Arbitration is supposed to provide a quicker, more private, and less expensive alternative to litigating a dispute in a courtroom. Because the parties may have very different resources – often an individual confronting a large corporation – California requires the parties to an arbitration to adhere closely to rules intended to keep the process as fair as possible.

When those rules are broken, even in a seemingly minor way, a court can halt an arbitration. That’s what happened in a case recently brought before the California Court of Appeal (Reynoso v Advanced Transportation Services.)

In March of 2017, shortly after going to work for Advanced Transportation Services, or ATS, a trucking company based in Visalia, Andrew Reynosa signed a document provided by the company that said any dispute related to his employment would be submitted to binding arbitration.

It also stated that the company and the employee would each bear their own costs for legal representation, but the company would pay most of the costs charged by the arbitrator. Only the initial “case management fee” charged by the arbitrator would be paid equally by the company and the employee, up to the first $400; anything over $400 would be paid by the company.

In April of 2019, Reynoso sued ATS in Tulare County Superior Court. The appellate court documents do not disclose the details of his claim, but they indicate that medical issues were involved.

Several weeks later Reynoso and ATS agreed that his claims would be submitted to binding arbitration, pursuant to the agreement he had signed. They selected Judicate West as the firm to provide the arbitration, with retired Judge John Wagner to serve as the neutral arbitrator.

On September 10, 2019, Reynoso paid a $250 filing fee to Judicate West. The firm billed ATS $250 for its share of the filing fee on October 9, 2019, which the company paid five days later.

In December of 2022, the arbitrator scheduled sessions for both sides over the first few months of 2023. He also told them that the “final date for payment of arbitration hearing fees and other outstanding invoices will be 2/23/2023.” Judicate West had sent ATS invoices totaling $23,040 on Dec. 12, 2022. These were marked as “due upon receipt.”

The arbitration was scheduled to begin in April of 2023, but on Feb. 21, 2023, ATS sent an email to the arbitrator and Reynosa’s attorney saying it needed to delay the hearing by six months, claiming it needed the time to gather more information about Reynosa’s medical history. The arbitrator agreed to the request.

The following day, ATS received an email from Judicate West confirming the company’s payment of $23,290 to the arbitration firm.

On March 20, 2023, Reynosa asked the Superior Court to terminate the arbitration, and to impose sanctions against ATS.

His attorney, Deborah Gutierrez, asserted that ATS had “materially breached” the arbitration agreement by not paying the arbitrator on time.

Judicate West has sent invoices to ATS on July 21, 2021, and December 12, 2022. Payment for each invoice was due within 30 days of the date of its receipt, but ATS had paid the invoices after the grace period had elapsed. The December 12, 2022, invoice, Gutierrez learned, had been paid on February 22, 2023, more than 40 days after the due date.

When the trial judge asked Gutierrez why she had not objected earlier to the delay in payments, she explained that Judicate West’s online payment portal allowed her to see only information about payments due from her client. The website gave her no access to payments due from, or made by, ATS, so she had no way of knowing that the company had not paid the invoices by the due dates.

The trial judge ruled against Reynoso, ordering him to continue with the arbitration.  The judge reasoned that the statutes governing arbitration state that “any extension of time for the due date shall be agreed upon by all parties,” Because Gutierrez had failed to object to the new dates specified in emails from Judicate West, these dates “appear to have been agreed upon by all parties.”

Reynoso appealed the trial court’s decision.

The appellate justices reversed the lower court’s ruling. ATS “materially breached the arbitration agreement” by making its payments after the due date, they said. Because Reynoso’s attorney was not informed of the late payments, Gutierrez or her client could not have made an informed decision about whether to disregard the late payments and continue with the arbitration.

The appellate court ordered the lower court to permit Reynoso to withdraw from the arbitration, and to hold hearings about sanctions against ATS. It also awarded Reynoso his costs on appeal.

The lesson here is clear: in arbitrations, as in most areas of the law, rules and deadlines mean what they say.

By Laurie Murphy