Case Number: 22STCP00797    Hearing Date: September 1, 2022    Dept: 31

PETITION TO COMPEL ARBITRATION & PAYMENT OF ARBITRATION FEES IS GRANTED, IN PART

Background 

On March 8, 2022, Petitioner Darin Beffa filed this Petition to Compel Arbitration and Payment of Arbitration Fees against Respondents John Pierce, David Sergenian, Pierce Bainbridge Beck Price & Hecht LLP (“Pierce Bainbridge”), formerly known as Pierce Sergenian LLP (“PS LLP”), Joseph Ashby, and Does 1 to 10.

Respondent Joseph Ashby was dismissed as a party on July 08, 2022.

On July 08, 2022, Respondent David Sergenian filed an Opposition to the Motion. Another opposition by Sergenian was filed on August 19, 2022; presumably in response to Petitioner filing a Memorandum of Points and Authorities in Support of Petition on August 05, 2022.

Respondents Pierce, Sergenian filed an opposition on July 15, 2022.

No Reply has been filed. 

Legal Standard 

 California Code of Civil Procedure section 1281.98 subdivision (a) provides in relevant part:

“(1) 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 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.”

Section 1281.98 subdivision (b) provides, in relevant part:

“(b) If the drafting party materially breaches the arbitration agreement and is in default under subdivision (a), the employee or consumer may unilaterally elect to do any of the following: …

(3) Petition the court for an order compelling the drafting party to pay all arbitration fees that the drafting party is obligated to pay under the arbitration agreement or the rules of the arbitration provider.” 

Discussion 

  1. Statement of Facts

Neither Petitioner nor Respondents dispute the fact that a binding arbitration agreement (“Agreement”) exists between the parties. The dispute regarding the Agreement pertains to who should be required to pay the arbitration costs. 

Petitioner claims to have been an employee of PS LLP, now known as Bainbridge Beck Price & Hecht LLP Hecht (Bainbridge Beck). (See Statement of the Case, attached as Ex. B to Sergenian Declaration.)

According to the Agreement, on May 03, 2019, Petitioner filed a claim before the American Arbitration Association (“AAA”) asserting claims for (1) Breach of Contract; (2) Breach of Implied Covenant of Good Faith and Fair Dealing; (3) Violations of Labor Code section 1102.5 (Retaliation); (4) Fraud; (5) Concealment; (6) False Promise; (7) Negligent Misrepresentation; (8) Intentional Interference with Contract; and (9) Wrongful Termination. (Hanafi Decl. ¶ 2.)

Robert Hofman was appointed the arbitrator. (Hanafi Decl. ¶ 3.) Plaintiff alleges that when Respondents challenged the AAA’s imposition of payment of arbitrator fees solely to Respondents, Respondents subsequently failed to pay the arbitrator fees in the amount of $11,000.00. (Id. ¶¶ 3, 4, Ex. 2, 3.) Having received no payment for the amount due, the AAA terminated the proceeding on March 11, 2021. (Id. ¶¶ 5, 6, Ex. 4, 5.)

Petitioner’s counsel attaches a copy of the partnership agreement between Petitioner and PS LLP that contains an Arbitration Clause. (Hanafi Decl.  Hanafi Decl. Ex. A § 7.6 p. 12-13.)

Section 7.6 Titled “Arbitration” states in relevant part:

“In the event of any dispute between or among any partners or between any one or more partners, on the one hand, and the Partnership on the other, with respect to this Partnership Agreement, [. . .] whether arising from facts or circumstances first existing before or after the adoption of this arbitration provision by the partners, such dispute shall be resolved exclusively through an arbitration proceeding conducted pursuant to the Commercial Rules of the American Arbitration Association and the supplementary Procedures for Large Complex Cases. . . . any party may have an interim order to that effect made by the arbitrator, or as appropriate a court having jurisdiction during the pendency of the arbitration proceeding. . . . The arbitrator shall have jurisdiction to determine the arbitrability of any dispute. . . . The arbitrators’ fees shall be borne equally by the parties to the arbitration, and each party will be responsible for paying his or her own costs for the arbitration, including but not limited to attorneys’ fees, witness fees, transcript costs or other expenses. The obligation to arbitrate any such dispute will survive any partner’s disassociation from the Partnership.”

(Hanafi Decl.  Hanafi Decl. Ex. A.)

As to the parties, the Agreement states:

“This Agreement of the limited liability partnership of Pierce Sergenian LLP is entered into, effective as of the 3rd day of January, 2017, by and among John M. Pierce and David A. Sergenian, pursuant to the terms and conditions set forth below.”

(Hanafi Decl.  Hanafi Decl. Ex. A.)

In requiring Respondents to pay arbitration fees, the arbitrator stated:

“The arbitrator resolved the dispute in his Decision and Order of April 9, 2020 by confirming that AAA’s decision applying its Employment Arbitration rules that require payment of the arbitrator’s compensation only by Respondents.”

(Hanafi Decl. Ex. 2.)

Accordingly, Petitioner brings forth this Petition requesting an order requiring Respondents to pay the Arbitration Fee.

  1.  Court’s Discretion to Consider Late Filed Oppositions

Respondents do not dispute that their Oppositions were untimely filed. Per Code of Civil Procedure section 1290:

“A proceeding under this title in the courts of this State is commenced by filing a petition. Any person named as a respondent in a petition may file a response thereto. The allegations of a petition are deemed to be admitted by a respondent duly served therewith unless a response is duly served and filed. The allegations of a response are deemed controverted or avoided.”

Per Code of Civil Procedure section 1290.6, responses must be served and filed within 10 days after service of the petition. Petitioner asserts that because Sergenian filed his Opposition 99 days after service, and Pierce and PS LLP served their Opposition 105 days after service, all facts in the Petition should be deemed admitted.

First, “under the plain language of section 1290, the allegations ‘deemed admitted,’ when a petition to vacate is not timely opposed, are only the factual allegations of the petition, not the legal conclusions. The admission of factual allegations does not require courts to grant an unopposed petition. Rather, courts still have the power and duty to draw their own legal conclusions and confirm, correct, or vacate the award, or dismiss the petition, as appropriate (§ 1986).).” (Taheri Law Group, A.P.C. v. Sorokurs (2009) 176 Cal. App. 4th 956, 962.) Therefore, the Court need not accept Plaintiff’s legal conclusions as true.

Second, the Court has the discretion to consider late-filed Oppositions if they do not prejudice the moving Party. In Correia v. NB Baker Electric, Inc. (2019), the Appeal Court specifically held:

“Code of Civil Procedure section 1290.6 specifically allows a court to extend the time for filing an opposition for good cause, and reviewing courts have long held trial courts are authorized to consider late-filed opposition papers for good cause if there is no undue prejudice to the moving party. [Citation.] The circumstances surrounding an untimely opposition to a petition or motion to compel arbitration should be viewed under ‘the strong policy of the law favoring the disposition of cases on the merits….’”

(Correia v. NB Baker Electric, Inc. (2019) 32 Cal.App.5th 602, 613, citing Juarez v. Wash Depot Holdings, Inc. (2018) 24 Cal.App.5th 1197, 1201-1202.)

Petitioner has not filed a Reply nor any Declaration attesting to being prejudiced by the late-filed Oppositions. Accordingly, the Court can consider Respondents’ Oppositions when ruling on the merits of this Petition.

  1. Respondent’s Sergenian’s Opposition

Respondent David A. Sergenian (“Sergenian”) argues that Petitioner was not an employee and even if he was, Sergenian was not the employer of Petitioner but rather PS LLP was the employer; as alleged by Petitioner. Therefore, PS LLP should pay the arbitration fees and not Sergenian as an individual.

Sergenian asserts that as a party of a registered limited liability partnership, he cannot be held liable for the contractual obligations of his former LLP under Corporations Code Section 16306 subdivision (c) which states:

“Notwithstanding any other section of this chapter, and subject to subdivisions (d), (e), (f), and (h), a partner in a registered limited liability partnership is not liable or accountable, directly or indirectly, including by way of indemnification, contribution, assessment, or otherwise, for debts, obligations, or liabilities of or chargeable to the partnership or another partner in the partnership, whether arising in tort, contract, or otherwise, that are incurred, created, or assumed by the partnership while the partnership is a registered limited liability partnership, by reason of being a partner or acting in the conduct of the business or activities of the partnership.”

(Corp. Code § 16306 subd. (c).)

PS LLP was a duly registered Limited Liability Partnership. (Sergenian Decl. ¶¶ 2, 3, Ex. A.) Sergenian attests that he resigned and departed from the partnership in November of 2017. (Id. at ¶ 5.) Sergenian asserts that he is not involved or associated with PS LLP’s successor firm, Pierce Bainbridge. (Id.) 

Accordingly, because Sergenian was neither Petitioner’s employer nor is he longer involved with PS LLP, he alleges he cannot be held personally liable for the arbitration fees. Furthermore, the arbitrator found that PS LLP was responsible for paying the arbitration fees, not Sergenian individually. (Sergenian Decl. Ex. D, G.)

A letter sent to the Parties by the AAA states:

“We have received the employee’s portion of the filing fee in the amount of $300.00. Accordingly, we request that the employer pay its share of the filing fee in the amount of $1,900.00 on or before May 21, 2019. Upon receipt of the balance of the filing fee, the AAA will proceed with administration.”

(Sergenian Decl. Ex. D.)

The arbitrator in the “DECISION AND ORDER RE PAYMENT OF ARBITRATION FEES AND COSTS” determined Employment Arbitration Rules applied and under Employment Rule 44:

“‘The employer or company shall pay the arbitrator’s compensation unless the employee or individual, post dispute, voluntarily elects to pay a portion of the arbitrator’s compensation.’ Accordingly, the arbitrator shall amend the Scheduling Order to include a provision for deposits from Respondents for this arbitration and that shall be promptly paid under the terms of the SO and upon being so notified by AAA.”

(Sergenian Decl. Ex. G.)

Sergenian states that absent the arbitrator’s order requiring “all” Respondents to pay the fee or a finding that Sergenian was the employer of Petitioner or that Sergenian is personally responsible for the arbitration fees, Sergenian is not required to pay the arbitration fees.

For the reasons stated, the Court finds that Sergenian has provided sufficient evidence to support the finding he is not personally liable for the arbitration fees pursuant to California’s corporate law and the arbitrator’s conclusion that Petitioner’s employers, Pierce Bainbridge, formerly known as PS LLP, should pay the arbitration fees because it was/is the Petitioner’s employer.

  1. Respondent Pierce and Pierce Bainbridge Beck Price & Hecht LLP’s Opposition

John Pierce joins Sergenian’s opposition to assert that he cannot be held personally liable for the arbitration fees under California’s corporate law.

In their Opposing papers, Respondents Pierce Bainbridge do not deny that they are liable for the arbitration fees.

Rather, as to PS LLP, it asserts that Petitioner’s claims are barred by the applicable statute of limitations. Petitioner was employed PS LLP from or around March 9, 2017, until on or around May 3, 2017. (Sergenian Decl. Ex. B “Statement of the Case”.) The petitioner filed his claim with the AAA on May 03, 2019.

To the extent that Petitioner’s claims may be time-barred, such a determination should be made by the arbitrator per the terms of the Agreement.

The Court finds that Respondent Pierce Bainbridge, as the former employers of the Petitioner, are responsible for paying the arbitration fees. Neither David A. Sergenian nor John Pierce were Petitioner’s employers and cannot be held personally liable for the arbitration fees.

Lastly, the Court notes that under SB 707, effective January 1, 2020,

“(a) In an employment or consumer arbitration that requires, either expressly or through application of state or federal law or the rules of the arbitration administrator, the drafting party to pay certain fees and costs before the arbitration can proceed, if the fees or costs to initiate an 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 arbitration under Section 1281.2.

(b) If the drafting party materially breaches the arbitration agreement and is in default under subdivision (a), the employee or consumer may do either of the following:

(1)   Withdraw the claim from arbitration and proceed in a court of appropriate jurisdiction.

(2)   Compel arbitration in which the drafting party shall pay reasonable attorney’s fees and costs related to the arbitration.”

(Code of Civ. Proc., § 1981.97.)

Code of Civil Procedure Section 1281.97 provides in relevant part:

“(b), the statute of limitations with regard to all claims brought or that relate back to any claim brought in arbitration shall be tolled as of the date of the first filing of a claim in a court, arbitration forum, or other dispute resolution forum.

(d) If the employee or consumer proceeds with an action in a court of appropriate jurisdiction, the court shall impose sanctions on the drafting party in accordance with Section 1281.99.”

(Code Civ. Proc., § 1981.97 subds. (b)(2)(c)-(d).)

Furthermore, section 1281.99 provides, in relevant part:

“The court shall impose a monetary sanction against a drafting party that materially breaches an arbitration agreement pursuant to subdivision (a) of Section 1281.97 or subdivision (a) of Section 1281.98, by ordering the drafting party to pay the reasonable expenses, including attorney’s fees and costs, incurred by the employee or consumer as a result of the material breach.”

(Code Civ. Proc., § 1281.99 subd. (a).)

Based on the foregoing, Petitioner’s Motion is GRANTED IN PART as to Respondent Bainbridge Beck Price & Hecht LLP Hecht, formerly known as Pierce Sergenian LLP and denied as to Respondents David A. Sergenian and John Pierce.

 Conclusion

The Petition Compelling Arbitration Fees and Payment of Arbitration fees is GRANTED, in part.

Respondent Pierce Bainbridge Beck Price & Hecht LLP, formerly known as Pierce Sergenian LLP, is ordered to pay the arbitration fees due within 30 days.

Petitioner to give notice.