Is Code of Civil Procedure § 1281.98 Prempted by the FAA?

Hohenshelt v. Superior Court, No. B327524 (D2d8 Feb. 27, 2024)

This is another case where an employer in an arbitration was late in paying the arbitrator’s fee so the employee moved to go back to litigating her case in court under Code of Civil Procedure § 1281.98. The employer here was clearly late under the relevant standard, and a bunch of recent cases are good authority that the upshot of that is that the employee does not need to arbitrate any more.

Employer argues, after a prompting for supplemental briefing, that the FAA preempts § 1281.98. The Court rejects that argument, based on the idea that § 1281.98 is an arbitration procedure statute that furthers, not dissuades against, arbitration by incentivizing parties to pay up and participate in full. So the Court of Appeal grants a writ ordering the litigation to proceed.

Justice Wiley dissents. He notes that California state courts don’t have the greatest record predicting how the US Supreme Court will rule on the preemption of anti-arbitration state laws under the FAA. Following a federal case district court case, Belyea v. GreenSky, Inc., 637 F. Supp. 3d 745, 759 (N. D. Cal. 2022), he notes that § 1281.98 can’t really encourage arbitration when its chosen enforcement method is to effectively invalidate an agreement to arbitrate. 

Setting aside whether SCOTUS’s manic desire to force arbitration on every employee and consumer is the right take on the law, Justice Wiley is clearly onto the the trend. Would not be surprised to see a cert grant on this in the next year or two.

Writ granted.