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Court of Appeal:
Associate’s UPL Did Not Invalidate Arbitration Agreement
Some Work on Case Was Performed by a Loeb & Loeb Firm Member Licensed to Practice Elsewhere
But Not California; That Does Not Require Reversing Judgment Confirming Arbitration Award
By a MetNews Staff Writer
Loeb & Loeb’s flub in having work done on a case by an associate who had not yet been admitted to practice in California did not result in the invalidation of an arbitration clause in the retainer agreement, the Court of Appeal for this district declared yesterday.
“We are asked to consider whether the trial court erred in confirming an arbitration award where the obligation to arbitrate arose from a provision in a law firm retainer agreement and one of the several law firm attorneys that rendered legal services pursuant to the retainer agreement did so in violation of California’s attorney licensing requirements,” the opinion handed down by Div. Eight sets forth.
“There was no error.”
Pro Tem’s Opinion
San Diego Superior Court Judge Albert T. Harutunian III, sitting on assignment, authored the opinion which affirms a judgment by Los Angeles Superior Court Timothy Patrick Dillon, pursuant to an arbitration award. Under the judgment, plaintiffs/appellants Mark Brawerman and his company, Turtle Mountain, Inc., recouped $138,075 of the fees they had paid Loeb & Loeb for representation in a business transaction.
That was the amount attributable to services performed by then-associate Christopher J. Kelly between December 2004 and July 2005. The latter date is when the transaction was completed; it is also when Kelly, who had been licensed in New York and New Jersey, was admitted to the State Bar of California.
He’s now a partner in Loeb & Loeb.
Brawerman and TMI wanted more than the $138,075 (plus $94,933 in fees incurred in the arbitration in connection with the issue of Kelly’s non-licensure). They wanted damages for alleged malpractice, insisting that arbitration should not have taken place and that there was a right to a trial in the Superior Court.
Issue Not Raised
Harutunian relegated to a footnote this observation:
“We note authority indicating that illegality of an entire contract for purposes of avoiding arbitration cannot be raised for the first time on appeal. Indeed, it must be raised for the first time in the trial court before the matter is sent to arbitration….Loeb and Kelly do not raise Brawerman and TMI’s failure at the outset to raise illegality as a ground for resisting arbitration, so we do not consider it.”
The visiting jurist made note of the California Supreme Court’s 1998 decision in Birbrower, Montalbano, Condon & Frank v. Superior Court. In that case, then-Justice Ming Chin wrote for the majority in saying that New York lawyers could not gain recompense for legal work performed in California but were not precluded for recovering for the portion of the services provided in New York.
Harutunian cited the case for the proposition that an “unlicensed attorney’s illegal practice of law pursuant to the retainer agreement does not render the entire retainer agreement illegal.”
He also pointed to the high court’s 1992 decision in Moncharsh v. Heily & Blase. There, Chief Justice Malcolm Lucas (now deceased) wrote that “when—as here—the alleged illegality goes to only a portion of the contract (that does not include the arbitration agreement), the entire controversy, including the issue of illegality, remains arbitrable.”
Harutunian noted:
“There is no claim here of any illegality in the retainer agreement’s arbitration provision.”
Appellants Cite Case
The Supreme Court case Brawerman and TMI contended was dispositive is Sheppard, Mullin, Richter & Hampton, LLP v. J-M Manufacturing Co., Inc., a 2018 decision. Justice Leondra Kruger wrote for the majority in saying that a law firm’s undisclosed conflict of interest invalidated the entire attorney-client agreement, rendering the arbitration clause a nullity.
Reconciling the cases. Harutunian wrote:
“We agree with the trial court that, read together, Sheppard and Birbrower required confirmation of the Award in this case. The arbitration provision in the Sheppard/J-M engagement agreement was unenforceable only because the ethical violation rendered the entire agreement unenforceable.…Birbrower makes clear that the unlicensed practice of law by firm attorneys does not completely invalidate an agreement pursuant to which firm attorneys also engaged in the licensed practice of law.”
Same Situation
The pro tem justice went on to declare:
“The circumstances that saved the fee agreement in Birbrower are also present here. Although the Birbrower attorneys did ‘substantial’ unlicensed work in California, they also did licensed work in New York. Here, though Kelly illegally did substantial work under the Retainer Agreement, other Loeb attorneys who were licensed in California also performed work for Brawerman and TMI under the same agreement. Brawerman and TMI met with and retained [Thomas] Rohlf and his firm, and the Retainer Agreement contains no reference to Kelly. Under these circumstances, we are bound to follow Birbrower and conclude that Kelly’s illegal work did not invalidate the entire Retainer Agreement, and we are further bound to follow Sheppard and Moncharsh and conclude that the Retainer Agreement’s arbitration provision therefore remains enforceable.”
The case is Brawerman v. Loeb & Loeb, 2022 S.O.S. 3424.
Steven R. Friedman and Michael E. Friedman of the Century City Law Office of Steven R. Friedman acted for Brawerman and TMI. Robert E. Mangels and Andrew I. Shadoff of the Century City firm of Jeffer Mangels Butler & Mitchell represented Loeb & Loeb.
Copyright 2022, Metropolitan News Company