On August 11, 2025, the California Supreme Court issued a decision in the matter of Dana Hohenshelt v. The Superior Court of Los Angeles, ruling that the Federal Arbitration Act (“FAA”) does not preempt the California Arbitration Act (“CAA”) provisions that require the drafter of the arbitration agreement to pay arbitration fees within thirty days of the due date in employment and consumer arbitration matters or face the loss of the right to compel arbitration. Furthermore, the Supreme Court concluded that a party’s failure to timely pay arbitration fees is subject to analysis by the fact finder on whether an untimely payment of arbitration fees was the result of willful, grossly negligent, or fraudulent conduct, or merely inadvertence or mistake.

Background

California Code of Civil Procedure Section 1281.98(a)(1), effective January 1, 2020, states in pertinent part that, “[i]n 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....

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