Friday, August 5, 2011
Court Tosses Order Confirming Attorney Fee Arbitration Award
By SHERRI M. OKAMOTO, Staff Writer
An attorney effectively rejected an adverse arbitration award in a fee dispute with a former client by timely filing a request for trial de novo on in the small claims division of the superior court, the Sixth District Court of Appeal ruled yesterday.
The justices said the request, filed by San Jose attorney John Kevin Crowley did not need to be filed as an unlimited jurisdiction matter since he waived any claim for fees in excess of the $5,000 jurisdictional limit by electing to proceed in the small claims court, giving the small claims court jurisdiction over his dispute with Carrie Giorgianni.
Crowley had represented Giorgianni in a family law proceeding to enforce a judgment against her former husband and billed her over $77,000 for his services.
Giorgianni paid approximately $69,000 and thereafter requested arbitration, pursuant to the Mandatory Fee Arbitration Act, through the Santa Clara County Bar Association Fee Arbitration Program. During the arbitration, she claimed she had been overcharged by approximately $40,000 while Crowley maintained that approximately $11,000 was due on outstanding billings.
The arbitrators agreed with Giorgianni and, on Aug. 28, 2009, awarded Giorgianni a recovery of $29,713.96.
Small Claims Action
On Sept. 21, 2009, Crowley filed a small claims court action against Giorgianni in which he sought an amount “not to exceed $5,000” for “[u]npaid fees for services and costs expended.” He alleged that the matter was an attorney-client fee dispute, checked the box indicating that the matter had already proceeded to arbitration, and attached the form specified for arbitrated attorney fee disputes.
On this form, Crowley again asserted that the amount of money in dispute was not more than $5,000, stated that he “want[ed] a trial in small claims court to decide the fee dispute,” and checked a box indicating that he wanted a trial.
The instructions on the form next to the box which Crowley checked provided that: “You can check this option only if you did not agree in writing to a binding award and you file this form within 30 days after the Notice of the Award.”
About two months later, Giorgianni filed a petition in the Santa Clara Superior Court to confirm the arbitration award. She alleged that the action was an unlimited civil case with an amount in controversy of $29,713.96—the amount of the arbitration award— and that no party had filed a timely rejection of the award.
Judge William J. Elfving granted Giorgianni’s petition.
Subject Matter Jurisdiction
Writing for the appellate court, Justice Wendy Clark Duffy disagreed with Giorgianni’s contention that the MFAA requires a party challenging an arbitration award to base subject matter jurisdiction on the amount of the arbitration award, and her alternate position that such a filing should be made in the court with jurisdiction over the amount demanded by the party in the MFAA arbitration.
Duffy noted that the MFAA “employs two distinct phrases with respect to post-award filings,” set forth in Business and Professions Sec. 6203(b) and Sec. 6204(c).
Sec. 6203(b) provides that party seeking to confirm, correct, or vacate an award may do so by filing a petition in “the court having jurisdiction over the amount of the arbitration award.” Duffy reasoned that “[c]learly, this fixes subject matter jurisdiction by the amount of the award.”
In contrast, under Sec.6204(c), a dissatisfied party seeking to reject the award must file within 30 days of service of the award “an action in the court having jurisdiction over the amount of money in controversy.”
Duffy opined that “when the Legislature wishes to define subject matter jurisdiction by reference to the amount of the MFAA arbitration award, it does so unambiguously,” as it did in Sec. 6203(b), and so the “amount of money in controversy” language of Sec. 6204(c) “cannot be reasonably construed as basing jurisdiction on the amount of the nonbinding MFAA arbitration award.”
The justice further reasoned that “nothing in the MFAA…suggests that a party, in rejecting a nonbinding arbitration award where no action is pending, must refer to the amount that had been claimed by any party in the arbitration itself in determining the court having jurisdiction over the de novo request.”
She suggested that such reference to arbitration claims in determining the proper court with jurisdiction to decide the dispute would be “antithetical to the notion that rejection of a nonbinding award results in the matter proceeding as if no arbitration had occurred.”
Duffy acknowledged that “generally, the amount of the demand in the complaint is ‘[t]he decisive factor’ in determining whether the court in which the action is filed has subject matter jurisdiction,” and under the Code of Civil Procedure, the jurisdictional propriety of filing an action as a limited civil case is determined by reference to the plaintiff’s demand or the amount of recovery he or she seeks.
“For these reasons, in this case, we construe ‘amount of money in controversy’ as provided in section 6204(c) to mean the amount of demand or recovery sought by the plaintiff filing the rejection of the MFAA arbitration award,” she said.
Based upon this statutory construction, Duffy concluded the small claims court had jurisdiction over Crowley’s claim since he attested that the dispute involved no more than $5,000.
Justice Patricia Bamattre-Manoukian and Nathan D. Mihara joined Duffy in her decision.
The case is Giorgianni v. Crowley, H035398.
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