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Causing Credit-Card Chargeback of Money Paid Attorney Wasn’t Waiver of Fee-Arbitration—C.A.
Justices Say That Ex-Client, in Persuading American Express to Return ‘Trial Deposit, Did Not Relinquish Contractual Right to Have Neutral Make Nonbinding Decision
By a MetNews Staff Writer
A litigant who, using a credit card, paid his attorney a $10,000 “trial deposit” and soon after that fired the lawyer, demanding—to no avail—a refund of the money, did not waive his contractual right to nonbinding arbitration of the fee dispute by having caused American Express to claw back the money from the account to which it been routed, Div. Five of the First District Court of Appeal has held.
Thursday’s unpublished opinion by Justice Danny Y. Chou reverses an order by San Mateo Superior Court Judge Susan Greenberg denying a motion by defendant Siddharth Breja to compel arbitration of the action against him by Redwood City attorney Andrew G Watters to regain the $10,000 and seeking other damages.
Breja, in hiring Watters on May 1, 2023, as either his third or fourth lawyer in a dissolution of marriage case in the San Francisco Superior Court, paid the deposit—to be refunded, under the terms of the legal services agreement, only “if the case settles at least 10 days before trial which is June 6-8, 2023”—as well as providing a $10,000 nonrefundable retainer. On May 26 of that year, 11 days before the initial trial date, with the case unsettled, there were two developments: a continuance was ordered and Breja terminated Watters’s representation of him.
Refund Sought
The former client demanded a refund of both the retainer and the trial deposit. Watters did not oblige, advising that he had, during his brief representation of Breja, fully earned $20,000 in light of the extensive demands on his time.
After Breja complained to American Express that the lawyer had defrauded him and the payment was provisionally reversed, Watters initially sued in the U.S. District Court for the Northern District of California under the federal Computer Fraud and Abuse Act, as well as putting forth state claims. He maintained that Breja “quickly became a nightmare client, inundating Plaintiff with around 150 emails and at least 100 text messages, as well as at least 50 phone calls, during the less than thirty days’ long representation,” and asserted:
“Due to Defendant’s constant and largely unnecessary communications and requests on the matter, the bill for legal services exceeded Defendant’s deposit and retainer. Plaintiffs hourly fees are $500 per hour, an amount that is in line with his 17 years’ experience and either at market value or below market value of peers in this county.”
District Court Judge Haywood S. Gilliam Jr. held on Jan. 18, 2024, that no claim under the federal statute was stated and ordered dismissal. Watters then brought his state court lawsuit.
Breja sought an order either dismissing the action or sending it to arbitration.
Trial Court Decision
Greenberg on Aug. 28, 2024, ruled (with italics in the original):
“Here, defendant could not more clearly act inconsistently with the arbitration right than when he intentionally sought the refund of his American Express charges after his email exchange with Mr. Watters on May 26, 2023 and May 27, 2023…instead of making a request to arbitrate. Rather, about a month after the conversation with Mr. Watters, defendant purposefully and intentionally sought the refund of the money he paid in trial deposit fees despite knowing that the trial deposit was only refundable upon the case settling at least 10 days prior to trial….The clause in the contract was clear that trial funds would only be refunded in the case of settlement and defendant knew the trial had been continued, not settled….”
Breja appealed. Watters, in defending Greenberg’s order, said:
“…Appellant concedes that he knew he needed to seek arbitration…[R]ather than seek arbitration as he knew he needed to do, Appellant mislead American Express by filing a fraudulent charge back with them, asserting he had met the express condition for a refund. He did not meet that condition as there was only one express condition for a refund: a settlement in his divorce case at least 10 days prior to trial. Appellant’s divorce case did not settle prior to the June 2023 trial date.”
Chou’s Opinion
Chou responded in his opinion on Thursday:
“…Breja had no obligation to seek arbitration at the time he initiated the chargeback. He had the right to seek arbitration, and he did seek arbitration when Watters sued. Pursuing the chargeback, whether it was fraudulent or not, did not relinquish the right to adjudicate the dispute in arbitration.”
He reasoned:
“Typically, a waiver of the right to compel arbitration arises when a party significantly engages in court proceedings, such as by answering the complaint or engaging in discovery, or unduly delays seeking or starting the arbitration….
“Breja did not intentionally give up his right to compel arbitration of the dispute by litigating in court or by waiting too long to invoke the arbitration provision. It was Watters, not Breja, who filed the lawsuit. And once Watters sued, Breja immediately sought to compel arbitration. Breja did not answer the complaint, undertake discovery, engage in motion practice, or otherwise participate in the litigation process.”
The jurist added:
“Nor did Watters meet his burden to prove that Breja’s efforts to obtain the chargeback from American Express reflected an intent contrary to arbitrating the parties’ dispute….Based on the record, a credit card chargeback is a consumer protection mechanism available to credit card holders under federal law….It is not litigation. Furthermore, the chargeback process here did not adjudicate who was legally entitled to the amounts reflected in the $10,000 charge. To the contrary, American Express’ e-mail to Breja stated that it was crediting Breja’s account for $10,000 but also emphasized that it might accept a response from Watters and rebill Breja’s account.”
Chou pointed out:
“Indeed, at no time during the chargeback process did Breja say that he was not going to arbitrate.”
The case is Watters v. Breja, A171728.
Other Litigation
Breja on Oct. 29, 2019, sued JUUL Labs, Inc., of which he had been senior vice president of global finance, claiming in the U.S. District Court for the Northern District of California that he had been wrongfully discharged based on whistleblowing. He had protested that the employer sent to market approximately one million mint-flavored e-cigarette nicotine pods that were contaminated.
The matter was dismissed with prejudice following arbitration by retired San Francisco Superior Court Judge Patrick J. Mahoney who found that each of Breja’s claims failed.
“Something is wrong with this guy,” Watters on Friday said of Breja, adding, “and it’s unfortunate that the Court of Appeal bent over backwards to help him with this ridiculous decision.”
Breja previously held executive positions with Uber (2017-18), Amazon (2012-17), and eBay (2008-11).
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