute
arbitration provision. (Gastelum, supra, 244 Cal.App.4th at p. 1018.) After the
arbitration was dismissed for Remax’s refusal to pay fees, the trial court granted
plaintiff’s motion to lift the stay of the litigation against both Remax and the supervisor.
(Ibid.) On appeal, the court held that the request to lift the stay was not itself an
appealable order. (Ibid.) In Gastelum, the arbitrator had already dismissed the arbitration
and there was no pending cross-motion to compel resumption of the arbitration. (Id. at
pp. 1020-1021.) Thus, the trial court’s order lifting the stay neither vacated an order
compelling an arbitration nor denied a renewed attempt to compel arbitration—the
arbitration had concluded without a decision on the merits as a result of the arbitrator’s
dismissal. (Id. at pp. 1018, 1020-1023.)
Here, the trial court determined that West Coast’s failure to pay the contractually
mandated arbitration fees constituted a material breach of the arbitration agreement and a
waiver of the right to compel plaintiffs to arbitrate. Because that determination of
material breach and waiver operated as a complete defense to West Coast’s enforcement
5
of the arbitration agreement, it is a functional equivalent of an order denying a petition to
compel arbitration. (See MKJA, supra, 191 Cal.App.4th at p. 655; Gallo, supra, 81
Cal.App.5th at p. 633.) The order is therefore appealable under section 1294,
subdivision (a), and we accordingly address its merits.
B. Withdrawal from Arbitration under Sections 1281.97 and 1281.98
“[I]n construing a statute, we ascertain the Legislature’s intent in order to
effectuate the law’s purpose.” (Green v. State of California (2007) 42 Cal.4th 254, 260.)
“We must look to the statute’s words and give them their usual and ordinary meaning.”
(Ibid.) “The statute’s plain meaning controls the court’s interpretation unless its words
are ambiguous.” (Ibid.) “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.” (Coalition of Concerned Communities, Inc. v. City of Los
Angeles (2004) 34 Cal.4th 733, 737.)
Sections 1281.97 and 1281.98 each prescribe procedures for payment and
remedies for nonpayment of arbitration fees and costs by “the drafting party,” i.e., “the
company or business that included a predispute arbitration provision in a contract with a
consumer or employee” (§1280, subd. (e)). Although all parties in their briefing
consistently cite to section 1281.98, which governs the payment of fees and costs “during
the pendency of the arbitration proceeding” (see § 1281.98, subd. (a)(1)), the fees West
Coast failed to pay were those required “to initiate an arbitration proceeding” and are
therefore subject to section 1281.97. The procedures and remedies under both provisions
are “largely parallel,” however, and require no different analysis. (See Gallo, supra, 81
Cal.App.5th at p. 633, fn. 4.)
Both sections provide that a drafting party who fails in its obligation to pay fees
and costs required to initiate or continue the arbitration within 30 days after the due date
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
6
result of the material breach.” (§ 1281.98, subd. (a)(1); see also 1281.97, subd. (a)(1).)
Consequently, even where an arbitration has commenced, “the employee or consumer
may unilaterally elect[,]” among other alternatives, to “[w]ithdraw the claim from
arbitration and proceed in a court of appropriate jurisdiction.” (§ 1281.98, subd. (b)(1),
italics added.)5 We perceive no ambiguity in the Legislature’s description of the
consumer’s choice as unilateral or in its resort to the language of “material breach,”
“default,” and “waiver” in giving legal consequence to the drafting party’s failure of
timely payment.
Even while articulating these distinct but overlapping theories by which the
employee or consumer may regain choice of forum, the Legislature was notably silent as
to any threshold formalities of the sort West Coast hypothesizes. Nothing in the plain
language of section 1281.98 purports to condition the consumer’s unilateral election upon
an initial arbitral determination of breach. Nor does anything in section 1281.98’s
concrete definition of breach, default, and waiver require such a determination: at issue
is payment, or not, by a specified date, comparable to the failure of a litigant to pay jury
fees or to timely file an answer, which are typically matters of ministerial record keeping
rather than adjudicative factfinding.
Instead of requiring an initial determination of default by anyone other than the
consumer, the statutory scheme ensures that the consumer’s unilateral election designates
a forum for determining the further consequences of the default. If the consumer elects to
proceed in court to commence or resume litigation, the consumer must, as plaintiffs did
here, seek vacatur of a prior order compelling arbitration and staying the litigation, or
5
The inclusion in section 1281.98 of the word “unilaterally”—excluded from
section 1281.97—suggests that the Legislature intended to forestall the argument that the
pendency of an arbitration required the consumer to secure arbitral approval of the
consumer’s chosen remedy. For matters subject to section 1281.97, where no arbitration
has commenced, there was no need for the Legislature to specify that the consumer’s
election of remedies is unilateral.
7
face the drafting party’s motion to compel arbitration notwithstanding its nonpayment.
(§ 1281.98, subd. (b)(1); see also § 1281.97, subd. (b)(1).) If the consumer elects to
proceed with the arbitration by paying the drafting party’s delinquent arbitration fees, the
consumer must necessarily persuade the arbitrator that it has a right to the inclusion of the
fees in the final award. (§ 1281.98, subd. (b)(4).) Similarly, if the consumer elects to
petition a court to require the drafting party to pay the arbitration fees, the consumer must
necessarily persuade the court that it is entitled to compel the drafting party to pay such
fees under the statute. (§ 1281.98, subd. (b)(3); see also § 1281.97, subd. (b)(2).)
Finally, if the consumer elects to proceed with the arbitration without the payment of
fees, that election is expressly conditioned on the voluntary agreement of the arbitrator,
who would be granted a statutory right to a collection action against the drafting party.
(§ 1281.98, subd. (b)(2).) Thus, we see no hint from the Legislature of any requirement
for consumers to first seek a purely ministerial determination from the arbitrator before
making the election the Legislature has empowered them to make unilaterally.
Although the clarity of the statute’s text obviates the need for further inquiry, we
observe that the legislative history is consistent with the statute’s plain language. In
enacting sections 1281.97 and 1281.98, the Legislature intended to prevent drafting
parties from abusing their obligation to pay arbitration fees as a means of “severely
prejudic[ing]” employees and consumers in the vindication of their rights by “hinder[ing]
the efficient resolution of disputes.” (See Stats. 2019, ch. 870, § 1(c)-(d).) The
Legislature expressed its “intent” “to affirm” “that a company’s failure to pay arbitration
fees pursuant to a mandatory arbitration provision constitutes a breach of the arbitration
agreement and allows the non-breaching party to bring a claim in court.” (Stats. 2019,
ch. 870, § 1(f).)
The committee reports underscore these stated purposes. The author and sponsors
intended the bill to provide a procedural recourse to employees and consumers who were
required to arbitrate their disputes, but whose arbitrations were being strategically
8
delayed by companies that either failed to pay the initial filing fee or failed to pay fees
during the course of the arbitration. (Sen. Jud. Com., Rep. on Sen. Bill No. 707 (2019-
2020 Reg. Sess.) Apr. 11, 2019, pp. 6, 9.) The Assembly Committee on Judiciary report
went further, explaining that “this bill provides that if a drafting party fails to pay any
costs or fees associated with the arbitration within 30 days of the passing of the due date,
the consumer or employee is free to remove the matter to court, or continue with
arbitration and seek recovery of the costs and fees.” (Assem. Com. on Jud., Analysis of
Sen. Bill No. 707 (2019-2020 Reg. Sess.) as amended May 20, 2019, p. 1, italics added.)
As the Legislature’s stated purpose supports our giving effect to the statute’s plain
language, we conclude that employees and consumers may make their “unilateral”
election under section 1281.98, subdivision (b) upon learning of the default, without first
seeking approval from the arbitrator. Fundamentally, the purpose of the statute is to
incentivize timely payment and to provide procedural redress for employees and
consumers whose arbitration is delayed by the drafting party’s nonpayment. Requiring
the employees or consumers to remain in arbitration to secure a default—from an
arbitrator who did not receive timely payment and may still remain unpaid—invites the
very abuse that the statute is intended to eradicate. We decline to impose this burden on
the intended beneficiaries of the statute, even if they may independently elect to submit
the issue of default to the arbitrator.
C. The Trial Court’s Jurisdiction
West Coast alternatively asserts that the limits on trial court jurisdiction over the
contractual arbitration deprived the trial court here of authority to vacate its own prior
order. This challenge to the trial court’s subject matter jurisdiction presents a pure issue
of law, which we review de novo. (Tearlach Resources Ltd. v. Western States Internat.,
Inc. (2013) 219 Cal.App.4th 773, 780.)
Under West Coast’s theory of the statute, the commencement of arbitration divests
the trial court of jurisdiction to do anything other than confirm, vacate, or correct an
9
arbitration award, unless and until the arbitrator grants plaintiffs leave to withdraw from
arbitration. By vacating its prior order, West Coast maintains, the trial court effectively
dismissed the arbitration. West Coast’s argument misconstrues the nature of trial court’s
order and conflates two distinct aspects of the trial court’s continuing jurisdiction.
Contractual arbitration “has explicit statutory sanction in California” but “is in no
sense . . . a usurpation or ouster of the judicial power vested in the trial court by our
Constitution.” (See Brock v. Kaiser Foundation Hospitals (1992) 10 Cal.App.4th 1790,
1795 (Brock), citing Snyder v. Superior Court (1937) 24 Cal.App.2d 263, 267.) As
courts of general jurisdiction, California’s superior courts are generally empowered to
resolve the legal disputes that are brought to them. (California Gun Rights Foundation v.
Superior Court (2020) 49 Cal.App.5th 777, 788.) The Legislature may impose
reasonable restrictions on the fundamental jurisdiction of the courts, but we will not infer
a legislative intent to deprive superior courts of authority in a particular area, absent clear
indication of such an intent. (Ibid.)
The contractual right to compel arbitration is not self-executing: the party
asserting its right may do so by petition or affirmative defense in the trial court and by
seeking a stay of judicial proceedings. (Brock, supra, 10 Cal.App.4th at pp. 1795-1796.)
Once a court grants a petition to compel arbitration and stays the litigation, the court
nonetheless retains (1) “vestigial jurisdiction over the action at law,” which then “sits in
the twilight zone of abatement,” and (2) a “separate, limited jurisdiction over the
contractual arbitration.” (Id. at p. 1796.)
The trial court’s limited jurisdiction over the contractual arbitration, to be sure,
does not extend to the power to dismiss the arbitration proceedings, once commenced.
(Brock, supra, 10 Cal.App.4th at pp. 1801-1802.) But the trial court neither dismissed
the arbitration proceedings nor relied on its limited jurisdiction over the arbitration itself.
Having announced their election to withdraw from the arbitration, plaintiffs by their
motion to vacate the stay of the litigation properly invoked the court’s vestigial
10
jurisdiction over the action at law. This “vestigial jurisdiction” extends to determining
whether the arbitration proceedings resulted in an award on the merits, in which case “the
action at law should be dismissed because of the res judicata effects of the arbitration
award”; if it did not, then “the action at law may resume to determine the rights of the
parties[.]” (Brock, supra, 10 Cal.App.4th at p. 1796, italics added; see also Titan/Value
Equities Group, Inc. v. Superior Court (1994) 29 Cal.App.4th 482, 487 (Titan).) The
trial court merely confirmed that arbitration had concluded without an award on the
merits—as a result of plaintiffs’ unilateral exercise of their statutory rights—then acted
within its jurisdiction to vacate its own prior order and allow the action at law to emerge
from “the twilight zone of abatement.” (Brock, supra, 10 Cal.App.4th at p. 1796; see
also Gaines v. Fidelity National Title Ins. Co. (2016) 62 Cal.4th 1081, 1096 (Gaines)
[citing Brock with approval].)
The cases on which West Coast relies compel no contrary result. West Coast has
cited several decisions predating section 1281.97 et seq. for the proposition that the court
retains only its vestigial jurisdiction, and the limited jurisdiction conferred by statute,
“[a]bsent an agreement to withdraw the controversy from arbitration.” (See Titan, supra,
29 Cal.App.4th at p. 487; see also Byerly v. Sale (1988) 204 Cal.App.3d 1312, 1315.)
These decisions, however, do not purport to limit the Legislature’s authority to modify
the statutory scheme by which a party may effect a withdrawal and invoke the vestiges of
trial court jurisdiction. Section 1281.98 established a narrow but unilateral entitlement to
withdraw from arbitration. The trial court’s review of the withdrawal is within its
vestigial jurisdiction. Even if the matter were not within the trial court’s vestigial
jurisdiction, 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.
11
Absent any California decisions interpreting the statute in its favor, West Coast
relies on two federal decisions, Sink v. Aden Enters., Inc. (9th Cir. 2003) 352 F.3d 1197(Sink) and Farmer v. Airbnb, Inc. (N.D. Cal. June 1, 2021) 2021 WL 4942675, 2021 U.S.
Dist. LEXIS 206791 (Farmer). Neither persuades us that the trial court lacked
jurisdiction to enter the challenged order.
In Sink, the Ninth Circuit held that it was “not clearly erroneous” for the district
court to confirm an arbitrator’s determination that the party required to pay the costs of
arbitration had defaulted in arbitration by failing to do so. (Sink, supra, 352 F.3d at
pp. 1199-1200.) Because the party was in default, the district court was no longer
required to compel the parties to arbitration. (Id. at pp. 1201-1202.) We do not read Sink
to require the district court to cede to the arbitrator the question of default in the first
instance—the Ninth Circuit reviewed the district court’s factual finding, which was in
turn based on the arbitrator’s determination, and determined that the district court did not
err under the applicable standard of review. (Id. at pp. 1199-1200.) Sink does not help
West Coast because it addresses a federal district court’s review of an arbitral entry of
default, not a trial court’s jurisdiction to decide whether to resume court proceedings after
a party abandons arbitration, whether under the present statutory scheme or otherwise.
(Id. at pp. 1199-1202.) “[C]ases are not authority for propositions not considered.”
(People v. Casper (2004) 33 Cal.4th 38, 43.)
We further reject West Coast’s contention that the Legislature intended to derive
such a procedure from Sink. The Legislature stated only its intention to affirm Sink’s
ultimate holding “that a company’s failure to pay arbitration fees pursuant to a mandatory
arbitration provision constitutes a breach of the arbitration agreement and allows the non-
breaching party to bring a claim in court.” (Stats. 2019, ch. 870, § 1(f); see also id. at §
1(e).) Its reference to Sink accordingly does not persuade us that the Legislature intended
to require employees or consumers to move the arbitrator for entry of default.
12
In Farmer, a district court held that because the arbitration agreement between the
parties delegated the question of arbitrability to the arbitrator, the parties had agreed to
submit the section 1281.98 issue to the arbitrator as a “ ‘gateway question [of
arbitrability].’ ” (Farmer, supra, 2021 WL 4942675, at *1, 2021 U.S. Dist. LEXIS
206791, at p. *3.) We acknowledge that, on a clear and unmistakable showing, a court
may determine that the parties have agreed to arbitrate “gateway” questions of
“arbitrability” because they agreed to an enforceable delegation clause. (Najarro v.
Superior Court (2021) 70 Cal.App.5th 871, 879 (Najarro).) But, as detailed below, West
Coast’s reliance on Farmer is flawed in two fundamental respects: (1) Farmer does not
hold that the application of a delegation clause presents a jurisdictional issue; and
(2) West Coast did not argue in the trial court, or in any substantial sense on appeal, that
the parties in the present arbitration agreement effectively delegated the section 1281.98
issue to the arbitrator.
We reject West Coast’s contention that the delegation clause presents an issue of
jurisdictional dimension. As West Coast implicitly acknowledged by its initial motion to
compel, California courts undisputedly have jurisdiction to order parties to arbitration in
the first instance. (See, e.g., § 1281.2; Brock, supra, 10 Cal.App.4th at p. 1795.) While
the parties may agree to delegate a dispute within a court’s jurisdiction to an arbitrator,
the contractual right to an arbitration is waivable—the parties’ agreement does not of
itself divest the court of jurisdiction. (See § 1281.2; Freeman v. State Farm Mut. Auto.
Ins. Co. (1975) 14 Cal.3d 473, 485.) Rather, when the court enforces an agreement to
arbitrate, its jurisdiction merely abates. (See Brock, supra, 10 Cal.App.4th at pp. 1795-
1796; Gaines, supra, 62 Cal.4th at p. 1096; see also People ex rel. Garamendi v.
American Autoplan, Inc. (1993) 20 Cal.App.4th 760, 770-771 [discussing stays pursuant
to a plea in abatement].) The threshold issue of arbitrability is, in this respect, no
different from any other dispute that the parties may agree to send to arbitration—the
court has jurisdiction until it decides to defer the issue to the arbitrator pursuant to the
13
parties’ waivable contractual rights; and even then it continues to hold the action in
abatement. (See Brock, supra, 10 Cal.App.4th at p. 1796.)
Thus, even if we assume that the parties did agree to delegate the section 1281.98
issue to the arbitrator, a contractual right to an arbitral resolution of that issue does not of
itself divest the court of jurisdiction: the parties may abandon—or forfeit—the
contractual right and submit the matter to the court. (See In re Checking Account
Overdraft Litigation MDL No. 2036 (11th Cir. 2012) 672 F.3d 1224, 1228 (Checking
Account Overdraft Litigation) [holding that party waived its right to arbitrate the
conscionability of the arbitration clause by asking the district court to decide the
conscionability challenge, rather than invoking the delegation clause]; Truly Nolen of
America v. Superior Court (2012) 208 Cal.App.4th 487, 515, fn. omitted (Truly Nolen)
[citing Checking Account Overdraft Litigation with approval in holding that party
“cannot now complain about the court’s authority to rule on [certain] issues” where the
party “fail[ed] to ask the court to defer [those issues] to the arbitrator”]; Mendoza v.
Trans Valley Transport (2022) 75 Cal.App.5th 748, 771 (Mendoza) [holding “that
Employers forfeited any right to have the arbitrator decide whether the parties have
entered into a contract to arbitrate Mendoza’s underlying claims by failing to preserve
those claims in the trial court. They also waived that right by fully litigating the question
there and here.”].)
Accordingly, to the extent West Coast contends that there was an enforceable
delegation clause in its arbitration agreement that required the trial court, as a matter of
contract enforcement, to defer the section 1281.98 issue to the arbitrator, West Coast has
not preserved that contention for appeal.6
6
Because we conclude that the delegation clause argument does not present a
jurisdictional issue, the rule that the “lack of subject matter jurisdiction cannot be waived
and may be raised at any time, even for the first time on appeal” does not impact this
14
In petitioning the trial court to compel arbitration, West Coast did not ask the trial
court to defer the question of arbitrability under the agreement to the arbitrator—it called
upon the trial court to decide the question of arbitrability and received a favorable result
as to Ann and John. Indeed, West Coast states in its opening brief that the trial court
found that its arbitration agreement was “valid and enforceable.” In opposing plaintiffs’
underlying motion, West Coast made no reference to any delegation clause. West Coast
accordingly forfeited the issue by failing to raise it in the trial court. (See Checking
Account Overdraft Litigation, supra, 672 F.3d at p. 1228; Truly Nolen, supra, 208
Cal.App.4th at p. 515; Mendoza, supra, 75 Cal.App.5th at pp. 768-771.)
We have discretion to permit parties to raise new issues in appellate briefing
where the issue posed is a pure question of law based on undisputed facts and involves
important questions of public policy. (See Coleman v. Medtronic, Inc. (2014) 223
Cal.App.4th 413, 428.) But the enforceability of a delegation clause is not a pure
question of law. (See Najarro, supra, 70 Cal.App.5th at pp. 879-882 [finding delegation
clause unenforceable based on fraud in the execution].) To the extent the enforceability
of a delegation clause may in some instances be decided on undisputed facts in the
appellate record, we are unable to presume that plaintiffs here—had West Coast properly
raised this issue in the trial court—would have conceded such facts.
In its opening brief on appeal, West Coast offered a single-sentence assertion that
the arbitration agreement “mandated that all questions regarding the enforceability and
voidability of the arbitration agreement were to be decided by the arbitrator,” with neither
analysis of whether the delegation clause was enforceable nor any citation to authority
supporting such analysis. West Coast has thus compounded its failure to preserve the
claim in the trial court by failing to support any assertion that its arbitration agreement
portion of the analysis. (See Alliance for California Business v. State Air Resources Bd.
(2018) 23 Cal.App.5th 1050, 1060 (Alliance).)
15
contained an enforceable delegation clause with reasoned argument and legal authority.
(See People v. Stanley (1995) 10 Cal.4th 764, 793; Ewald v. Nationstar Mortgage, LLC
(2017) 13 Cal.App.5th 947, 948; see also United Grand Corp. v. Malibu Hillbillies, LLC
(2019) 36 Cal.App.5th 142, 146, 153.) Accordingly, we need not decide whether a valid
and enforceable delegation clause may require a consumer to present the section 1281.98
issue to an arbitrator.
D. Application of Section 1281.98 to Voluntary Arbitration Agreements
Section 1281.98 applies to “consumer arbitration[s]” and delineates the respective
rights and obligations of “consumer[s]” and “drafting part[ies].” (§ 1281.98.) Although
“ ‘[c]onsumer’ ” and “ ‘[d]rafting party’ ” are separately defined terms (§ 1280, subds. (c)
and (e)), “arbitration” and “consumer arbitration” are not. West Coast argues that
“consumer arbitration” should therefore be read, in light of the Legislature’s express
findings, to limit the application of section 1281.98 to arbitration under “mandatory”
predispute arbitration agreements, excluding arbitration under “voluntary” predispute
agreements. Because the arbitration agreement here was facially voluntary, West Coast
contends that the statute is inapplicable.
Reviewing de novo West Coast’s interpretation of the statute, we conclude that the
Legislature intended no such limitation. (See Alliance, supra, 23 Cal.App.5th at p. 1060.)
West Coast’s proposed limitation is inconsistent with the statute’s plain language.
“When a term goes undefined in a statute, we give the term its ordinary meaning.” (De
Vries v. Regents of University of California (2016) 6 Cal.App.5th 574, 590-591 (De
Vries).) “Consumer arbitration” is a composite of a defined term—consumer—and an
undefined term—arbitration. Particularly in the context of the pertinent statutory scheme,
arbitration is a process by which a dispute is resolved by an arbitrator, rather than by a
court. (See §§ 1280, subds. (e), (g) & (h), 1282.) We take the ordinary meaning of
“consumer arbitration,” accordingly, to be arbitration involving a “consumer” and a
controversy arising from the consumer’s transaction with the drafting party, irrespective
16
of how the parties reached their predispute agreement to arbitrate.
Our construction accords with the Legislature’s clear and overriding purpose in
enacting the statutory scheme—to ensure timely dispute resolution by (1) deterring
untimely payment of arbitration fees and (2) providing consumers and employees with a
procedural mechanism to secure dispute resolution should the drafting party fail to timely
pay arbitration fees. The focus of the statute is the fair and timely resolution of the
dispute anticipated in the parties’ arbitration agreement, not the means by which the
drafting party secured the predispute agreement in the first place.
West Coast argues that its preferred definition of “consumer arbitration” is
consistent with the definition of that term in the California Rules of Court governing
ethical standards for neutral arbitrators in contractual arbitration, which limit the scope of
that term to situations where the consumer was required to accept the arbitration
provision. (See Speier v. The Advantage Fund, LLC (2021) 63 Cal.App.5th 134, 149,
fn. 4 [citing definition]; Jevne v. Superior Court (2005) 35 Cal.4th 935, 954, fn. 6
[same].) But West Coast has given us no reason to believe that the Legislature intended
to appropriate this definition of “consumer arbitration” for use in section 1281.98. The
purpose for which the defined term “consumer arbitration” as used in the ethical
standards is to delineate the cases in which certain disclosures are required. (See
Honeycutt v. JPMorgan Chase Bank, N.A. (2018) 25 Cal.App.5th 909, 922-924; Cal.
Rules of Court Ethics Standards for Neutral Arbitrators in Contractual Arbitration,
stds. (2), (7)-(8) & (12).) If the Legislature had intended to use an expressly narrowed
definition of the term applicable in the specialized context of ethical standards governing
the single issue of disclosure, the Legislature would likewise have defined the term. (See
De Vries, supra, 6 Cal.App.5th at pp. 590-591; Presbyterian Camp & Conference
Centers, Inc. v. Superior Court (2019) 42 Cal.App.5th 148, 154.)
We acknowledge that the Legislature declared that strategically failing to pay
arbitration fees and costs, which “severely prejudice the ability of employees or
17
consumers to vindicate their rights[,] . . . 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.” (Stats. 2019, ch. 870, § 1(d), italics added.) But the
Legislature did not declare that the strategic delay of arbitration through non-payment of
fees and costs is “only” problematic and unfair where it is achieved by the party that
imposed the arbitration obligation predispute. That an abusive practice is more acutely
prejudicial in the context of a mandatory predispute agreement than a voluntary one does
not detract from the Legislature’s broader purposes. To adopt West Coast’s position
would be graft onto section 1281.98 an exception that lacks any textual support to permit
a practice that the Legislature determined was problematic and unfair.
We also acknowledge the record evidence that West Coast’s belated payment was
unintentional and that the ensuing delay amounted to a few days. But nothing in section
1281.98 as drafted depends on the intent or good faith of a particular drafting party in a
specific case. (See Espinoza v. Superior Court (2022) 83 Cal.App.5th 761, 775-778
[addressing section 1281.97]; De Leon v. Juanita’s Foods (Nov. 23, 2022) ___
Cal.Rptr.3d ___, 2022 WL 17174498, at pp. *1, *4, *6-*9, 2022 Cal.App. LEXIS 974, at
pp. *2, *8, *13-*22 (De Leon).) To further its stated purpose, the Legislature in enacting
sections 1281.97 and 1281.98 chose to neither require nor permit an inquiry into the
reasons for a drafting party’s nonpayment. (See § 1281.98; Assem. Com. on Jud.,
Analysis of Sen. Bill No. 707 (2019-2020 Reg. Sess.) as amended May 20, 2019,
pp. 9-10 [acknowledging that material breach and sanction provisions are “strict” and
“unforgiving”].) It is within the Legislature’s purview to make a civil remedy available,
as a matter of policy, without regard to fault. (See, e.g., Hypertouch, Inc. v. ValueClick,
Inc. (2011) 192 Cal.App.4th 805, 821-822 [discussing a strict liability statute].)
The Legislature similarly chose not to condition the remedies of sections 1281.97
and 1281.98 on litigation of the voluntary or mandatory character of the predispute
execution of the arbitration agreement. To limit the scope of the statute to mandatory
18
arbitration agreements would, furthermore, invite ancillary litigation of voluntariness that
would undermine the purpose of the statute. (See De Leon, supra, ___ Cal.Rptr.3d at
p. ___, 2022 WL 17174498, at p. *9, 2022 Cal.App. LEXIS 974, at pp. *21-*22.) It is
more consistent with the statutory purpose to interpret the statute to prohibit the
“problematic and unfair” practice of delaying arbitration by failing to timely pay required
fees in all arbitrations between a drafting party and a consumer, without analyzing
whether the particular drafting party in question engaged in all of the behaviors that the
Legislature determined were problematic. We will not disturb the balance struck by the
Legislature. Accordingly, we conclude that whether an arbitration agreement was
“mandatory” or “voluntary” in its execution is immaterial to the section 1281.98 analysis.
III. DISPOSITION
The order lifting the stay and permitting the resumption of litigation is affirmed.
Respondents are entitled to their costs on appeal.
19
____________________________
LIE, J.
WE CONCUR:
____________________________
GREENWOOD, P.J.
_____________________________
GROVER, J.
Williams et al. v. West Coast Hospitals, Inc.
H049177
Trial Court: Santa Cruz County Superior Court
Superior Court No.: 20CV01064
Trial Judge: The Honorable Timothy R. Volkmann
Attorneys for Defendant and Appellant Lewis Brisbois Bisgaard & Smith
West Coast Hospitals, Inc.:
Jeffry A. Miller
Daniel R. Velladao
Reuben B. Jacobson
Tracy D. Forbath
Attorneys for Plaintiffs and Respondents Scruggs, Spini & Fulton
Ann Williams et al.:
G. Dana Scruggs
Samuel Forbes-Roberts
Williams et al. v. West Coast Hospitals, Inc.
H049177