Thursday, February 15, 2007
Arbitration Agreement Between Lawyer, Client Upheld
Failure to Invoke Statutory Right to Non-Binding Arbitration Was Waiver, Court Says
By a MetNews Staff Writer
A client who signed a pre-dispute binding arbitration agreement with a law firm waived any objection to the enforcement of the agreement when he failed to request non-binding arbitration under the mandatory fee arbitration statute, the Court of Appeal for this district ruled yesterday.
Reversing a contrary ruling by Los Angeles Superior Court Judge Judith C. Chirlin, Div. Seven said Steven H. Kassel must submit to binding arbitration of his fee dispute with the firm of Ervin, Cohen & Jessup. Kassel is a tax professional who retained the law firm in 2002 to represent him in litigation over a dispute with a competitor.
A fee dispute resulted, and the firm served him with a notice of his right to non-binding arbitration in January 2004. He was served by certified mail and did not respond prior to being sued in December 2005.
In its complaint, the firm alleged that the defendant was given notice of his statutory right to non-binding arbitration, that he did not exercise that right, and that he had entered into a retainer agreement requiring that any dispute between the parties be resolved through binding arbitration.
The firm subsequently sought a right-to-attach order, asserting that Kassel was insolvent. In its application, the firm said it was not waiving its right to binding arbitration of its underlying claim.
While that application was pending, the firm moved to compel arbitration of the fee dispute before the American Arbitration Association as set forth in the retainer agreement. In opposing the motion, Kassel asserted, among other things, that binding pre-dispute arbitration agreements violate the fee arbitration law, which gives the client the option of non-binding arbitration as an alternative to litigation of the fee dispute.
Chirlin ruled that the arbitration provision in the retainer agreement was unenforceable under Business and Professions Code Sec. 6204(a), which says the parties may agree to binding arbitration of a fee dispute “at any time after the dispute...has arisen.,” and that in the absence of such an agreement, either party may request trial de novo within 30 days of the arbitration award.
But Justice Earl Johnson Jr., writing for the Court of Appeal, noted that the statute applies by its terms only to an “award of arbitrators appointed pursuant to” the mandatory fee arbitration statute. By not exercising his right to non-binding arbitration within the time provided by that law, Kassel waived his right to block enforcement of his pre-dispute arbitration agreement, which is outside the scope of the statute, Johnson said.
In an unpublished portion of the opinion, Johnson said the law firm did not waive its right to arbitration by failing to file an application for a stay of the court proceedings at the same time it filed its application for a right-to- attach order.
The California Arbitration Law, the justice noted, expressly provides that a party does not waive its right to arbitration by seeking a provisional remedy. There is no requirement that the party move to stay proceedings at the time it seeks that remedy where, as in this case, there is no motion to compel arbitration pending, Johnson said.
Attorneys on appeal were James E. Adler and Roy A. Levun of the Law Offices of David B. Bloom for Ervin, Cohen & Jessup and Mark C. Watson and Matthew H. Weinerof the Law Offices of Mark C. Watson, for Kassel.
The case is Ervin, Cohen & Jessup v. Kassel, B191761.
Copyright 2007, Metropolitan News Company