Goobich v. Excelligence Learning Corporation

Background

Joel Goobich alleged that Excelligence Learning Corporation, formerly known as QTL Corporation, underpaid commissions owed under a 1998 employment agreement. The agreement concerned certain proprietary paint formulas, gave Excelligence exclusive rights to formulas Goobich created after the agreement date, allowed Goobich to inspect company books and records, and required disputes arising from the agreement to be resolved through binding arbitration. Goobich alleged that Excelligence misrepresented or concealed information about amounts owed and used his formulas to create products for which he was owed additional commissions.

Goobich requested company records in February 2019. Excelligence provided some records and later paid $27,874 in undisputed unpaid royalties. Goobich maintained that he was owed more and requested additional documents. He filed an arbitration request with the American Arbitration Association in July 2019. The association initially determined that its Employment Arbitration Rules applied and requested a filing fee from Excelligence. After Excelligence did not pay the requested fee, the association administratively closed the arbitration and refunded Goobich’s fee.

Goobich then filed this federal action asserting claims including accounting, breach of contract, alleged breaches of the covenant of good faith and fair dealing, misrepresentation, trade-secret misappropriation, unfair competition, unjust enrichment, and fraudulent concealment. He later moved for default judgment or, alternatively, to compel arbitration, and requested attorneys’ fees and costs. He argued that Excelligence’s failure to pay the arbitration fee was a material breach subject to California Code of Civil Procedure sections 1281.97 through 1281.99.

The court’s analysis

The court held that the California statutes did not apply retroactively. The statutes took effect on January 1, 2020, while Goobich’s arbitration request and Excelligence’s failure to pay the fee occurred in 2019. The court found no statutory text or legislative-history evidence showing that the statutes were intended to clarify existing law or apply to earlier events.

The court also rejected the argument that the statutes could be applied retroactively because they were merely remedial. It reasoned that the statutes introduced terminating sanctions, attorneys’ fees, and other penalties for failing to pay arbitration fees, and therefore could increase Excelligence’s liability for past conduct. Applying them to the 2019 events would improperly impose that increased liability retroactively. The court followed an earlier decision from the same district, which had likewise held that these statutes did not apply retroactively.

Because the statutes did not apply, the court concluded that Goobich was not entitled to relief under them. It therefore denied in full his motion for default judgment or, alternatively, to compel arbitration, and for attorneys’ fees.

Order to show cause

The court separately observed that Goobich could still seek arbitration under California Code of Civil Procedure section 1281.2, which generally requires arbitration when a written arbitration agreement exists and a party refuses to arbitrate. Goobich had stated that he did not seek arbitration unless Excelligence also had to pay his reasonable arbitration-related fees and costs. Excelligence had likewise argued that compelling arbitration without requiring Goobich to pay his share would be improper.

The court noted that both parties agreed they had a valid arbitration agreement and appeared willing to arbitrate before their dispute over fee allocation. It therefore ordered the parties to show cause—meaning to explain—why the federal proceedings should not be stayed while arbitration proceeds. The parties were ordered to file a joint stipulation or separate responses by September 11, 2020. The court did not, in this order, compel arbitration or stay the proceedings.