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Hernandez v. Sohnen Enterprises (CA2/5 B323303 5/22/24) Arbitration | FAA Preemption

By May 22, 2024June 24th, 2024Uncategorized

After an employer failed to pay arbitration costs within 30 days of the due date, the employee filed a motion to withdraw from arbitration and litigate in state court as permitted under California Code of Civil Procedure section 1281.97.  The trial court found the employer breached the arbitration agreement and granted the motion.  On appeal, the employer contends that the Federal Arbitration Act (FAA; 9 U.S.C. § 1 et seq.) governs the parties’ arbitration agreement and preempts section 1281.97.  First, we conclude that an order granting a motion under section 1281.97 to withdraw from arbitration and proceed in court is appealable.  Second, we find the arbitration agreement in this case is governed by the FAA, including both the substantive and procedural provisions of the FAA, rather than California’s arbitration laws.  As a result, the procedures of section 1281.97 do not apply and the order must be reversed.  Even if we were to conclude that section 1281.97 applies, however, we would still reverse, because when an agreement falls within the scope of the FAA and does not expressly adopt California arbitration laws, the FAA preempts the provisions of section 1281.97 that mandate findings of breach and waiver.  Accordingly, we reverse.