2013-00146720-CU-BC

Thomas Anthony Lusi vs. C Anthony Hughes

Nature of Proceeding:   Petition to Compel Arbitration

Filed By:  Chivers, Cassidy E.

Defendants’ motion to compel arbitration and to stay this civil action is GRANTED, as
follows.

This action arises out of defendant attorneys’ representation of plaintiffs in bankruptcy
proceedings.  The complaint asserts on claims for legal malpractice, breach of contract
and breach of fiduciary duty on behalf of the two plaintiff spouses.  Defendants now
assert that both plaintiffs signed a “Retainer for Services” agreement which contains a
provision requiring them to submit each of the claims asserted here to binding
arbitration.  The agreement provides in pertinent part:

H.  LEGAL DISPUTES:  It is understood that, in the event of any legal dispute
arising out of this agreement, the prevailing party shall be entitled to attorney’s
fees, court costs, and interest on any unpaid amounts.  Unless otherwise
provided above, legal costs will be calculated on the basis of $250.00 per hour
Arbitration in California.  Any dispute or claim arising [from] or related to this
Agreement, its performance, breach, or interpretation (including issues about its
validity or enforceability), shall be exclusively (except as provided below)
resolved by final binding arbitration before the American Arbitration Association
(AAA).  One arbitrator shall be selected using AAA procedures.  The arbitrator
shall use all reasonable efforts to minimize discovery and to complete the
arbitration proceedings as expeditiously as possible.  The Arbitrator shall render
a written decision within thirty (30) calendar days of the hearing.  The arbitrator
wall not award attorney’s fees, or punitive, incidental, consequential, treble or
other multiple or exemplary damages, and the parties hereby agree to waive
and not seek such damages. Either party may seek judicial relief to compel the
other party to comply with the provisions of this Section.  The arbitration shall be
held in Sacramento, California; both parties hereby give their irrevocable
consent to jurisdiction of the State of California, as well as processes of the
AAA in California.  Awards shall be final, binding and non-appealable (except on
the minimal grounds required under the Federal Arbitration Act or other
applicable law).  All awards may be filed with one or more courts, state, federal
or foreign having jurisdiction over the party against whom such award is
rendered or its property, as a basis of judgment and of the issuance of
execution for its collection. (Underlining added for emphasis.)

Based on this language, defendants request the Court to stay the present action and
compel arbitration of these claims.

At the outset, the Court notes that arbitration must be compelled where there is a valid,
binding arbitration agreement unless the opposing party proves the agreement is
unenforceable on unconscionability or other grounds. (See, e.g., Armendariz v.
Foundation Health (2000) 24 Cal.4th 83, 96-100, 114;  Gatton v. T-Mobile USA (2007)
152 Cal.App.4th 571, 579.)

In opposition, plaintiffs raise three (3) primary contentions:  (1) The parties’ agreement
does expressly require the arbitration of the claims in this malpractice action; (2)
defendants never explained to plaintiffs that they would be required to arbitrate any
claims of malpractice; and (3) when the retainer agreement was signed, plaintiffs were
not aware they were giving up their right to a jury trial for their malpractice claims.  The
opposition further contends that the authorities cited by defendants are factually
distinguishable and that the present motion is essentially controlled by Lawrence v.
Walzer & Gabrielson (1989) 207 Cal.App.3d 1501, where the court held that the
arbitration clause in a fee agreement was limited to fee disputes and other financial
matters and did not extend to malpractice claims.

Plaintiffs are correct that the Lawrence v. Walzer & Gabrielson decision affirmed the
denial of the defendant attorney attempt to compel arbitration in part because the
parties’ agreement could not be reasonably construed as requiring arbitration of
malpractice claims.  However, this result is largely unremarkable given that the
arbitration clause in Lawrence was by its own terms applicable only to disputes
regarding “fees, costs or any other aspect” of the attorney-client relationship.  The
court concluded that since the terms “fees” and “costs” preceded the phrase “any other
aspect,” the latter phrase is reasonably interpreted as referring only to similar financial
matters and could not in this context be fairly construed as requiring arbitration of
malpractice claims.

In contrast, the relevant arbitration language in the present case is noticeably more  broad and expressly requires arbitration of “Any dispute or claim arising [from] or
related to this Agreement, its performance, breach, or interpretation (including issues
about its validity or enforceability), shall be exclusively (except as provided below)
resolved by final binding arbitration…”  This provision is similar to language found in
another case which was held to be enforceable. (Powers v. Dickson, Carlson &
Campillo (1997) 54 Cal.App.4th 1102, 1106-1107 [“Any other dispute (other than
Attorney’s fees) between the parties hereto arising out of or relating to this Contract or
Attorney’s professional services rendered to or for Client, shall be resolved by binding
arbitration before the [AAA]…]. (Emphasis added).)  In Powers, the Second District
Court of Appeal began its legal analysis with the following:

As a general rule, a written agreement to arbitrate a future controversy is valid
and enforceable and requires no special waivers or provisions. … An attorney
may ethically, and without conflict of interest, include in an initial retainer
agreement with a client a provision requiring the arbitration of both fee disputes
and legal malpractice claims. (Id., at 1108-1109.)

The plaintiffs in Powers, like plaintiffs in the present case, argued that the 1989
Lawrence decision (also by the Second District) mandated denial of arbitration to the
extent the arbitration clause did not specifically mention malpractice claims but this
argument was rejected.  In doing so, the Powers Court stated:

Neither provision could reasonably have been understood by the Powers to
concern exclusively financial matters, nor is the “other disputes” language mere
surplusage to arbitration of fee disputes.  The March 3, 1993, arbitration
provision contained a second paragraph devoted entirely to arbitration of
disputes other than disputes over attorney’s fees.  In fact, unlike the first
paragraph concerning fee disputes which provided that disputes were to be
submitted to the Los Angeles County Bar Association, the second paragraph
provided that other disputes were to be arbitrated before the American
Arbitration Association. The September 9, 1993, amendment’s language also
clearly covered disputes arising out of professional services.  The language in
both arbitration provisions is broad enough to unambiguously include
malpractice claims against defendants.  Moreover, such a construction of the
language is both reasonable and equitable. (Id., at 1113 (emphasis added).)

Since the arbitration clause in the present case is not only distinguishable from the
language in Lawrence but also quite similar to the language at issue in Powers, this
Court must reject plaintiffs’ arguments both that defendants’ failure to explicitly mention
malpractice claims in its arbitration clause precludes its enforcement and that the
Lawrence decision otherwise controls.

Plaintiffs’ second contention that the arbitration clause is essentially unenforceable
here because defendants never explained that any malpractice claims would have to
be submitted to arbitration but this assertion too lacks merit.  Although the Lawrence
Court clarified that a client must be made aware of or provided at least some
explanation of an arbitration clause, Powers subsequently held that an arbitration
clause similar to the one in the present case was enforceable even though the
plaintiffs insisted they did not carefully read the agreement, did not understand the
significance of the arbitration provision and did not knowingly waive their right to a jury
trial, explaining that such arguments may not ordinarily be used to invalidate a written
agreement to arbitrate. (Powers, at 1105-1106, 1109.)  Powers also added the retainer
agreement containing the arbitration provision was not an adhesion contract because
the plaintiffs clearly possessed the freedom to employ the attorney of their choice. (Id.,
at 1110.)

In the case at bar, the arbitration clause is found in a five-page document under the
heading of “LEGAL DISPUTES” and containing language which plainly requires the
arbitration of any dispute or claim arising out of the agreement for legal services.  In
yet another Second District decision, the Court of Appeal recently held that defendant
attorneys had no duty to point out the existence of an arbitration clause where that
clause is clear and explicit. (Mount Holyoke Homes, L.P. v. Jeffer, Mangels (2013) 219
Cal.App.4th 1299, 1309.)  As in Powers, plaintiffs’ failure to carefully read the retainer
agreement and to understand the arbitration provision precluded a jury trial of any
future malpractice claims does not, without more, defeat arbitration inasmuch as the
contractual language is unambiguous, clear and explicit.

While the preceding analysis effectively disposes of the opposition’s sole remaining
claim that plaintiffs were not aware they were waiving a jury trial, the Powers Court
explained:

An arbitration provision need not contain an express waiver of the right to a jury
trial to be enforceable.  “[T]o predicate the legality of a consensual arbitration
agreement upon the parties’ express waiver of jury trial would be as artificial as
it would be disastrous.  [¶] When parties agree to submit their disputes to
arbitration they select a forum that is alternative to, and independent of, the
judicial–a forum in which, as they well know, disputes are not resolved by juries.
Hence there are literally thousands of commercial and labor contracts that
provide for arbitration but do not contain express waivers of jury trial. …  [T]o
destroy their viability upon an extreme hypothesis that they fail expressly to
negative jury trials would be to frustrate the parties’ interests and destroy the
sanctity of their mutual promises.” [Madden v. Kaiser Foundation Hospitals
(1976) 17 Cal.3d 699, 713-714.] (Powers, at 1109 (emphasis added).)

Finding no valid challenge to the enforceability of the arbitration clause found in
defendants’ retainer agreement, the latter’s motion to compel arbitration is hereby
granted and the prosecution of the present action in this Court shall be stayed.

This minute order is effective immediately.  Pursuant to CRC Rule 3.1312, defendants
to prepare formal order consistent with the foregoing.