Mediation/Attorney’s Fees/Pending Cases: Fifth District Orders Publication Of Case Allowing Homeowners To Recover Pre-Litigation Mediation Fees From HOA
Grossman v. Park Fort Washington Association Is Ordered Published
On December 19, 2012, I posted about Grossman v. Park Fort Washington Association, Case No. F063125 (5th Dist. Dec. 19, 2012) (Franson, J.), a case in which the Court of Appeal held that the trial court correctly awarded fees for pre-litigation mediation to homeowners involved in a tussle with their homeowners association over construction of a backyard cabana and fireplace. Today, January 15, 2013, the Court of Appeal ordered the case to be published with minor changes that do not affect the judgment.
Arbitration/Consumers/Class Actions/FAA: Second District, Division 8 Rules That Consumer Legal Remedies Act’s Prohibition Against Class Waivers Is Preempted By The Federal Arbitration Act
“Saving Clause” of the FAA Doesn’t Save Consumer’s Unwaivable Statutory Rights Here
A hot arbitration topic is whether in various circumstances the Federal Arbitration Act (FAA) preempts “unwaivable statutory rights” under state law. That was an important question in Flores v. West Covina Auto Group, Case No. B238265 (2nd Dist. Div. 8 January 11, 2013) (Flier, J., author) (unpublished). The lawsuit arose from the purchase of a previously owned automobile from West Covina Auto Group, LLC (WCT). WCT successfully moved to compel arbitration based on an arbitration provision in the auto sales contact, and the consumer appealed.
The consumer argued that arbitration was inappropriate: “(1) a ‘poison pill’ provision in the arbitration clause prohibits arbitration; (2) WCT waived its right to arbitration; (3) the arbitration clause is unconscionable; (4) there was no meeting of the minds or mutual consent regarding the arbitration clause; and (5) as an unexpected term in an [sic] contract of adhesion, the arbitration clause is unenforceable.” All the arguments went down in flames.
The Federal Arbitration Act provides arbitration agreements “shall be valid, irrevocable, and enforceable,” except on “such grounds as exist at law or in equity for the revocation of any contract” – the last phrase being the so-called “saving clause” of the Act. The consumers here argued, in effect, that their unwaivable statutory rights under the CLRA constituted grounds under the savings clause to avoid arbitration. But the savings clause of the Act was not enough to save them from arbitration here.
Significantly, the Court of Appeal held that the ruling in Fisher v. DCH Temecula Imports LLC, 187 Cal.App.4th 601 (2010), holding that the right to a class action lawsuit or classwide arbitration was an unwaivable statutory right under the California Consumer Legal Remedies Act, has been preempted by the Federal Arbitration Act, following the Supreme Court’s ruling in AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011).
No waiver by the auto dealer of the right to arbitrate was found to have occurred, despite extensive litigation. Here, timing was important: Fisher was decided just after the plaintiffs filed their original complaint, precluding arbitration, and within two weeks after the filing of Concepcion, the auto dealer informed the trial court that it intended to compel arbitration. In concluding that the auto dealer had not waived its right to arbitrate, the Court “decline[d] to establish a rule that WCT should have done everything possible to compel arbitration, no matter how futile, expensive, or protracted the process.”
Despite the fact that the contract contained a number of clauses that other courts have found to be one-sided, prejudicial, and unconscionable, the Court here found no prejudice or unconscionability. I note the Court stated, “appellants have not shown prejudice” – and therein lies a clue as to how consumers must attack such arbitration clauses if they are to have any hope of avoiding arbitration. They must make particularized showings, based on admissible evidence, that in their case, the contractual provisions are unduly prejudicial or unconscionable. Given the post-Concepcion legal trend, a general argument that waiver of a statutory right to a class action is unconscionable, without a particularized showing based on evidence, is going to be a tough, if not impossible, argument to win.
Arbitration/Construction/Burden of Proof: Fourth District, Division 3 Affirms Contractor’s Right To Arbitrate In Decision That Hinges On The Word “Involves”
Disneyland of Construction: Involvement In Project Versus Involvement In Dispute Is The Issue Here
Carol M. Highsmith, photographer. Between 1980 and 2006. Library of Congress.
Subcontractor Pacific Westline, Inc. sued contractor C.W. Driver, alleging Driver refused to pay for additional work on a hotel at Disneyland. Driver successfully petitioned to compel arbitration, and Pacific appealed the order granting Driver’s petition. Pacific Westline, Inc. v. C.W. Driver, Inc., Case No. G046357 (4th Dist. Div. 3 January 9, 2013) (Bedsworth, J.) (unpublished).
The subcontract between Pacific and Driver, which incorporated ADR procedures adopted in the “prime contract” between Disney and Driver, mandated arbitration “for disputes not involving the acts, omissions or otherwise the responsibility of [Disney].” Thus, the requirement to arbitrate hinged on whether the dispute “involved” Disney, because if Disney was involved, then Pacific did not have to arbitrate.
Justice Bedsworth, a wordsmith himself, noted that “involve” has several meanings. But that was no help to Pacific, because “the burden must fall upon the party opposing arbitration to demonstrate that an arbitration clause cannot be interpreted to require arbitration of the dispute.” (citing Coast Plaza Doctors Hospital v. Blue Cross of California, 83 Cal.App.4th 677, 686-687). Here, the clause could be interpreted to require arbitration of the dispute.
Besides, involvement in the project was not the key to arbitration: “the clause speaks instead of involvement in the claim or the dispute.” And the evidence showed only Disney’s involvement in the project, not in the dispute with Driver.
Affirmed.
Arbitration/1286.2 Vacatur: Second District, Div. 2 Affirms Judgment Confirming Arbitration Award in Attorney-Client Fee Dispute
“Manifest Disregard of the Law” Doctrine Inapplicable to Arbitrator’s Decision Concerning Attorney’s Fees Dispute Between Law Firm and Client
Appellant Fuchs & Associates, Inc. (Law Firm) sued former client, Elke Lesso, for unpaid attorney’s fees of $647.688.13. An arbitrator found Law Firm was not entitled to recover additional fees, and its attorney fee lien was invalid. On appeal, the Law Firm attacked the arbitration award – unsuccessfully. Fuchs & Associates, Inc. v. Lesso, Case No. B239246 (2nd Dist. Div. 2 January 8, 2013) (Doi Todd, Acting P.J., author) (unpublished).
The Court of Appeal rejected arguments that the Arbitrator exceeded his powers by rewriting the fee agreement, failing to decide issues submitted, or deciding issues not submitted. The Court also rejected an argument that the arbitration hearing should have been continued, because the Law Firm did not identify what additional evidence it wished to present that it was precluded from presenting, or how it was prejudiced.
The Law Firm also argued that the arbitration award should be vacated because of the Arbitrator’s “manifest disregard of the law.” This is a basis for rejecting an award in federal cases, but in state cases, a strict review standard for legal error “does not include a ‘manifest disregard’ exception, while at the same time leaving open the possibility of greater judicial review . . . in the case of rulings inconsistent with the protection of statutory rights.” (citing Pearson Dental Supplies, Inc. v. Superior Court, 48 Cal.4th 665, 679, n. 3 (2010)).
Evidently, however, the Court of Appeal viewed this attorney-client fee dispute as a private affair that did not trigger protection of statutory rights and heightened scrutiny, for it observed: “[Law Firm] has not cited any authority showing than an arbitrator’s decision on a law firm’s action for attorney fees has ever been reviewed on the merits by a trial court under the exceptional circumstances involving a statutory or public policy decision.”
Is it possible that the Court’s view of the case was somewhat colored by Law Firm’s failure to “advise Lesso to seek independent legal counsel before she signed the loan” (to make possible the payment of in pendente lite attorney fees); by Law Firm’s concession “that it did not inform Lesso that it would be taking the position that the [attorney’s fees] lien would attach to all of her assets”; or by the fact that at the time of the arbitration, the attorney had been disciplined by the State Bar three times? See Fuchs & Associates, Inc., n. 3.
Scope of Arbitrator’s Power: Arbitrator Did Not Exceed Scope of His Power When He Denied A Motion For An Uncontested Arbitration
Result Is Dictated By Stipulation to Arbitrate, Weak Record, and Failure To Object Earlier
Wheel of Fortune. Carol M. Highsmith, photographer. Between 1980 – 2006. Library of Congress.
Plaintiff Jin Gang Zhao was on a bus headed to a casino, when a bus accident occurred, he fell to the floor, and injured his back. In the ensuing arbitration, Mr. Zhao was awarded $15,000 in damages against a dissolved bus company located in China, and defendant was awarded $26,268.03 in costs. The Arbitrator apparently rejected the plaintiff’s objection that injury in the bus accident drove plaintiff to drink “Red Sorghum,” a strong Chinese liquor, causing him to suffer liver damage. Plaintiff appealed confirmation of the arbitration award on the grounds that the stipulation to arbitrate was invalid, and the Arbitrator exceeded the scope of his power by denying plaintiff’s motion for an uncontested arbitration. Zhao v. Ming Du International Trade, Inc., Case No. B236813 (2nd Dist. Div. 5 January 7, 2013) (Turner, P.J., author) (unpublished).
The wrinkle here is that the defendant was dissolved and absent from the US, did not sign the stipulation to arbitrate, and did not show up at the hearing. Because the defendant did not sign the stipulation, plaintiff argued it was invalid. And because defendant did not show up at the hearing, despite a notice to attend, plaintiff argued that the arbitration should have been tried as an uncontested matter.
But the Court of Appeal did not agree with plaintiff. The defendant didn’t sign the stipulation, but its carrier did, and no evidence was offered that plaintiff objected, or that the carrier lacked agency authority. True, defendant failed to appear for the hearing, but the Court of Appeal explained, “it is clear that the very intention of the stipulation was to have the matter proceed to a contested binding arbitration, otherwise the stipulation itself makes no sense.” The stipulation provided that the Arbitrator “[i]n his sole discretion” would control proceedings and regulate the order of proof, and determine all questions submitted to the Arbitrator. Result: “The arbitrator acted well within the scope of his powers.”
Thus, the plaintiff was stuck with the outcome, as the arbitration award was affirmed.
Of course, the plaintiff and his counsel didn’t have to sign the stipulation to arbitrate, but absent 20/20 hindsight, plaintiff and his counsel could not know the result would be unfavorable.
Mediation/Condition Precedent/Attorney’s Fees: Second District, Division 2 Reverses Award Of Attorney’s Fees To Prevailing Tenant Who Failed To Request Mediation
Magnitude Of Loss Of Fees Based On Failure To Mediate Eclipses Substantive Win
Eclipse Chewing Tobacco. c1871. Library of Congress.
Our blog has a sidebar category “Mediation: Condition Precedent” that conveniently summarizes the problem that arose for the plaintiff/respondent/tenant in the next case. The accompanying tobacco label for a solar eclipse provides a graphic for the outcome.
In this landlord/tenant dispute, tenant prevailed, with the trial court awarding the tenant $12,140.84 in actual damages, and $25,485 for landlord’s bad faith retention of a security deposit. The tenant moved for attorney’s fees pursuant to a clause in the lease. Of the $107,217 in fees sought by the tenant, the court awarded $73,125 in attorney fees. The calculus, however, changed substantially after the landlord appealed. De Carlo v. Kosser, Case No. B237278 (2nd Dist. Div. 5 January 7, 2013) (Armstrong, Acting P.J., author) (unpublished).
On appeal, the judgment was affirmed, except that it was reversed as to attorney fees. The reason? Here, the opinion hedges. If the tenant’s suit was a suit on a lease, then the tenant failed to request mediation, a condition precedent to the recovery of fees under the lease. And if it was not a suit on a lease? Then it was a suit on a settlement agreement that did not provide for an award of fees. Ouch either way.