Last Monday, the California Supreme Court issued its decision in Hohenshelt v. Superior Court of Los Angeles County, and held that California Code of Civil Procedure section 1281.98, a provision of the California Arbitration Act that governs the payment of fees in employment and consumer arbitrations, is not preempted by the Federal Arbitration Act. That provision provides that, absent a contrary contractual provision, the party who drafted an arbitration agreement and is responsible for paying arbitration fees must do so within 30 days from the due date, or will be deemed to have waived their right to compel arbitration.
The majority found that, though this provision was arbitration-specific, it was not preempted because it only applied to strategic nonpayment of fees, as opposed to nonpayment of fees resulting from a good faith mistake, inadvertence, or other excusable neglect. So construed, the majority found the provision “does not deviate” from generally applicable state law contract principles, and thus was not preempted.
Justice Corrigan, joined by Justice Jenkins, dissented, finding that, even as construed by the majority, the law treated arbitration agreements differently than other contracts, and was thus preempted.
