Filed 8/14/26 Lippincott v. Hassibi CA6
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
HENRY LIPPINCOTT, H051829
(Santa Clara County
Plaintiff and Appellant, Super. Ct. No. 22CV393460)
v.
ARASH HASSIBI et al.,
Defendants and Appellants.
Plaintiff Henry Lippincott brought an arbitration proceeding against Arash Hassibi
and Joinedapp, Inc. (collectively, defendants) but the proceeding was terminated after
defendants did not timely pay arbitration fees. Lippincott sued defendants in state court,
and the trial court awarded Lippincott $244,095.73 in attorney fees and costs associated
with the abandoned arbitration proceeding and $12,000 in monetary sanctions for
expenses incurred as a result of the nonpayment. (Code Civ. Proc., §§ 1281.98,
subds. (a)–(c), 1281.99, subd. (a); undesignated statutory references are to this Code.)
Both parties appealed. While the appeal was pending, the Supreme Court concluded a
party may avoid forfeiture of its arbitral rights under section 1281.98 by showing its
nonpayment was excusable. (Hohenshelt v. Superior Court (2025) 18 Cal.5th 310, 323
(Hohenshelt).) We will reverse the order and remand for the trial court to determine
whether defendants’ nonpayment was excusable such that they had not abandoned the
arbitration proceeding, preventing Lippincott from recovering associated attorney fees
and costs (§ 1281.98, subd. (c)(1)), and to determine anew the amount of sanctions to
award Lippincott due to defendants’ nonpayment. (§ 1281.99, subd. (a).)
I. FACTUAL AND PROCEDURAL BACKGROUND
Joinedapp is a software company that aspires to enable ecommerce transactions
within social messaging applications. Hassibi is Joinedapp’s CEO. Lippincott worked
for Joinedapp as a co-founder focused on business development and fundraising. He
signed multiple employment and stock option agreements containing arbitration clauses.
The clauses stated that arbitration would be the only remedy for any claim against
Joinedapp and its officers or agents. The employment agreement was governed by
California law and the stock option agreement by Delaware law. The arbitration clauses
stated that any arbitration proceeding would proceed under the American Arbitration
Association (AAA) commercial arbitration rules and that the parties would be entitled to
discovery in accordance with the Federal Rules of Civil Procedure.
Lippincott initiated an arbitration dispute against defendants with 18 separate
causes of action, alleging defendants terminated him without cause or any compensation
after he raised millions of dollars in capital for Joinedapp but just before his stock options
would vest. Lippincott also asserted defendants fraudulently misrepresented Joinedapp’s
compensation structure and success to Lippincott and outside investors and incorrectly
classified him as an independent contractor. AAA determined the matter would be
administered in accordance with the AAA commercial arbitration rules, the substantive
law of the claims at issue would apply, and discovery would be completed in accordance
with the Federal Rules of Civil Procedure.
AAA administratively closed the matter after defendants did not pay the
arbitration filing fee despite multiple payment reminders. Hassibi represented that
Joinedapp had obtained different counsel but did not pay the filing fees after asking for
an extension. Lippincott elected to pay the filing fees to begin the arbitration.
Defendants changed legal counsel two more times the following month.
The arbitration proceeded, but defendants’ counsel eventually withdrew due to
defendants’ nonpayment of bills. The arbitrator suspended the matter because defendants
2
did not pay the arbitration fees. Hassibi informed the arbitrator that he was working on
securing new funds and asked for a six-week extension that was not granted by
Lippincott. Due to defendants’ noncompliance with the payment request, the arbitrator
terminated the arbitration proceeding.
Lippincott sued defendants in superior court after the labor commissioner declined
to assert jurisdiction, alleging 21 causes of actions for securities law and labor law
violations, fraud and misrepresentation, and breach and default of arbitration. Lippincott
moved for attorney fees, costs, and interest associated with the abandoned arbitration
proceeding and requested monetary sanctions in the form of ongoing attorney fees, costs,
and interest incurred in the court case, both with a 2x lodestar multiplier. According to
Lippincott, he incurred the court costs only as a result of defendants’ breach of
nonpayment. (§§ 1281.98, subd. (c), 1281.99, subd. (a).) He pointed to Hassibi’s wealth
to argue that defendants defaulted on the arbitration strategically and asked that the trial
court enter default judgment against defendants, strike defendants’ pleadings and deny
their discovery requests, and hold defendants in contempt if they refused to promptly pay
the requested fees and sanctions. (§ 1281.99, subd. (b).)
Defendants argued that Lippincott lacked standing to bring the motion because he
was not an employee. They also asserted that Lippincott was not entitled to fees and
costs before sections 1281.98 and 1281.99 were enacted or before the breach of
nonpayment, and that Lippincott could only recover fees and costs that were reasonably
necessary to bring the sanctions motion. Defendants argued that Lippincott’s requested
fees and costs were unreasonable and that defendants’ efforts to move the case forward
rendered the request for discretionary sanctions inappropriate.
The trial court granted Lippincott’s motion for fees and costs associated with the
abandoned arbitration proceeding (§ 1281.98, subd. (c)(1)) and his request for monetary
sanctions consisting of expenses incurred as a result of defendants’ breach (§§ 1281.98,
subd. (c)(2), 1281.99, subd. (a)). The trial court determined Lippincott had standing to
bring the motion as an allegedly misclassified employee, defendants were liable for fees
and expenses incurred before the enactment of sections 1281.98 and 1281.99, and
3
Lippincott did not request any expenses incurred before the nonpayment under section
1281.99. According to the trial court, the fees and costs associated with the abandoned
arbitration proceeding were generally expected to be awarded (§ 1281.98, subd. (c)(1))
and monetary sanctions consisting of reasonable attorney fees and costs incurred as a
result of the material breach were mandatory (§ 1281.99, subd. (a)), but nonmonetary
sanctions were discretionary depending on whether the drafting party acted with
substantial justification or whether imposing nonmonetary sanctions would be unjust
(§ 1281.99, subd. (b)).
The trial court determined Lippincott should be awarded attorney fees for
preparatory work and work completed during the arbitration and that his counsel’s hours
and hourly rate were reasonable. But it reduced the requested fees by refusing to apply a
lodestar multiplier, and it awarded as sanctions only the fees and costs incurred as a result
of changing course from arbitration to litigation. Ultimately, the court awarded
Lippincott $244,095.73 in fees, costs, and interest related to the abandoned arbitration
proceeding under section 1281.98, subdivision (c)(1), and $12,000 in sanctions for fees
and costs incurred in bringing the current motion due to defendants’ material breach
under section 1281.99, subdivision (a). The trial court refused to impose terminating
sanctions under section 1281.99, subdivision (b), noting that defendants’ financial
circumstances appeared to be the primary driver of their failure to pay arbitration fees.
Defendants moved to vacate the order granting fees and sanctions or, on the
alternative, requested a rehearing. Defendants argued Lippincott’s motion was
procedurally improper because he both moved for attorney fees and brought a separate
cause of action to recover attorney fees, the trial court improperly adjudicated
Lippincott’s employee misclassification status by ignoring the arbitrator’s findings in the
underlying arbitration, Hassibi was not a drafting party to the arbitration agreement and
could not be liable for sanctions, and the fee award was excessive and not supported by
sufficient evidence. The trial court construed defendants’ motion to vacate as a motion
for reconsideration and denied the motion as presenting no new law or facts that could
not have been raised in the original briefing. (§ 1008, subd. (a).) (The court also
4
removed defendants’ simultaneous motion for new trial from the calendar as the case had
not yet gone to trial.) The trial court stated it had not yet made any rulings on the merits
or entered a final judgment and denied Lippincott’s request for additional fees and
sanctions for having to oppose the motion to vacate.
II. DISCUSSION
The California Arbitration Act (CAA) was enacted to safeguard the right of private
parties to resolve their disputes through the streamlined procedures of arbitration. (Gallo
v. Wood Ranch USA, Inc. (2022) 81 Cal.App.5th 621, 633 (Gallo), disapproved on other
grounds in Hohenshelt, supra, 18 Cal.5th at p. 349.)
Section 1281.98 assists consumers and employees who are required to submit a
dispute to arbitration and are stuck in “ ‘procedural limbo’ ” because the company
requiring arbitration has not paid the arbitration fees required to proceed. (Gallo, supra,
81 Cal.App.5th at p. 634.) Section 1281.98, subdivision (a)(1) states that the party who
drafts an employment agreement and does not pay arbitration fees within 30 days after
the due date during the pendency of an arbitration is in material breach of the arbitration
agreement, in default of the arbitration, and waives the right to compel the employee to
proceed with arbitration. (§ 1281.98, subd. (a)(1).) If an employer materially breaches
the agreement and is in default under that provision, the employee may unilaterally elect
to withdraw the claim from arbitration and litigate in court following the material breach.
(§ 1281.98, subd. (b)(1).) Alternatively, the employee may continue with the arbitration
if the arbitration provider agrees to continue administering the proceeding
notwithstanding the drafting party’s failure to pay fees or costs. (§ 1281.98, subd. (b)(2).)
The employee may also petition the court for an order compelling the drafting party to
pay all arbitration fees (§ 1281.98, subd. (b)(3)), or continue with arbitration by paying
the drafting party’s fees and recover them as part of an arbitration award without regard
to the ultimate decision on the merits. (§ 1281.98, subd. (b)(4).)
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If the employee proceeds to litigate in court, the employee may bring a motion or
separate action to recover all attorney fees, costs, and interest “associated with the
abandoned arbitration proceeding.” (§ 1281.98, subd. (c)(1).) The court must also
impose sanctions upon the employer in accordance with section 1281.99. (§ 1281.98,
subd. (c)(2).) Section 1281.99 mandates a monetary sanction against a drafting party that
materially breaches an arbitration agreement by ordering the drafting party to pay
“reasonable expenses,” including attorney fees and costs, incurred by the employee “as a
result of the material breach” (§ 1281.99, subd. (a)), and allows the court to impose
evidentiary, terminating, or contempt sanctions unless the court finds the drafting party
acted with substantial justification or imposition of the nonmonetary sanctions would be
unjust (§ 1281.99, subd. (b)).
A. THE TRIAL COURT MUST DETERMINE WHETHER DEFENDANTS’ NONPAYMENT
MAY BE EXCUSED UNDER SECTION 1281.98
The CAA’s procedural rules apply by default to cases brought in California courts
unless the parties expressly agree the Federal Arbitration Act’s (FAA) procedural rules
apply or the CAA is preempted. (Quach v. California Commerce Club, Inc. (2024)
16 Cal.5th 562, 582.) Although the parties agree that sections 1281.98 and 1281.99
apply, defendants argue for the first time on appeal that they are not required to pay
attorney fees and costs related to the abandoned arbitration proceeding because
section 1281.98 is preempted by the FAA.1 We exercise our discretion to consider the
1
Defendants also argue for the first time on appeal that section 1281.97 is
preempted by the FAA. Section 1281.97 is identical to section 1281.98 but applies when
arbitration has not yet begun. (Compare § 1281.97, subd. (a)(1) with § 1281.98,
subd. (a)(1)). As defendants concede, courts analyze and apply sections 1281.97 and
1281.98 similarly. (Williams v. West Coast Hospitals, Inc. (2022) 86 Cal.App.5th 1054,
1066, disapproved on other grounds in Hohenshelt, supra, 18 Cal.5th at p. 349.) We will
not address defendants’ contention because Lippincott did not request nor did the trial
court award fees or sanctions under section 1281.97.
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issue of preemption, which we review de novo. (People v. Venice Suites, LLC (2021)
71 Cal.App.5th 715, 724; Gallo, supra, 81 Cal.App.5th at p. 633.)
While the appeal was pending, the California Supreme Court held
section 1281.98’s provision that drafting parties waive their right to arbitrate if they do
not timely to pay arbitration fees is not preempted by the FAA because the provision only
applies if nonpayment was willful. (Hohenshelt, supra, 18 Cal.5th at pp. 322–323.) In
Hohenshelt, an employee sought to withdraw from arbitration after the employer did not
timely pay arbitration fees; the employer argued that defense counsel was preparing to go
out on paternity leave and was unaware of the invoices due to an earlier notice stating the
arbitrator was unavailable. (Id. at pp. 324–325.) Construing section 1281.98 in the
context of other statutes, the Court determined the Legislature was concerned about
“willful, grossly negligent, or fraudulent” nonpayment of arbitration fees and intended to
deter employers from engaging in strategic nonpayment of fees. (Hohenshelt, at pp. 323,
346.) The Legislature did not intend 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. (Id. at pp. 323, 337.)
The Supreme Court concluded that section 1281.98 is not preempted by the FAA
because the provision renders arbitration agreements enforceable on the same grounds
that apply to other contracts. (Hohenshelt, supra, 18 Cal.5th at pp. 327, 344, 346.) If a
drafting party willfully withholds fees needed to proceed with arbitration, the other
party’s duty to arbitrate is discharged, but if the drafting party acts in good faith, its
arbitral rights are not automatically discharged and the situation is evaluated under usual
contract principles governing relief from default, including whether the other party has
been prejudiced. (Id. at pp. 344, 346.) The Supreme Court directed the Court of Appeal
“to remand the matter to the trial court for consideration of whether [the employer] may
be excused for its failure to timely pay arbitration fees, such that the stay of litigation
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should not be lifted and the parties should be returned to arbitration, and whether the
delay resulted in compensable harm to [the employee].” (Id. at p. 349.)
While Hohenshelt considered whether a drafting party forfeited its arbitral rights
under section 1281.98, subdivision (a), awarding attorney fees and costs associated with
the arbitration proceeding under section 1281, subdivision (c)(1) “is premised on a
finding that the drafting part[y] has ‘abandoned’ the arbitration, that is, has forfeited its
arbitral rights.” (Wilson v. Tap Worldwide, LLC (2025) 114 Cal.App.5th 1077, 1088
(Wilson).) Here, the trial court followed pre-Hohenshelt case law and strictly applied
section 1281.98. Similar to Hohenshelt, the trial court made no findings on whether
defendants’ nonpayment was excusable such that they could avoid forfeiture of
arbitration under section 1281.98. (Hohenshelt, supra, 18 Cal.5th at p. 349.) Lippincott
included information below discussing the value of Hassibi’s property, defendants’ ability
to pay their own counsel, Joindapp’s payroll, a PPP loan, and assurances on Joinedapp’s
website that it was well funded, and argued nonpayment was a strategic choice. The trial
court considered defendants’ financial situation only when finding that terminating
sanctions under section 1281.99, subdivision (b) would be unjust and contrary to public
policy that favors a decision on the merits. The court noted defendants’ “financial
situation … appeared to be the primary driver of their failure to pay arbitration fees” and
defendant Joinedapp displayed all indicators of a company in financial trouble when
arbitration fees were due “in light of its multiple changes of counsel, lack of counsel for a
period of time, and inability to pay the arbitration fees.” In a footnote, the court wrote
that Lippincott presented “speculative evidence regarding defendant Hassibi’s financial
circumstances (based on the alleged value of Hassibi’s home and the alleged value of his
car). Without any more concrete information about Hassibi’s actual finances, including
any debt information, the court finds this information to be of limited value, at best, and
accords it zero weight.”
8
Because the trial court did not have the benefit of Hohenshelt, we will remand to
the trial court to determine in the first instance whether defendants’ nonpayment should
be excused as an inadvertent mistake or excusable neglect. (Hohenshelt, supra,
18 Cal.5th at p. 323.) Lippincott contends on appeal that after he moved for sanctions
below, he learned that defendant Joinedapp had hundreds of thousands of dollars in its
bank account when refusing to pay the arbitration fees despite asserting lack of funds
below.2 The trial court’s inquiry will require the trial court to scrutinize defendants’
reasons for nonpayment, which it may not be able to do on the present record without
further discovery.
We granted defendants’ request that the parties be permitted to provide
supplemental briefing on Wilson, supra, 114 Cal.App.5th 1077, a case that interpreted
Hohenshelt. Defendants argue Wilson supports their arguments concerning the
appropriate amount of attorney fees and costs under section 1281.98, subdivision (c)(1).
In Wilson, the employer-initiated payment for an arbitration proceeding on the last day it
was due, but the payment was not processed until the following Monday. (Wilson, at
p. 1082.) The trial court strictly applied section 1281.98 and granted the employee’s
motion to vacate arbitration and awarded the employee attorney fees and costs under
section 1281.98, subdivision (c)(1) and sanctions under section 1281.99, subdivision (a).
(Wilson, at p. 1083.) The Wilson court reversed the order awarding attorney fees and
costs and concluded remand was not necessary because the uncontested factual findings
2
Lippincott requests in his reply brief that we admit Joinedapp’s bank records as
evidence. We deny the request, which is not supported by a motion (Cal. Rules of Court,
rule 8.252(a)), noting also that we may not take judicial notice of the truth of the records’
contents even if the records are judicially noticeable. (Heritage Pacific Financial, LLC v.
Monroy (2013) 215 Cal.App.4th 972, 987–988.) As for defendants’ contention that
Lippincott should be sanctioned for introducing confidential records, the issue is forfeited
because it is not supported by argument. (Cal. Rules of Court, rule 8.204(a)(1)(B); Tellez
v. Rich Voss Trucking, Inc. (2015) 240 Cal.App.4th 1052, 1066.)
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by the trial court established the employer’s untimely payment was not willful, grossly
negligent, or fraudulent. (Id. at pp. 1088–1091.)
Unlike Wilson, defendants here did not initiate payment for arbitration fees at any
point, and the trial court did not make factual findings regarding whether nonpayment
was willful or fraudulent. We cannot make a finding concerning the nature of
nonpayment on the record before us. The proper disposition is to allow the trial court to
determine in the first instance whether defendants’ nonpayment should be excused under
section 1281.98. (See Hohenshelt, supra, 18 Cal.5th at p. 349.)
B. THE TRIAL COURT MUST REDETERMINE THE APPROPRIATE AMOUNT OF
MONETARY SANCTIONS UNDER SECTION 1281.99
The drafting party of an arbitration agreement is subject to mandatory monetary
sanctions under section 1281.99 if it materially breaches the arbitration agreement
through nonpayment of arbitration fees. (§ 1281.99, subd. (a).) The court must also
impose sanctions on the drafting party in accordance with section 1281.99 if an employee
withdraws from arbitration and proceeds in court after the drafting party’s material
breach. (§ 1281.98, subd. (c)(2).) Section 1281.99’s mandatory sanction provision
requires an employer to pay “reasonable expenses, including attorney’s fees and costs,
incurred by the employee … as a result of the material breach.” (§ 1281.99, subd. (a).)
Section 1281.99 permits compensatory damages resulting from material breach
“[c]onsistent with general contract law” (Hohenshelt, supra, 18 Cal.5th at pp. 333, 339–
340), avoiding preemption by the FAA.
We invited supplemental briefing on the propriety and scope of sanctions under
section 1281.98, subdivision (c)(2) and section 1281.99, subdivision (a). Defendants
acknowledge that unlike fees and costs associated with the abandoned arbitration
proceeding which may be awarded under section 1281.98, subdivision (c)(1) only if
nonpayment was inexcusable, monetary sanctions under section 1281.99 are owed
regardless of whether nonpayment was willful. (Hohenshelt, supra, 18 Cal.5th at
10
pp. 339–340; Wilson, supra, 114 Cal.App.5th at p. 1090.) The parties fundamentally
disagree on the scope of sanctions that must be awarded under section 1281.99,
subdivision (a).
In the trial court, Lippincott sought as sanctions the fees and costs incurred in the
trial court case, including attorney fees, costs, and interest, all with a 2x multiplier. He
also sought ongoing payments of those expenses on monthly basis. The trial court found
Lippincott’s interpretation of section 1281.99 overbroad and found that Lippincott was
entitled to fees and costs that may have been incurred “as a result of having had to
transition from arbitration to litigation, including any fees and costs associated with
bringing this motion for sanctions.” The trial court ultimately limited the lodestar to 15
hours of attorney time associated with the sanctions motion and awarded Lippincott
$12,000 in attorney fees as sanctions, leaving open the possibility of Lippincott bringing
a separate motion making a more specific showing of fees and costs “clearly and
unmistak[]ably … [incurred as] a direct result of Defendants’ failure to maintain the
arbitration.” Lippincott argues the trial court interpreted the scope of section 1281.99,
subdivision (a) too narrowly because the “as a result of” suggests but-for causation that
entitles him to attorney fees and costs associated with the court case. Defendants contend
Lippincott is entitled to only those fees and costs incurred due to the employer’s material
breach of nonpayment, such as those incurred to investigate the breach and bring a
sanctions motion.
The scope of expenses authorized under section 1281.99 is a question of statutory
interpretation, which we review de novo. (People v. Gonzalez (2017) 2 Cal.5th 1138,
1141.) “As in any case involving statutory interpretation, our fundamental task here is to
determine the Legislature’s intent so as to effectuate the law’s purpose.” (People v.
Murphy (2001) 25 Cal.4th 136, 142.) We first examine the statute’s words and give them
a plain and commonsense meaning. (Ibid.) We “consider the language of the entire
scheme and related statutes, harmonizing the terms when possible.” (Riverside County
11
Sheriff’s Dept. v. Stiglitz (2014) 60 Cal.4th 624, 632.) If statutory language is susceptible
of more than one reasonable interpretation, we “ ‘look to a variety of extrinsic aids,
including the ostensible objects to be achieved, the evils to be remedied, the legislative
history, public policy, contemporaneous administrative construction, and the statutory
scheme of which the statute is a part.’ ” (In re M.M. (2012) 54 Cal.4th 530, 536 (In re
M.M.).)
Section 1281.99, subdivision (a) states that a court must impose monetary
sanctions against an employer who materially breaches an arbitration agreement through
nonpayment by ordering the employer to pay “reasonable expenses, including attorney’s
fees and costs, incurred by the employee or consumer as a result of the material breach.”
(§ 1281.99, subd. (a).) The “reasonable expenses” language of section 1281.99 is
narrower than section 1281.98, subdivision (c)(1), which allows an employee to recover
“all attorney’s fees and all costs” associated with an abandoned arbitration proceeding.
(In re M.M., supra, 54 Cal.4th at p. 536.) Section 1281.99 does not define “as a result of
the material breach.” (§ 1281.99, subd. (a).) The Supreme Court recently stated that
section 1281.99 serves “to make the [nonbreaching] party whole” after nonpayment of
arbitration fees. (Hohenshelt, supra, 18 Cal.5th at pp. 339–340.)
Because section 1281.99 functions as a mechanism to make a party whole due to
an employer’s nonpayment of arbitration fees, the provision requires awarding more than
merely the attorney fees and costs incurred to bring the sanctions motion. (Cf. Sino
Century Development Limited v. Farley (2012) 211 Cal.App.4th 688, 698 [California
Rule of Court, rule 2.30 was not intended to fully compensate an aggrieved party and
authorizes a court to award as sanctions only reasonable attorney fees incurred in
connection with a motion for sanctions and the order to show cause].) The awarded
sanctions must consist of actual sustained expenses that would not have been incurred
but-for the breach, placing Lippincott in the same position he would have been in if the
breach did not occur. (Morgado v. City and County of San Francisco (2020)
12
53 Cal.App.5th 1216, 1220.) Those expenses include the attorney fees and costs incurred
directly due to the breach itself, such as fees and costs related to documenting and
establishing the breach, preparing the motion triggered by the breach, and directing the
matter to the trial court.
Limiting sanctions to expenses incurred from the breach as described ante aligns
with the statutory scheme. An employer that does not pay arbitration fees is subject to
various consequences. (Hohenshelt, supra, 18 Cal.5th at p. 339.) The employer waives
its right to arbitration and the employee may proceed in court and recover attorney fees
and costs associated with the abandoned arbitration under section 1281.98,
subdivision (c)(1) only if the employer’s nonpayment was willful. (Hohenshelt, at
pp. 344, 346.) The employee, however, is entitled to expenses incurred due to the
nonpayment under section 1281.99, subdivision (a) regardless of the reason for
nonpayment (Hohenshelt, at pp. 339–340) and regardless of whether the employee
proceeds in court thereafter. (See § 1281.98, subd. (c)(2).) To make an employee whole
yet avoid a windfall in either circumstance, sanctions under section 1281.99,
subdivision (a) must be limited to expenses related to the breach of nonpayment, such as
fees and costs for documenting and establishing the breach, preparing the sanctions
motion and, where relevant, directing the matter to the trial court.
Lippincott argues he would be made whole only if he recovers all expenses
associated with the court case because he would have avoided the court case altogether if
the breach of nonpayment had not occurred. But Lippincott was not required to file in
court after defendants’ nonpayment. He could have continued with the arbitration despite
nonpayment if the arbitrator agreed under section 1281.98, subdivision (b)(2), or paid the
fees himself and recovered them as part of the arbitration award under section 1281.98,
subdivision (b)(4). Section 1281.99 does not function to incentivize plaintiffs to file in
court. The trial court is better positioned to assess the value of services rendered in a
particular action and has broad discretion to determine the amount of attorney fees to
13
award. (Pasternack v. McCullough (2021) 65 Cal.App.5th 1050, 1057.) We will remand
for the trial court to determine the amount of attorney fees and costs that will make
Lippincott whole as a result of defendants’ nonpayment. (Cornerstone Realty Advisors,
LLC v. Summit Healthcare REIT, Inc. (2020) 56 Cal.App.5th 771, 791.)
Given our reversal and remand to the trial court to determine whether defendants’
nonpayment may be excused and to determine the appropriate amount of sanctions under
section 1281.99, we do not reach the parties’ challenges to the reasonableness of either
award. On remand, the trial court must ensure any award for attorney fees and costs
under section 1281.98 does not include the hours awarded as sanctions under section
1281.99 for the same legal services. (Jackson v. Yarbray (2009) 179 Cal.App.4th 75, 98.)
As to defendants’ argument first raised in their motion for reconsideration concerning the
propriety of the order against Hassibi, the trial court did not abuse its discretion by
denying reconsideration based on a failure to explain why the issue could not have been
raised earlier. (New York Times Co. v. Superior Court (2005) 135 Cal.App.4th 206, 212.)
III. DISPOSITION
The order awarding attorney fees and costs and ordering sanctions against
defendants under sections 1281.98 and 1281.99 is reversed. The matter is remanded to
the trial court to determine: (1) whether defendants’ nonpayment resulted from a good
faith mistake, inadvertence, or other excusable neglect such that they have not abandoned
the arbitration proceeding under section 1281.98, subdivision (c)(1); and (2) the
reasonable amount of sanctions under section 1281.99, subdivision (a) for expenses
Lippincott incurred as a result of the nonpayment. The amount of section 1281.99
sanctions may include attorney fees and costs related to documenting and establishing the
breach, preparing the sanctions motion, and transitioning the matter to the trial court.
Each party shall bear its own costs on appeal. (Cal. Rules of Court, rule 8.278(a)(5).)
14
____________________________________
Grover, Acting P. J.
WE CONCUR:
____________________________
Lie, J.
____________________________
Wilson, J.
H051829
Lippincott v Hassibi et al.
