We've all heard the saying: "The check is in the mail." Which, as a trope, generally means: "I have not, in fact, paid you yet, and the check is not actually in the mail."
But what if the check is, in fact, in the mail? Have you been paid yet?
The Court of Appeal today says: "No."
It's in the context here of a pretty substantial fubar by the company and, presumably, its lawyers. The company (Na Hoku) gets sued in San Francisco for sexual harassment, moves to compel arbitration, and prevails. So now the company is in arbitration. It pays its initial AAA arbitration fees, but six months later, on September 1, the AAA sends it a bill for the arbitrator's fees ($22,500). The AAA tells the company it can pay those fees online (via credit card, echeck or online) or via a physical check, but either way, the fees are due on September 1 (the day of the letter), and have got to be received within 30 days to avoid dismissal of the arbitration. The AAA also tells the company: You've got to pay the bill within 30 days, and we can't give you an extension, since the CCP expressly says you've only got 30 days to pay before the arbitration gets bounced and the plaintiff can refile in court.
So if you were the company (or lawyer), you'd make sure to pretty quickly pay, right? Maybe on September 2 (that Friday), maybe the next week, or whatever. Definitely sometime that month -- i.e., within the 30 days deadline -- right?
The company kind of did that. It paid in September, before the 30 day deadline. But only if by "paid" one means "sent a check." Did it write a check within 30 days? Yes. Did it put it in the mail within 30 days? Yes. On September 30, that's exactly what it did.
But the AAA didn't receive the check until October 5, which everyone admits is over 30 days past the September 1 due date stated in the letter.
At which point plaintiff says: "Now I get to sue, since you didn't pay within 30 days." The trial court says: "Nope. The company paid by sending the check within 30 days, so you can't sue." Plaintiff files a writ and the Court of Appeal reverses.
"Paid" within 30 days means actually paid. Simply putting a check in the mail during that period doesn't count. So holds the Court of Appeal.
Which is, in truth, a fairly straightforward and common sense interpretation of how we generally do things. We all routinely pay credit card bills, for example. If your payment is due on the 10th, it's not enough to say (or even prove) that you put a check in the mail on that day. What matters is when the check is received. If it's not received until after the 10th, you didn't pay on time. Sorry.
Ditto for arbitration fees.
It's also a mistake that's easily avoided. Why wait until the very last day to pay the bill here? You know it's a statutory deadline, and you also know there are severe consequences for missing it. Just pay it. On time. With time to spare, even. It's like lawyers who deliberately wait until the very last day before the statute of limitations expires before filing suit. As I routinely tell my students, unless there's a darn good reason, don't do that. Just file a week early. It avoids so much potential trouble. Why take the risk?
So too the lesson from today's opinion. When you get a bill for arbitration fees, pay it. Pronto. And go ahead and either pay it online or send in the check with plenty of time to spare.
Why take the risk doing anything else?
One final thing. Even though I'm on board with the result (and resulting rule) here, can I respectfully suggest to Justice Petrou that she remove the citation and quote from Navrides v. Zurich Ins. Co. on page 16 of the opinion? That portion of the opinion reads: "Our construction and rejection of real parties’ interpretation is also in line with the general principle that the depositing a check in the mail does not constitute payment. See Navrides v. Zurich Ins. Co. (1971) 5 Cal.3d 698, 706 [“the mere giving of a check payable to the agent does not constitute payment”]. . . ."
Yes, that quote exists in Navrides, but it doesn't actually stand for the proposition for which Justice Petrou cites it. The holding in Navrides was about agency principles, which is why the quote says that giving a check "payable to the agent" does not necessarily constitute payment. The check in that case was made payable to two people (a lawyer and client), and the question there was whether that check constituted payment to the one person (the client) who was owed money. Whereas in the current case, there's no agency question, and the check was clearly written to the correct person.
Plus, even if the quote meant to hold what Justice Petrou suggests -- and, again, I'm fine with the truth of the general principle, and the other cases she cites for the point do indeed say precisely that -- it's at least a bit deceptive to omit the next two sentences from the Navrides quote, which make clear that the giving of a check does constitute payment if it is cashed. (Which matters, because, here, the AAA did indeed cash the check.) So, yes, the California Supreme Court did indeed utter the line in Navrides that "the mere giving of a check payable to the agent does not constitute payment," but after the very next sentence, also said "But once the check is paid, the payment of the underlying debt which was theretofore conditional becomes absolute and relates back to the date of the delivery of the check." (emphasis added). You see how the omitted "relation back" stuff totally matters here, whereas the "agency" stuff (from the quote) really doesn't.
So I'd take that citation out. Doesn't add much, and purports to stands for a proposition that's not true. If you hand a person a check on the 10th, it counts as paying them on the 10th, even if they only cash the check (and get the money) on the 13th. So saying, without elaboration, that “the mere giving of a check payable to the agent does not constitute payment” isn't really responsive to what we're talking about in the present case, and might well be misinterpreted (or, worse, relied upon in future cases).
