Case Number: EC061572    Hearing Date: August 01, 2014    Dept: NCD

TENTATIVE RULING (8-1-14)
#1
EC 061572
LIPTON & MARGOLIN, APC v. KO

Motion to Compel Arbitration

TENTATIVE:
Motion to compel arbitration brought by plaintiff and cross-defendant Lipton & Margolin, LLC is GRANTED. Plaintiff and cross-defendant Lipton & Margolin, LLC and all other cross-defendants and cross-complainant Andrew Ko are ordered to submit the cross-complaint to arbitration pursuant to their express agreement.
The court finds that an agreement to arbitrate the controversy set forth in the cross-complaint exists, that there is no showing that there has been any waiver of the right to compel arbitration, and no showing that the agreement has been revoked or that grounds exist for revocation of the agreement. The opposition has also failed to establish that the agreement is unconscionable.

The court further orders under CCP § 1281.4 that this action as to the arbitrating parties shall be stayed until an arbitration has been had according to this order.

The demurrers on calendar this date are accordingly STAYED.

FACTUAL BACKGROUND:
This action is brought by plaintiff Lipton & Margolin, APC, attorneys, to recover fees allegedly owed plaintiff by its former client, defendant Andrew Ko.

Ko has filed a cross-complaint against plaintiff and cross-defendants Hugh A. Lipton, and Keith A. Bregman, alleging that defendants breached the retainer agreement and engaged in legal malpractice in connection with the underlying representation of Ko in a family law matter.

The matter was originally heard on June 13, 2014. The court’s tentative ruling was to grant the unopposed motion. After argument the matter was continued to this date, with a briefing schedule set for the filing of an opposition and reply. A timely opposition has now been filed to the motion.

ANALYSIS:
CCP § 1282.2 , governing orders to arbitrate controversies, provides:
“On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that:
(a) The right to compel arbitration has been waived by the petitioner; or
(b) Grounds exist for the revocation of the agreement.”

There is a strong public policy in favor of arbitration of disputes and any doubts concerning the scope of arbitrable disputes should be resolved in favor of arbitration. Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9. Arbitration agreements should be liberally interpreted, and arbitration should be ordered unless the agreement clearly does not apply to the dispute in question. Vianna v. Doctors’ Management Co. (1994) 27 Cal.App.4th 1186, 1189.

Here, the parties entered a written arbitration agreement, which provides, in pertinent part:
“It is understood that any dispute as to LEGAL MALPRACTICE, that is, as to whether legal services rendered under this contract were unnecessary or unauthorized or were improperly rendered, will be determined by submission to arbitration as provided by California law, and not by a lawsuit or resort to court process except as California provides judicial review or arbitration proceedings.”
[Ex. C, Article 1].

This agreement is signed by both the attorney and client.

The client has agreed to submit disputes as to Legal Malpractice to arbitration, which appears to encompass all causes of action stated in the cross-complaint. The parties to the arbitration are defined as the client and the attorney, to include “the undersigned attorney and his or her professional corporation or partnership, and any employees, agents, successors-in-interest, heirs and assigns of the foregoing individuals or entities.” [Ex. B, Article 2 (a)]. This appears to encompass all cross-defendants so that the cross-complaint in its entirety will be submitted to arbitration.

The opposition argues that the arbitration provision does not apply to the entire cross-complaint but only to “whether legal services rendered under this contract were unnecessary or unauthorized or were improperly rendered…” The argument is that the agreement applies only to things that Lipton & Margolin did do, and not the actions that they did not take, which should have been taken, or every error or omission of any kind. This is an extremely strained reading of the agreement, quoted above, which expressly applies to claims for legal malpractice, which is what is at issue here. It makes little sense to conclude that at the time they entered into the agreement the parties did not intend that such agreement would cover malpractice through omission as well as malpractice through commission. The case relied upon, Bona v. David (2007) 147 Cal.App.4th 1055, involved an arbitration clause providing that “Any controversy among the parties involving the construction or application of any provision of this Agreement” shall be submitted to mediation and then arbitration, which was attempted to be applied to a defamation lawsuit. The case does not support the position that the agreement here does not apply to all of the claims set forth in the cross-complaint.

The opposition also argues that there has been no demand and refusal to arbitrate submitted. The opposition attaches a letter from counsel for cross-defendants in which it is stated that counsel will be filing a motion to compel arbitration, which is appropriate for the cross-complaint, “although I understand that you disagree.” [Ex. 4]. The reply submits a declaration indicating that there was a letter of April 2, 2014 sent to counsel for cross-complainant suggesting the matter be arbitrated, and that there was some communication in which counsel for cross-complainant suggested that “instead of wasting my time sending a letter” to him, he “should have just filed a motion to compel arbitration…” [Bregman Decl., para. 3]. This is sufficient to show a demand and refusal to arbitrate, and it also appears by filing his cross-complaint in this matter, and certainly by opposing this motion, cross-complainant is resisting arbitration under the agreement.

The opposition also argues that the agreement is unconscionable.

There is no substantial evidence or argument offered concerning any procedural unconscionability with respect to cross-complainant entering this agreement. There is no showing concerning the circumstances under which the agreement was entered, and this appears to be the type of transaction where cross-complainant had reasonably available alternative legal services from which he could have selected.

Under Armendariz, as noted above, “procedural and substantive unconscionability must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability.” Armendariz, at 114 (emphasis added).
Since there is no procedural unconscionability here, the agreement shall be enforced.

Ko also argues that there has been a waiver, or estoppel, with respect to the right to pursue arbitration. The argument is that after receiving the cross-complaint, Lipton & Margolin asked for extra time to respond to the pleading by misrepresenting that the cross-complaint was being tendered to its insurer.

In order to avoid arbitration on the ground of waiver, a respondent must satisfy a heavy burden of proof that petitioner waived its right to arbitration. The court will apply three factors, including whether the party:
(1) has previously taken steps inconsistent with an intent to invoke arbitration;
(2) has unreasonably delayed seeking arbitration;
(3) has acted in bad faith or engaged in willful misconduct.
Keating v. The Superior Court of Alameda County (1982) 31 Cal.3d 584, 604-5, reversed in part on other grounds, Southland Corp. v. Keating (1984) 465 U.S. 1.

Additionally, the court must make a finding that the party asserting there has been a waiver has suffered prejudice. Id.

“The question of waiver is one of fact, and an appellate court’s function is to review a trial court’s findings regarding waiver to determine whether these are supported by substantial evidence.” Berman v. Health Net (2000) 80 Cal.App.4th 1359.

Here, the opposition fails to establish waiver. There have been no steps taken inconsistent with an intent to invoke arbitration, as the complaint seems to be that the thirty day extension was not to submit the matter to the insurer but to file this motion, which is a motion to compel arbitration, a thirty day delay is not unreasonable, and there has been no prejudice to cross-complainant.