Wednesday, December 10, 2008
Court Limits Effect of Arbitration Provision in Retainer Agreement
By STEVEN M. ELLIS, Staff Writer
This district’s Court of Appeal has ruled that a Beverly Hills law firm could invoke a provision in its retainer agreement to seek arbitration in a former client’s malpractice action despite previously pleading and moving for judgment, but that ambiguities in the provision limited its applicability to disputes over the agreement’s existence.
Concluding that Carpenter & Zuckerman LLP did not waive the binding arbitration provision, Div. Eight nonetheless held Monday in an unpublished opinion that the firm could not rely on the provision because language the firm used could not be read to encompass disputes over the quality of legal services.
Jenny Wang was involved in an auto accident in 2005, and hired attorney Paul Zuckerman and his firm in 2007 after having first retained the Law Offices of Larry H. Parker Inc.
Although the other driver’s insurer initially rejected a $100,000 policy limits settlement demand from Parker’s firm, Zuckerman’s firm allegedly made a second demand for settlement in the same amount without Wang’s knowledge, which the insurer promptly accepted.
Wang then rehired the Parker firm, which finalized the settlement, and filed suit against Zuckerman and his firm, claiming they had destroyed both her ability to receive any monies above the stated policy limits, as well as her “excess bad faith” case against the insurer for rejecting the first demand.
Zuckerman and his firm filed an answer to the complaint in September 2007, as well as a cross-complaint against the Parker firm, and listed as one of its affirmative defenses “mandatory arbitration” based on a retainer agreement with Wang, which provided:
“In the event either party disputes this Agreement, an action or proceeding to enforce the same is required, or any dispute arises between Law Firm and Client arising out of the subject matter of this dispute, each party agrees to resolve any such dispute by binding arbitration, held before a mutually selected retired judge of the Los Angeles Superior Court.”
Zuckerman’s firm then moved for judgment on the pleadings, claiming Wang’s complaint did not allege she suffered any damages, and objected to discovery from Wang on the ground that it would be moving to compel arbitration, which it later did.
Wang opposed the motion, claiming that the provision did not cover a malpractice claim and was unenforceable, and that Zuckerman had waived the provision by failing to seek its enforcement earlier and by engaging in conduct that was inconsistent with arbitration.
However, Los Angeles Superior Court Conrad R. Aragon granted the motion, specifically rejecting the waiver argument, and concluding that the provision covered a malpractice claim.
Provision Not Waived
On Wang’s petition for a writ of mandate, Justice Patricia A. Bigelow upheld Aragon’s finding that Zuckerman’s firm had not waived its right to invoke the provision given the relatively short span of time before the firm moved to do so, and the fact that the parties had never exchanged any discovery.
But she wrote that Aragon had erred when he misstated the provision as providing for arbitration of all disputes arising out of the subject matter of “the agreement” instead of the subject matter of “this dispute,” and said the trial court had to vacate the order compelling arbitration.
“The first part of the arbitration clause provides that arbitration is required where either party ‘disputes this Agreement.’ By its plain terms, the most plausible construction of this language is that arbitration is required when either party disputes the existence of the agreement. We cannot see how a ‘dispute [over] this agreement’ can be construed as a dispute concerning the quality of the legal services provided by the firm (including a claim for legal malpractice).”
Noting that the clause then goes on to talk about arbitration of “any dispute…arising out of the subject matter of this dispute,” Bigelow said that “this dispute” must refer to a dispute referenced earlier in the clause, the only example being one in which “either party disputes this Agreement.”
“Read literally, ‘this dispute’ can only be read as referring to a dispute regarding the existence of the agreement, and perhaps also to a dispute involving the enforceability of the agreement or any of its terms,” she opined. “It cannot be read as encompassing a dispute over the quality of the legal services provided by the firm (including a claim for legal malpractice).”
Bigelow added that the result was “especially true when we keep in mind that any uncertainty must be construed against the party that drafted the agreement, i.e., C&Z.”
Justices Laurence D. Rubin and Justice Madeleine Flier joined Bigelow in her opinion.
Ronald Beck and Alvin Change of Perona, Langer, Beck & Serbin in Long Beach represented Wang before the Court of Appeal, while Beverly Hills attorney Jeffrey C. McIntyre represented Zuckerman and his firm.
The case is Wang v. Superior Court (Zuckerman), B207513.
Copyright 2008, Metropolitan News Company