Moving Party: Plaintiffs Roger Biglangawa and Tessie Biglangawa (“plaintiffs”)

Resp. Party: Defendant Keith Bae (“defendant”)

Plaintiffs’ motion to excuse them from paying arbitration costs or allowing them to withdraw from arbitration proceedings is GRANTED. Defendant has the option of either paying plaintiffs’ share of the arbitration costs or waiving his right to arbitrate the action.

BACKGROUND:

Plaintiffs commenced this action on April 1, 2011. Plaintiff filed a first amended complaint on April 13, 2011, against defendants for: (1) elder financial abuse; (2) fraud; (3) breach of written contract; (4) conspiracy to commit fraud; (5) conspiracy to commit breach of contract; (6) negligent misrepresentation; (7) breach of fiduciary duty; (8) accounting; (9) quiet title; (10) unjust enrichment; and (11) declaratory relief.

On July 18, 2011, the Court granted defendants’ motion to compel arbitration and stay proceedings.

On June 28, 2013, the arbitration was terminated for nonpayment of fees. (See Lee Decl., Exh. E.) After plaintiffs paid all fees, the arbitration was reinstated on September 4, 2013. (Id., Exhs. E-F.)

On July 11, 2013, the Court ordered the case dismissed and retained jurisdiction to enforce the terms of the arbitration agreement and the judgment. Plaintiffs have not moved to set aside this dismissal.

ANALYSIS:

On July 11, 2013, the Court dismissed the action and retained jurisdiction to enforce the terms of the arbitration agreement and any judgment. Plaintiffs fail to discuss this dismissal in their moving papers, and defendant does not raise this as a defense in his opposition. Nonetheless, the Court concludes that plaintiffs’ motion pertains to the terms of the arbitration agreement, and that the ancillary jurisdiction retained by the court is broad enough to encompass the instant motion. Were the Court not to hear this motion, plaintiffs would have no recourse and would be denied an opportunity to have their claims heard in any forum.

In Roldan v. Callahan & Blaine (2013) 219 Cal.App.4th 87, the court addressed the issue of what to do when a plaintiff’s action is compelled to arbitration and the plaintiff cannot afford to share in the expense of the arbitration forum. In Roldan, the plaintiffs (the Roldans), who were elderly and of limited financial means, brought an action defendant (Campbell) which was compelled to arbitration. (Id. at pp. 90-92.) The Roldans thereafter moved for an order decreeing that they were not required to pay any portion of the “up front” costs of arbitration because requiring them to pay such costs effectively precluded them from pursuing their claims against Callahan in the arbitration forum. (Id. at pp. 92-93.) The trial court denied the motion and the plaintiffs appealed. (Id. at p. 93.)

The appellate court began by noting that the law presumes that the Roldans were aware of and intended to enter into the arbitration provision, and that they understood that they were to pay a pro rata share of the expenses and fees for arbitration. (Roldan, 219 Cal.App.4th at pp. 93-94.) However, this did not mean that plaintiffs would have any knowledge as to how much their share would be. (Id. at p. 94.) The court also presumed that both parties were aware of the public policy of “ensuring that all litigants have access to the justice system for resolution of their grievances, without regard to their financial means.” (Ibid.) Despite this, the subject arbitration provision showed “no effort to ensure that clients of limited means would have equal access to the alternative forum it mandates.” (Ibid.) The court noted that, unlike in the judicial forum, the arbitration forum does not provide an opportunity to obtain fee waivers. (Id. at pp. 94-95.) The court declined to consider whether the arbitration agreements were unenforceable for this reason, and assumed for the purposes of the appeal that the orders compelling arbitration were correct. (Id. at p. 95.)

The only issue addressed by the appellate court was whether the Roldans could be excused from paying the arbitration fees. (Roldan, 219 Cal.App.4th at p. 95.) The court concluded that they could. (Ibid.)

If, as plaintiffs contend, they lack the means to share the cost of the arbitration, to rule otherwise might effectively deprive them of access to any forum for resolution of their claims against Callahan. We will not do that. Of course, as the trial court recognized, we cannot order the arbitration forum to waive its fees, as a court would do in the case of an indigent litigant. Nor do we have authority to order Callahan to pay plaintiffs’ share of those fees. What we can do, however, is give Callahan a choice: if the trial court determines that any of these plaintiffs is unable to share in the cost of the arbitration, Callahan can elect to either pay that plaintiff’s share of the arbitration cost and remain in arbitration, or waive its right to arbitrate that plaintiff’s claim.

Admittedly, this resolution may result in Callahan paying a greater share of the arbitration cost than its retainer agreements otherwise required. But given the financial condition of these clients at the time they signed those retainer agreements, Callahan could not have been confident they would ever be able to pay a great deal toward the cost of arbitration in the event of a dispute. In fact, it might be fair to say Callahan had more of a hope than an expectation that arbitration costs would ever actually be shared with these plaintiffs. And when we balance that mere hope against the very real possibility these plaintiffs might be deprived of a forum if they are accorded no relief from these costs, it is clear which consideration must prevail.

(Id. at p. 96.) The appellate court reversed the trial court’s order denying the Roldans’ motion, with orders for the trial court to “estimate the anticipated cost of the arbitration proceeding previously ordered” and to then “determine whether any of these plaintiffs are financially able to pay their pro rata share of that cost.” (Ibid.) If the trial court determined that the Roldans were unable to pay the fees, it was required to “issue an order specifying that Callahan has the option of either paying that plaintiff’s share of the arbitration cost or waiving its right to arbitrate . . . and allowing the case to proceed in court.” (Ibid.)

Therefore, pursuant to Roldan, the Court must estimate the anticipated cost of the arbitration proceeding and determine whether plaintiffs are able to pay their share of the costs. If plaintiffs show that they are unable to do so, defendant has the option of either paying plaintiffs’ share of the costs or waiving the right to arbitrate.

Plaintiffs provide letters from the AAA sent in May and June 2013 stating that each party was billed $56,430.00 and that the arbitration would close because these invoices were not paid. (Lee Decl., Exhs. D-E.) After plaintiffs paid all fees due, the arbitration was reinstated in September 2013. (Id., ¶ 19, Exh. F; T. Biglangawa Decl., ¶ 20, R. Biglangawa Decl., ¶ 18.) Plaintiffs provide invoices from after the reinstatement showing that they have incurred $32,542.50 in arbitration fees, and have already paid $15,842.50, leaving $16,700.00 due and owing. (Id., Exh. B.)

Plaintiffs declare that they are no longer able to pay for arbitration expenses in this action. (T. Biglangawa Decl., ¶ 4; R. Biglangawa Decl., ¶ 4.) Plaintiffs have had medical problems and currently live off of combined Social Security payments, which total approximately $2,496.00. (T. Biglangawa Decl., ¶¶ 7-9; R. Biglangawa Decl., ¶¶ 7-8.) Their living expenses exceed their Social Security payments and they have gone into debt trying to arbitrate this action. (T. Biglangawa Decl., ¶¶ 9-10; R. Biglangawa Decl., ¶¶ 8-9.) Plaintiffs had to borrow money to pay for costs of the arbitration. (T. Biglangawa Decl., ¶¶ 11-12; R. Biglangawa Decl., ¶¶ 10-11.) Plaintiffs owe approximately $40,000.00 in credit card bills and loans. (T. Biglangawa Decl., ¶¶ 13-15; R. Biglangawa Decl. ¶¶ 12-14.) Plaintiffs declare that they cannot afford to pay the arbitrator to move forward with the case. (T. Biglangawa Decl., ¶ 16; R. Biglangawa Decl., ¶ 15.) Plaintiffs declare that defendant has failed to pay for his share of the arbitration costs. (T. Biglangawa Decl., ¶¶ 18-19; R. Biglangawa Decl., ¶¶ 17, 19.)

Plaintiffs’ evidence is sufficient to show that they are unable to pay the arbitration expenses. Defendant’s opposition fails to refute plaintiffs’ evidence and arguments, and instead merely asserts that plaintiffs’ evidence is not sufficient. This assertion is not well taken – plaintiffs’ evidence is sufficient to support their motion. Defendant fails to provide his own declaration as to the costs of arbitration and, troublingly, does not dispute plaintiffs’ claim that he has failed to pay his share of the arbitration costs and that plaintiffs have been required to pay his share in order to continue with the arbitration.

Plaintiffs’ motion is GRANTED. Defendant has the option of either paying plaintiffs’ share of the arbitration costs or waiving his right to arbitrate the action.

Payment of the arbitration costs is to occur within 30 days. If Defendant chooses not to pay these costs within 30 days, plaintiffs may file a motion to 1) vacate the July 11, 2013 order of dismissal, 2) vacate the July 18, 2011 order compelling arbitration; and 3) setting this case for trial.