California SB 707

[Pericles]

California SB 707 goes into effect on January 1, 2020.

SB 707 provides that any drafting party, as defined, that fails to pay arbitration fees and costs in employment or consumer disputes is subject to some fairly significant ramifications.

“Drafting party” means the company or business that included a predispute arbitration provision in a contract with a consumer or employee. The term includes any third party relying upon, or otherwise subject to the arbitration provision, other than the employee or consumer.

SB 707 provides that any drafting party that fails to pay the fees necessary to commence or continue arbitration within 30 days after such fees are due is held to have materially breached the agreement and is in default.

SB 707 imposes mandatory monetary sanctions on any drafting party found to be in default of an arbitration agreement for this failure. It further permits the court or arbitrator to impose additional evidentiary, terminating, or contempt sanctions. These include an “evidence sanction” that prohibits the drafting party from conducting discovery, and a “terminating sanction” that strikes out pleadings by the drafting party or issues a default judgment against the drafting party.