Hundreds of Arbitration Demands and a Fee Invoice: What Happens if a California Business Does Not Pay

Last updated: November 2026. Reviewed by Pavel Kolmogorov, California business litigation attorney (State Bar No. 321018).

If the business that wrote the arbitration clause does not pay the fees to start a consumer arbitration within 30 days after the due date, Code of Civil Procedure section 1281.97 treats that as a material breach. The business waives its right to compel arbitration, the claimant may go to court, and the court must award the claimant's reasonable expenses. In 2025 the California Supreme Court read the companion section to excuse some good faith late payments, but not willful ones. Kolmogorov Law, P.C. defends California businesses in these disputes.

Call (909) 235-6116 or contact us online to discuss a set of arbitration demands and the fee deadline that came with them.

How a company's own clause becomes the problem

A consumer contract requires individual arbitration and bars class actions. Then several hundred customers, represented by the same lawyers, each file a separate demand. Where the clause, the law, or the arbitration provider's rules place fees on the business, the invoices arrive together.

The statutes speak of a "drafting party." That is the company or business that included a predispute arbitration provision in a contract with a consumer or employee. A consumer is an individual who seeks, uses, or acquires goods or services for personal, family, or household purposes. (Code Civ. Proc., § 1280, subds. (c), (e).) The same sections govern employment arbitrations, which this page does not address.

The 30-day rule for fees to start the arbitration

If the fees or costs to initiate the arbitration are not paid within 30 days after the due date, the drafting party is in material breach of the arbitration agreement and in default of the arbitration. It also waives its right to compel arbitration. (Code Civ. Proc., § 1281.97, subd. (a)(1).)

Once the consumer meets the filing requirements, the provider must immediately send an invoice to all parties, stating the full amount owed and the date payment is due. Unless the arbitration agreement states a number of days for payment, the invoice is issued as due upon receipt. (Code Civ. Proc., § 1281.97, subd. (a)(2).)

This section contains no provision for extending the due date, unlike the section on later fees described below.

What a claimant can do after a missed payment

The consumer has two choices. One is to withdraw the claim from arbitration and proceed in court. The other is to compel arbitration, with the drafting party paying reasonable attorney's fees and costs related to the arbitration. (Code Civ. Proc., § 1281.97, subd. (b).)

If the consumer goes to court, the statute of limitations is tolled from the first filing in any forum, and the court must impose sanctions. (Code Civ. Proc., § 1281.97, subds. (c), (d).) The monetary sanction is mandatory: the reasonable expenses, including attorney's fees and costs, that the consumer incurred as a result of the breach. The court may add an order barring the business from conducting discovery, an order striking its pleadings, a default judgment, or contempt. Those further sanctions do not apply if the court finds substantial justification or that the sanction would be unjust. (Code Civ. Proc., § 1281.99.)

Fees that come due later: section 1281.98

The same 30-day rule applies to fees required to continue an arbitration already under way. Here the statute does allow an extension of the due date, but only if all parties agree. The provider must also give every party a document showing the date the invoice was paid. (Code Civ. Proc., § 1281.98, subd. (a).)

After a default at this stage the consumer has four options. The consumer may withdraw to court, continue if the provider agrees, or petition the court for an order compelling payment. The fourth is to pay the fees and recover them in the award regardless of the merits. (Code Civ. Proc., § 1281.98, subd. (b).)

What the California Supreme Court changed in 2025

Before August 2025, Courts of Appeal read these sections as an inflexible rule, under which a late payment ended the right to arbitrate whatever the reason. The Supreme Court rejected that reading of section 1281.98. It held that the section, properly construed, is not preempted by the Federal Arbitration Act. It also held that the section does not displace the general California rule that nonperformance forfeits a contract right only when it is willful, grossly negligent, or fraudulent. (Hohenshelt v. Superior Court (2025) 18 Cal.5th 310.)

Under that decision, a business whose late payment was a good faith mistake or excusable neglect may ask the court for relief from forfeiture. It must still compensate the consumer for the losses the delay caused. The court described the Legislature's target as strategic nonpayment.

Two limits matter in a mass filing. The holding is stated for section 1281.98, which governs later fees. The court did not rule separately on section 1281.97, although it disapproved, to the extent inconsistent, an earlier decision that had read that section just as strictly. And a deliberate decision not to pay several hundred invoices is hard to describe as a mistake.

A later Court of Appeal decision, in an employment arbitration, shows the kind of facts that qualify. The employer had started its payment on the deadline, and a processing delay caused it to arrive three days late. The court reversed an award of fees and costs against it. (Wilson v. TAP Worldwide, LLC (2025) 114 Cal.App.5th 1077.)

Options when the invoices arrive

Calendar 30 days from each due date and treat the date as fixed.
Keep proof of when each payment was sent and received.
Raise defects in the demands with the provider promptly. Nothing in the sections discussed here says an objection suspends the deadline.
Test whether each claimant is a customer who agreed to the terms. See our clickwrap and browsewrap page.
For later fees, get any extension in writing from every party. Section 1281.97 provides for none.

Letting the arbitrations lapse in order to defend one case in court gives up the clause and invites sanctions. It may also lead to the proceeding described on our page about a business named in a class action. Our comparison of arbitration and litigation covers the trade-offs, and our page on the motion to compel arbitration explains how a clause is enforced.

What to bring to the first meeting

The demands and every invoice from the arbitration provider, with dates of receipt.
The customer terms in force for each claimant, including the arbitration clause.
Records showing whether each claimant was a customer.

Frequently asked questions

A law firm filed 400 arbitration demands against us and the fees are due in 30 days. What happens if we do not pay?

California Code of Civil Procedure section 1281.97 applies. A business that drafted a consumer arbitration clause and does not pay the initiation fees within 30 days after the due date is in material breach and waives its right to compel arbitration. Each claimant may then sue in court or compel arbitration at the business's expense. The court must award the claimant's reasonable expenses, including attorney's fees. The 2025 California Supreme Court decision on late payments does not excuse a deliberate refusal to pay.

What is CCP 1281.97?

It is the California statute that sets a payment deadline for the fees needed to start a consumer or employment arbitration. If the business that put the arbitration clause in the contract does not pay within 30 days after the due date, it is in material breach, is in default of the arbitration, and waives its right to compel arbitration. Section 1281.98 applies a parallel rule to later fees, and in 2025 the California Supreme Court read that section to allow relief for some good faith late payments.

Is CCP 1281.98 preempted by the Federal Arbitration Act?

No, according to the California Supreme Court. In Hohenshelt v. Superior Court, decided in August 2025, the court held that section 1281.98 is not preempted when it is read together with general California rules that allow relief from forfeiture. On that reading, a late payment forfeits the right to arbitrate only if it was willful, grossly negligent, or fraudulent. Its holding is stated for section 1281.98 and not for section 1281.97.

Our payment to the arbitration provider arrived two days late because of a bank error. Have we lost the right to arbitrate?

Not necessarily. Since the California Supreme Court's 2025 decision, a business whose late payment came from a good faith mistake or excusable neglect may seek relief from forfeiture. The payment must not have been withheld willfully, fraudulently, or through gross negligence, and the business must compensate the consumer for losses the delay caused. That decision concerned fees under section 1281.98, so initiation fees need separate analysis.

Can the arbitration provider extend the fee deadline?

Not on its own. For fees due during a California consumer arbitration, section 1281.98 says any extension of the due date must be agreed upon by all parties. Section 1281.97, which governs the fees to start the arbitration, contains no extension provision. An informal assurance is not a safe basis for paying late.

Talk to a California business litigation attorney

If your business is facing a mass arbitration filing or a dispute over arbitration fees, call (909) 235-6116 or contact us online before the payment date. Kolmogorov Law, P.C. is located in Irvine, California.

This page provides general information about California and federal law and is not legal advice. Outcomes depend on the arbitration agreement, the facts, and the court.