CORONA URIBE vs ECODRIVEUSA, LLC, DBA ECODRIVEUSA, LLC, et al.

A Stipulation and Appointment of Official Reporter Pro Tempore (CV/E-206) is required to be signed by each party, the private court reporter, and the Judge prior to the hearing, if not using a reporter from the Court’s Approved Official Reporter Pro Tempore list.

Once the form is signed it must be filed with the clerk. If a litigant has been granted a fee waiver

24CV015989: CORONA URIBE vs ECODRIVEUSA, LLC, DBA ECODRIVEUSA, LLC, et al. 11/12/2025 Hearing on Motion - Other to Lift Arbitration Stay in Department 25

and requests a court reporter, the party must submit a Request for Court Reporter by a Party with a Fee Waiver (CV/E-211) and it must be filed with the clerk at least 10 days prior to the hearing or at the time the proceeding is scheduled if less than 10 days away. Once approved, the clerk will forward the form to the Court Reporter’s Office and an official reporter will be provided.

Plaintiff Brenda Natali Corona Uribe’s (“Plaintiff”) motion to lift arbitration stay and impose sanctions is ruled upon as follows.

This is a consumer action related to Plaintiff’s purchased of used vehicle from Defendant EcoDriveUSA, LLC (“Defendant”). Plaintiff filed this action on August 12, 2024 against Defendant and Old Republic Insurance Co. (“Old Republic”). Defendant filed its answer on September 26, 2024. Old Republic filed its answer on September 16, 2024.

On or about February 10, 2025, Plaintiff, Defendant and Old Republic entered into a stipulation to stay the action and proceed to arbitration, which the Court entered on March 11, 2025 (“Stipulation”). (Stipulation and Order to Stay the Action and Proceed to Arbitration, March 11, 2025.) Per the Stipulation, Plaintiff and Defendant stipulated to binding arbitration with JAMS, with Hon. David I. Brown as arbitrator. (Ibid.) The parties stipulated to stay the action as to the claims against Old Republic. (Ibid.)

On March 27, 2025, JAMS sent a Notice of Intent to Initiate Arbitration, explaining that Plaintiff had paid the $250 non-refundable filing fee, and that all other fees associated with the arbitration would be borne by Defendant, including the $1750 non-refundable filing fee. (Declaration of Jason A. Stones (“Stones Decl.”), Ex. 2.) On April 4, 2025, JAMS sent a Commencement of Consumer Arbitration and Notice of Appointment of Arbitrator. (Id., Ex. 3.) Defendant, however, did not pay the arbitration fees, and JAMS closed the matter on June 12, 2025. (Id., Ex. 6.)

By this motion, Plaintiff moves to lift the arbitration stay, and to impose $10,875.02 in attorneys’ fees and costs pursuant to Code of Civil Procedure[1] section 1281.97. Plaintiff seeks attorneys’ fees from October 16, 2024 to July 14, 2025, as well as “anticipated” hours for review of the opposition, drafting reply, and attending the hearing.

Section 1281.97(a)(1) provides:

In an . . . consumer arbitration that requires, either expressly or through application of state or federal law or the rules of the arbitration provider, 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

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV015989: CORONA URIBE vs ECODRIVEUSA, LLC, DBA ECODRIVEUSA, LLC, et al. 11/12/2025 Hearing on Motion - Other to Lift Arbitration Stay in Department 25

agreement, is in default of the arbitration, and waives its right to compel arbitration under Section 1281.2.

(Code Civ. Proc. §1281.97(a)(1) (emphasis added).) If the drafting party materially breached the arbitration agreement, and is in default, the employee or consumer may withdraw the claim from arbitration and proceed in a court of appropriate jurisdiction. (Code Civ. Proc. §1281.97(b)(1).) “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. §1281.97(d) (emphasis added).)

Section 1281.99 states:

(a) 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(a).)

Defendant does not object to lifting the stay, but explains that prior to Plaintiff filing the motion, Defendant had offered to stipulate to forego arbitration. (Declaration of Michael E. Thomas (“Thomas Decl.”), ¶ 2, Ex. 1.)[2] Defendant’s counsel indicates that Defendant is currently initiating a dissolution of the company and has consulted with a bankruptcy attorney. (Id., ¶ 8.) No notice of stay due to bankruptcy has been filed in this action.

Given that Defendant does not oppose the motion to lift the arbitration stay, the motion to lift the stay is GRANTED.

Defendant, however, opposes Plaintiff’s request for monetary sanctions, and asks that the amount be reduced. Relying on Hohenshelt v. Superior Court (2025) 18 Cal.5th 310, it argues that Section 1281.99 sanctions are subject to normal contract defenses, and its failure to perform may be excused when the cost is so great that it makes performance impracticable. Defendant provides evidence that it was unable to pay the arbitrator’s fees due lack of available funds and impending dissolution and bankruptcy. (Thomas Decl., ¶¶ 5, 8.)

Defendant’s reliance on Hohenshelt is misplaced. The issue in Hohenshelt was whether the whether the Federal Arbitration Act (“FAA”) preempted Section 1281.98’s provision (similar to 1281.97’s provision) that the drafting parties waive their right to arbitrate if they fail to timely pay arbitration fees. The High Court held that that the FAA did not preempt Section 1281.98. In so holding, the Court explained:

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV015989: CORONA URIBE vs ECODRIVEUSA, LLC, DBA ECODRIVEUSA, LLC, et al. 11/12/2025 Hearing on Motion - Other to Lift Arbitration Stay in Department 25

Although section 1281.98 has been interpreted by various Courts of Appeal to impose an inflexible and sometimes harsh rule resulting in loss of arbitral rights, we reject that rigid construction and instead conclude that the statute does not abrogate the longstanding principle, established by statute and common law, that one party’s nonperformance of an obligation automatically extinguishes the other party’s contractual duties only when nonperformance is willful, grossly negligent, or fraudulent. As explained below, the Legislature sought to deter companies and employers from engaging in strategic nonpayment of arbitration fees; we find no indication that it intended to strip companies and employers of their contractual right to arbitration where nonpayment of fees results from a good faith mistake, inadvertence, or other excusable neglect.

(Hohenshelt, supra, 18 Cal.5th at 323 (italics in original, underline added.)

The High Court directed the Court of Appeal to remand the matter to the trial court “for consideration of whether Golden State may be excused for its failure to timely pay arbitration fees, such that the stay of litigation should not be lifted and the parties should be returned to arbitration, and whether the delay resulted in compensable harm to Hohenshelt.” (Id., at 349.)

Here, as noted above, Defendant does not oppose lifting the stay. Thus, whether the Defendant’s failure to timely pay the arbitration fees resulted in a waiver of its right to arbitrate is not at issue.

Further, with respect to the Section 1281.99(a) mandatory monetary sanctions provision, the High Court relied on Civil Code section 3275[3] as “operative as a background statute”, and found that Section 1281.99(a)’s requirement that the drafting party pay “the reasonable expenses, including attorney’s fees and costs, incurred by the employee or consumer as a result of the material breach,” is “[c]onsistent with this compensation requirement.” (Id., at 333.) The High Court also held that “[c]onsistent with general contract law, a material breach is enough to trigger an award of compensatory damages, which the mandatory sanctions provision of section 1281.99, subdivision (a) provides for,” but noted that other consequences (such as the loss of the defaulting party’s right to arbitrate) depend on the circumstances (akin to relief from discretionary sanctions under section 1281.99(b)). (Id. at p. 339.)

The High Court, looking at the Legislative History, understood Section 1281.99 to “require[] the drafting party to pay any reasonable expenses incurred by the employee or consumer as a result of its failure to timely pay arbitration fees [citation]—in essence, to make the other party whole (Civ. Code, § 3275)— whether the nonpayment was willful or not.” (Id., at 339–340 (underline added).) As a result, under the reasoning of the Hohenshelt Court, even if Defendant’s failure to pay the arbitration fees was not willful, monetary sanctions pursuant to Section 1281.99(a) are mandatory.

Accordingly, the Court finds that the monetary sanctions provisions in section 1281.99(a), as

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV015989: CORONA URIBE vs ECODRIVEUSA, LLC, DBA ECODRIVEUSA, LLC, et al. 11/12/2025 Hearing on Motion - Other to Lift Arbitration Stay in Department 25

referenced in section 1281.97(d), are mandatory. (See Wilson v. Tap Worldwide, LLC (2025) 114 Cal.App.5th 1077 [noting that Hohenshelt held that the mandatory sanctions provision was consistent with the compensation requirement and required reasonable expenses incurred to be paid to make the party whole, whether the nonpayment was willful or not, and distinguishing that from section 1298.98’s other attorney fees provision that does not reference section 1281.99].)

Further, even if the Court were to consider whether Defendant’s failure to pay fees was the result of mistake, inadvertence, or excusable neglect, the Court finds that Defendant has not made such a showing. While Counsel asserts that Defendant was suffering financial distress as of June 2025 and is currently initiating dissolution of the company (Thomas Decl ¶¶ 5-8), there is no evidence before the Court regarding whether such financial distress was occurring or foreseeable when Defendant demanded arbitration after the Complaint was filed on August 13, 2024 or when the stipulation was signed (only three months earlier) on March 11, 2025.

There is no evidence regarding Defendant’s financial situation on April 8, 2025, when Counsel asked JAMS to resend the retainer request to continue the arbitration proceedings. (Exh. 5 to Stone Decl.) Rather, it appears that Defendant demanded arbitration and then succeeded in stalling proceedings for months while disputing payment, then agreeing to pay, and then subsequently failing to pay, which resulted in closure of the arbitration. (Exhs. 4-6 to Stone Decl.) Such conduct appears to be squarely within the type of behavior that the Legislature sought to prohibit and deter through the mandatory sanctions provision in section 1281.99. (See Hohenshelt, supra, 18 Cal.5th at p.339 [quoting analysis of Assembly Committee on Judiciary relating to payment provisions which provided, “In light of the extreme hardship that needlessly delaying arbitration may cause to plaintiffs, the material breach and sanction provisions of this bill would seem to be a strict yet reasonable method to ensure the timely adjudication of employee and consumer claims that are subject to arbitration”].)

Defendant next contends that Plaintiff’s request for attorneys’ fees is overbroad and excessive because Plaintiff “has included in its claim for fees all legal expenses before the parties even stipulated to arbitration. Plaintiff also seeks and award of fees for communications with Old Republic which is not even subject to an arbitration provision.” (Opposition, 2:25-28.)

The plain language of Section 1291.99(a) limits the attorney’s fees and costs to those incurred as a result of the material breach.[4] Neither party provides legal authority addressing this language. The Court interprets the term “as a result of the material breach” to mean the costs and fees incurred after Defendant failed to pay the arbitration fees and JAMS closed the matter. Accordingly, the Court will only award attorneys’ fees and costs actually incurred after June 12, 2025. The Court will not award the “anticipated” five hours for review of the opposition, drafting reply, and attending the hearing. The awarded fees are:

 6/25/2025 - Review email from opposing counsel for Old Republic (0.1 hr @ $460.00/hr)[5]

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV015989: CORONA URIBE vs ECODRIVEUSA, LLC, DBA ECODRIVEUSA, LLC, et al. 11/12/2025 Hearing on Motion - Other to Lift Arbitration Stay in Department 25

 6/26/2025 - Review email from opposing counsel for EcoDriveUSA (0.1 hr @ $460.00/hr)  6/26/2025 - Send email to opposing counsel for EcoDriveUSA (0.1 hr @ $460.00/hr)  6/26/2025 - Review Court's tentative ruling (0.1 hr @ $460.00/hr)  7/9/2025 - Review stipulation from EcoDriveUSA (0.1 hr @ $460.00/hr)  7/9/2025 - Send email to opposing counsel for EcoDriveUSA (0.1 hr @ $460.00/hr)  7/10/2025 - Draft Motion to Lift Stay and Impose Arbitration Sanctions (3.5hrs @ $460.00/hr)  7/14/2025 - Revise Motion to Lift Stay and Impose Arbitration Sanctions (2.5 hrs @ $460.00/hr)

In sum, the Court will award a total of $3,036 in attorneys’ fees.

The Court will award $317.48 in costs for:

 JAMS filing fee - $257.48  Filing Fee for Motion to Lift Stay - $60

The total amount awarded to Plaintiff is $3,353.48.

This minute order is effective immediately. No formal order or other notice is required. (Code Civ. Proc. §1019.5; CRC Rule 3.1312.)

Moving counsel’s notice of motion does not provide notice of the Court’s tentative ruling system, as required by Local Rule 1.06. Moving counsel is directed to contact Defendant’s counsel and advise counsel of Local Rule 1.06 and the Court’s tentative ruling procedure and the manner to request a hearing. If moving counsel is unable to contact Defendant’s counsel prior to hearing, moving counsel is ordered to appear at the hearing.

[1] Unless otherwise indicated, all further statutory references are to the Code of Civil Procedure. [2] Plaintiff’s counsel declined to sign the stipulation, indicating that Plaintiff did not agree to

forgo arbitration, rather Defendant breached the arbitration agreement. (Reply Declaration of Jason Stones, ¶ 3, Ex. 11.) [3] Civil Code section 3275 provides, “Whenever, by the terms of an obligation, a party thereto

incurs a forfeiture, or a loss in the nature of a forfeiture, by reason of his failure to comply with its provisions, he may be relieved therefrom, upon making full compensation to the other party, except in case of a grossly negligent, willful, or fraudulent breach of duty.” [4] In her memorandum of points and authorities, Plaintiff cites to Sections 1281.98 and

1281.99(a) to support her argument that she entitled to attorneys’ fees and costs associated “with the abandoned arbitration and material breach.” Plaintiff’s reliance on Section 1281.98 is misplaced because that section applies when an arbitration has proceeded, but the drafting party

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV015989: CORONA URIBE vs ECODRIVEUSA, LLC, DBA ECODRIVEUSA, LLC, et al. 11/12/2025 Hearing on Motion - Other to Lift Arbitration Stay in Department 25

fails to pay the fees or costs required to continue the arbitration proceeding. Section 1281.98(c)(1) allows the withdrawing employee/consumer to “bring a motion, or a separate action, to recover all attorney's fees and all costs associated with the abandoned arbitration proceeding. The recovery of arbitration fees, interest, and related attorney's fees shall be without regard to any findings on the merits in the underlying action or arbitration.” (Code Civ. Proc. §1281.98(c)(1).) Here, Defendant did not pay the initial filing fee, thus, Section 1281.97 applies. Section 1281.97 does not include a similar provision to that of Section 1281.98(c)(1). [5] Defendant does not dispute the hourly rates for Plaintiff’s counsel. The Court finds that

$460/hr for Jason Stones is reasonable.