Miller v. Plex, Inc.

Background

Rebecka Miller brought a putative class action against Plex, Inc. and other defendants. The court previously compelled the parties to arbitrate and stayed the lawsuit while arbitration proceeded. The arbitration agreement required arbitration before JAMS under the JAMS Streamlined Arbitration Rules & Procedures, and the court had previously found that the agreement delegated questions of arbitrability to the arbitrator.

Miller initiated arbitration against Plex through JAMS. The parties paid initial fees, Plex submitted an answer and counterclaim, and the parties jointly selected an arbitrator. JAMS later invoiced Plex for a service fee due upon receipt. Plex delayed payment, and JAMS sent several follow-up requests. JAMS then administratively stayed the arbitration, stating that it would lift the administrative stay upon full payment and would close the matter if payment was not received by November 18, 2023.

Plex confirmed that payment had been made, and JAMS received the payment before the November 18 deadline. Miller threatened legal action against JAMS and sought to have the arbitration closed. JAMS closed the matter, stating that it did so because of Miller’s notice of withdrawal. JAMS later refused to reopen the matter unless the parties agreed or a court ordered them to proceed. Miller then moved to lift the stay in the federal action.

Federal Arbitration Act and JAMS Rules

The Federal Arbitration Act requires a court to stay a lawsuit referred to arbitration until the arbitration has been conducted according to the parties’ agreement. The court concluded that it could lift the stay only if arbitration had occurred in accordance with the agreement and the JAMS Rules.

The court held that JAMS did not terminate the arbitration in accordance with its rules. JAMS Rule 6(c) would have permitted termination if Plex failed to pay its fees, but the court concluded that Plex paid before the revised deadline stated in JAMS’s administrative-stay notice. The court rejected JAMS’s later interpretation that the November 18 date did not extend the payment deadline, finding that the notice reasonably extended the deadline.

The court also rejected termination based on Miller’s supposed withdrawal. It concluded that Miller had not withdrawn; rather, she had repeatedly asked JAMS to terminate the arbitration. The court further determined that JAMS Rule 10(a) did not allow a party to withdraw unilaterally after JAMS issued a commencement letter. Therefore, the JAMS Rules did not authorize termination on the stated withdrawal basis.

Because the arbitration had not been conducted according to the parties’ agreement, the Federal Arbitration Act required the stay to remain in effect. The court concluded that it lacked authority to lift the stay on that record.

California Law and Preemption

Miller relied on California Code of Civil Procedure section 1281.98, known as Senate Bill 707, which can allow an employee or consumer to withdraw from arbitration and proceed in court when the drafting party materially breaches the arbitration agreement by failing to pay a required fee within the statutory period.

The court held that the Federal Arbitration Act preempted section 1281.98 only to the extent the state law conflicted with the federal statute under the circumstances presented here. In the court’s view, applying the state law to permit Miller to return to court would conflict with the Federal Arbitration Act’s requirement that the parties receive arbitration under the rules they agreed to use. The court expressly declined to decide whether the Federal Arbitration Act categorically preempts section 1281.98 in all circumstances.

Default and Waiver

The court rejected Miller’s argument that Plex defaulted in arbitration. Although Plex delayed payment, it paid before the revised deadline set by JAMS and made genuine efforts to complete the payment. The court also noted that JAMS did not terminate the arbitration because of the delayed payment and did not determine that Plex had defaulted.

The court likewise rejected Miller’s waiver argument. Waiver of the right to arbitrate required knowledge of the right and intentional acts inconsistent with that right. The court found that Plex participated in the arbitration, submitted an answer and counterclaim, jointly selected an arbitrator, responded to JAMS’s payment requests, and ultimately paid the fee. Considering Plex’s actions as a whole, the court found no waiver.

Disposition

The court denied Miller’s motion to lift the stay and ordered the parties to proceed with arbitration. The stay in the federal action remained in effect.