Court of Appeal clarifies limits on fee shifting for late arbitration payments post-Hohenshelt: Wilson v. Tap Worldwide, LLC

In Wilson v. Tap Worldwide, LLC (2025) 114 Cal.App.5th 1077, the Court of Appeal (Second Appellate District, Division One) reversed an award of attorney’s fees and costs, holding that the trial court misinterpreted Code of Civil Procedure § 1281.98’s “abandonment” standard after the California Supreme Court clarified that the lapse must be willful, grossly negligent, or fraudulent.

Plaintiff sued Defendant for various employment-related causes of action. Defendant successfully moved to compel arbitration and initiated an electronic payment for the arbitration fee on the day it was due (a Friday), but the arbitration provider received it the following Monday. Plaintiff moved to vacate the order compelling arbitration, arguing the late payment violated the 30-day deadline imposed by Code. Civ. Proc § 1281.98. The trial court granted the motion, ruling that payment must be received by the provider within the deadline. Plaintiff then moved for attorney’s fees and costs. The trial court denied Defendant’s motion for relief under § 473(b) but limited Plaintiff’s fee award to only work having utility in the context of arbitration. Plaintiff appealed the limited fee award, and Defendant voluntarily dismissed its appeal challenging the order vacating arbitration.

The Court of Appeal reversed the award of fees and costs to Plaintiff. Following briefing, the California Supreme Court decided Hohenshelt v. Superior Court (2025) 18 Cal.5th 310, holding that § 1281.98 “extinguishes the other party’s contractual duties only when nonperformance is willful, grossly negligent, or fraudulent” to avoid preemption by the Federal Arbitration Act (FAA). The Court of Appeal, agreeing the trial court’s order vacating arbitration was final, found that the fee award was premised on an incorrect interpretation of § 1281.98(c)(1), as the award of fees is “is premised on a finding that the drafting party has ‘abandoned’ the arbitration.” Per Hohenshelt, Defendant’s electronic payment, though slightly late, did not meet the criteria required for abandonment. The Court of Appeal declined to remand the issue, finding no genuine factual dispute that Defendant’s untimely payment did not meet the criteria required under Hohenshelt. While Plaintiff was still entitled to “reasonable expenses incurred… as a result of [Defendant’s] failure to timely pay arbitration fees,” the trial court had already imposed $1,750 in sanctions under § 1281.99.

Full opinion

Scroll to Top