Wednesday, January 10, 2007
Predispute Fee Arbitration Agreement Unenforceable—C.A.
By KENNETH OFGANG, Staff Writer
California’s attorney fee arbitration statute, which makes arbitration optional for a client and mandatory for an attorney, precludes a law firm from enforcing a predispute fee arbitration agreement, the Fourth District Court of Appeal held yesterday.
The legislative intent in adopted the mandatory fee arbitration act, beginning at Business and Professions Code Sec. 6200, was to give the client the right to decide whether to litigate or arbitrate a fee dispute, and to make arbitration nonbinding absent a post-dispute agreement to the contrary, as a matter of public policy, Presiding Justice Judith McConnell wrote for Div. One.
McConnell cited Alternative Systems, Inc. v. Carey (1998) 67 Cal.App.4th 1034, which held that a client could not be bound by a predispute arbitration agreement.
The presiding justice rejected a contention by the law firm of Allen Matkins Leck Gamble & Mallory LLP that the opinion is no longer good law in light of Aguilar v. Lerner (2004) 32 Cal.4th 974.
The I court held that a client who sued his lawyer for malpractice waived his contention that the fee arbitration statute prohibits a lawyer from forcing the client to submit a fee dispute to binding arbitration. And Justice Ming Chin, in a separate concurrence by Justices Marvin Baxter and Janice Rogers Brown, wrote that the client was required to arbitrate not only because he waived his rights but “for a far more fundamental reason: An agreement for binding arbitration between an attorney and a client is enforceable under the California Arbitration Act whether or not the client requests and receives nonbinding arbitration under the MFAA.”
But McConnell said Chin was wrong.
At issue was an agreement between Dr. Richard Schatz and Allen Matkins, which had represented him in a partnership dispute and an unrelated easement dispute. Schatz paid about $180,000 in fees, but stopped making payments prior to a trial over the easement.
The firm billed him for another $170,000 in fees, which he did not pay, and the firm demanded binding arbitration under an agreement the client had signed when the firm first agreed to represent him.
A San Diego Superior Court judge held the agreement unenforceable, and the Court of Appeal agreed, ruling that Schatz—who lost in a fee dispute arbitration conducted by the San Diego County Bar Association—is entitled to a trial de novo in the Superior Court.
The case is Schatz v. Allen Matkins Leck Gamble & Mallory LLP, D043347.
Copyright 2007, Metropolitan News Company