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Law Finance Group

On Behalf of | Jul 6, 2023 | Firm News

In Law Finance Group, LLC v. Key, — P.3d —, 2023 WL 4168752 (2023), the Supreme Court reversed and remanded the lower courts’ decisions, and instead held that the deadline under § 1288.2 for seeking vacatur of an arbitral award is a non-jurisdictional statute of limitations that is subject to equitable tolling and equitable estoppel.

In this case, Sarah Plott Key (“Key”) was engaged in litigation against her sister, Elizbeth Plott Tyler (“Tyler”), over the distribution of the Plott Family Trust. Having run out of money to pay her litigation expenses on the eve of the trial, Key turned to Law Finance Group (“Lender”) to fund her litigation expenses with a loan contract (“Agreement”). When Key prevailed in the probate action against Tyler, Key repaid Lender the principal of the loan, but refused to pay any of the accrued interest or fees, claiming that their Agreement was unlawful under California Financing Law (Financial Code (“FC”), § 22000, which restricts the interest and fees that can be charged on “consumer loans”). Lender submitted the dispute to arbitration, and the arbitration panel concluded that the Agreement was generally enforceable, but the interest and fee provisions violated California’s financing law; thus, the arbitration panel awarded Lender a “fair” computation of damages and attorney’s fees, and required Key to cover the forum’s administrative expenses. When Lender subsequently filed a petition in Superior Court to confirm the award, Key’s attorney informed Lender that Key planned to file a petition to vacate the award in addition to her opposition to Lender’s petition to confirm.

Key’s attorney and Lender mutually agreed that under California Code of Civil Procedure (“CCP”) § 1290.6, the statute of limitations to file a response is 100 days from the petition filing date; Lender agreed to stipulate to an extension of Key’s response deadline. Then, 130 days after service of the arbitral award, Key filed her petition to vacate the award, and 139 days after service, Key filed her response to Lender’s petition to confirm.

Key argued that the arbitration panel exceeded its authority by enforcing a modified version of the Agreement despite concluding that Lender had attempted to charge unlawful interest and fees. Further, she argued that, rather than reforming the Agreement, the arbitration panel should have declared the loan void under FC § 22750(a) and barred Lender from collecting any recompense in connection with the transaction.

In response, Lender argued that Key’s request to vacate was untimely, because her petition to vacate and her response to Lender’s confirmation petition weren’t filed within 100 days after services of the final award as required under CCP § 1288 and CCP § 1288.2 respectively.

The Trial Court denied Key’s petition to vacate as untimely under CCP § 1288, but held that Key’s response to Lender’s petition was timely under CCP § 1290.6, due to Key and Lenders’ mutual agreement to a joint briefing schedule. The Trial Court agreed with Key that the arbitrators violated Key’s statutory rights by refusing to void the Agreement under FC § 22750, and vacated the award.

The Court of Appeals reversed the Trial Court’s judgement, holding that the response requesting vacatur was untimely under CCP § 1288.2 (which imposes a 100-day deadline for a response to a petition to confirm when the response request that the award be vacated). The Court of Appeals held that the 100-day deadline was jurisdictional, and that the parties therefore lacked the power to extend by stipulation. The Appellate Court further rejected Key’s argument that she was entitled to challenge the arbitration award regardless of whether she filed a timely request to vacate, because the Agreement was an illegal contract that courts may not enforce.

The Supreme Court reversed and remanded the Appellate Court’s decision, holding that the deadline imposed by CCP § 1288.2 for seeking vacatur of an arbitral award is a non-jurisdictional statute of limitations that is subject to equitable tolling and equitable estoppel. Having established that Key’s vacatur requests were filed outside the applicable statutory period, the focus was whether the deadline under CCP § 1288.2 is non-jurisdictional such that the court has the authority to adjust it for equitable reasons. The Supreme Court held that “absent clearer evidence of legislative intent, we presume that the Legislature did not intend to limit the fundamental jurisdiction of the courts by enacting the 100-day deadline to challenge an arbitral award under section 1288.2.” The Court elaborated that the danger that results from limiting fundamental jurisdiction is courts having no choice but to dismiss cases for lack of jurisdiction whenever a party fails to comply with a jurisdictional time bar, even if equitable concerns would support a different result. The Supreme Court asked that the Court of Appeals determine whether equitable considerations should excuse Key’s failure to comply with the statutory deadline.