Arbitration/Fees/Construction: Fifth District Agrees Attorney’s Fees Clause Provided For Recovery Of Fees Only In Arbitration, Not In Superior Court
Parties’ Agreement To Litigate In Superior Court Proved Fatal To Prevailing Party’s Fee Recovery
Plaintiff Mari sued Defendant Hawkins for professional negligence in connection with a survey, and prevailed in the trial court. However, the trial court denied Plaintiff’s request for attorney’s fees, because the fee provision was part of an arbitration provision stating, “[t]he arbitrator will award attorney’s fees to the prevailing party” — and the parties agreed to proceed in superior court rather than to arbitrate. Mari v. Hawkins, Case No. F062563 (5th Dist. June 25, 2012) (Kane, J., author) (unpublished). Plaintiff appealed the adverse fee ruling.
The contract between the parties contained three separate fee provisions. However, the broadly worded fee provision, quoted above, applied only to arbitration. Plaintiff argued that the provision applied, and the parties simply substituted a judge for an arbitrator. Nope, that didn’t work.
The second fee provision provided, “[i]f any proceeding is brought to enforce or interpret the provisions of this Agreement, the prevailing party therein shall be entitled to receive from the losing party therein, its reasonable attorney’s fees . . . “ Plaintiff ingeniously argued that prevailing on the claim for professional negligence required interpreting the contract. Nope, that didn’t work either. Suing for professional negligence is different than suing to enforce or interpret the provisions of a contract.
The third fee provision provided, “[i]n the event [plaintiff] institutes a proceeding against [defendants], either directly or by way of cross-complaint, including a claim for . . . alleged negligence . . . wherein [defendants prevail], [plaintiff] agrees to pay [defendants] immediately following the proceedings all costs of defense, including . . . reasonable attorneys’ fees . . . .” Nope, that too didn’t work. The problem here is that the clause is not reciprocal – it provides recovery to a prevailing defendant, but not to a prevailing plaintiff. But I thought attorney’s fees provisions were reciprocal? Well might you ask. Attorney’s fees provisions are reciprocal when the action is on a contract (Civ. Code section 1717). Here, you will recall that Plaintiff prevailed on a cause for professional negligence, not for breach of contract. Therefore, the third provision is valid, despite the fact that it is not reciprocal. However, because that fee provision is not reciprocal, the prevailing Plaintiff derived no benefit from it here. Too late for tears . . . .
The order of the trial court was affirmed.
Comment: Consider the economics of this case. The parties went to trial, filed post-trial briefs, and went through an appeal. At trial, Plaintiff was found to be damaged in the amount of $155,134, but the damage amount was reduced by the trial judge to $50,000, due to a contractual fee limitation. Then, because the parties had agreed to litigate in superior court, Plaintiff was denied fees. The opinion does not tell us how much the fees were, but you can guess.
Practice Tip: When confronted with a choice of an arbitral or judicial forum, consider the fee implications. Also, consider whether agreeing to litigate in one forum rather than another forum means the attorney’s fees provisions ought to be revisited and revised.
Marc Alexander
Marc Alexander is of counsel in the Santa Ana office of AlvaradoSmith APC, and a member of the Firm’s litigation department. He has over 30 years of experience in bench and jury trials, binding arbitrations, judicial references, mediations, and appellate work in state and federal courts in California.
Mr. Alexander received his B.A. with honors from the University of California, Santa Cruz. He received an M.A. and a Ph.D. in history from Johns Hopkins, and he is a member of Phi Beta Kappa. Mr. Alexander received his Juris Doctor degree from UCLA in 1981, and has been licensed to practice law continuously in California since 1981. Upon graduating from law school, he clerked on the United States Court of Appeals for the Ninth Circuit with the Hon. Warren J. Ferguson.
After clerking for the federal court, Mr. Alexander practiced in California as a litigator with Irell and Manella in its Century City and Orange County offices. In 1986, he joined the litigation department at McKittrick, Jackson, DeMarco & Peckenpaugh in Orange County, California. Mr. Alexander was a shareholder in the litigation department at McKittrick, Jackson, DeMarco & Peckenpaugh; Jackson, DeMarco & Peckenpaugh; Jackson, DeMarco, Tidus & Peckenpaugh; and, Jackson, DeMarco, Tidus, Petersen & Peckenpaugh, until 2008.
Mr. Alexander has broad experience in business and real estate litigation. His experience encompasses landlord-tenant disputes, foreclosures, purchase and sale disputes, title disputes, homeowner association disputes; unfair competition disputes, including non-compete and non-solicitation disputes; partnership and corporate disputes; securities defense; and, intellectual property disputes.
Mr. Alexander is a mediator on the panel for the United States District Court, Central District of California, and a mediator on the panel for the Superior Court of the County of Orange, California.
Over the years, Mr. Alexander has written a number of articles and book reviews on legal subjects. A sampling of his articles includes: Can Private Attorney General Actions Be Forced Into Litigation?, California Litigation, Vol. 28, No. 2, 2015; Summary Contempt and Due Process: England, 1631, California, 1888,” California Litigation, Vol. 27, No. 3 2014; When The American Rule Doesn’t Apply: Attorney’s Fees As Damages In Litigation, California Litigation, Vol. 21, No. 3, 2008 (co-authored with William M. Hensley), Peril of Private Justice: Suspension of Proceedings, Orange County Lawyer, September 2004, Trespass to Chattel and Unsolicited Bulk Email, Orange County Lawyer, September 2003, Protecting Views With Municipal Ordinances, California Land Use, April, 2001, A Newsperson’s Shield Law: A Primer, Civil Litigation Reporter, August, 1995, Despicable Conduct, Or How Punitives Have Been Damaged, Orange County Lawyer, April, 1988, Software Patents and The On-Sale Bar, The Computer Lawyer, January, 1988, When Can An Attorney Contact The Employee Of A Party Represented By Counsel? — Bright Line And Multi-Factor Approaches, Civil Litigation Reporter, December, 1987, When Is A Software Program “Made For Hire?”, The Computer Lawyer, September, 1986, Discretionary Power To Impound And Destroy Infringing Articles: An Historical Perspective, Journal Of The Copyright Society Of The USA (1980).
Mr. Alexander is a co-creator and contributor, with his long-time colleague Mike Hensley, to CalAttorneysFees, a blawg about the law of attorney’s fees in California.
Mr. Alexander is married and has three grown children. He also has a dog named Watson.
Mr. Alexander is available for mediation and arbitration services, and can be contacted by email:
or by telephone:
714.852.6800
or by snail mail:
Marc Alexander
AlvaradoSmith APC
1 MacArthur Place, Suite 200
Santa Ana, CA 92707
Contact Me
Email: calmediation@gmail.com
Telephone: 714 852-6800
Marc Alexander
In the News: $5M Award In FINRA Arbitration, $21.6M Award in JAMS Arbitration
Are Arbitrators Stingier Than Trial Court Judges?
Payback in FINRA Arbitration
Bill Singer comments about a FINRA (Financial Industry Regulatory Authority) arbitration in the June 20, 2012 on-line edition of Forbes, under the heading, “Former Morgan Stanley Smith Barney Brokers Win $5 Million Employment Dispute Arbitration Award.” We surmise some of the conduct may have occurred in California, because the Respondent was also ordered to pay $354,816.54 in attorneys’ fees pursuant to California Civil Code Section 1717 (contract provides for fees to party prevailing on contract cause of action).
Both Sides Declare Victory in JAMS Arbitration
In another arbitration, JAMS awarded the Marin General Hospital Corporation $21.6 million in a dispute with Sutter Health, and $721,000 to Sutter Health. Evidently Marin General Hospital Corporation’s claims were larger still, for both sides are reported to declare themselves pleased with the outcome. So reports the June 20, 2012 edition of the San Anselmo-FairfaxPatch.
The arbitrator was retired Judge Rebecca Westerfield.
Mediation/Settlement/CCP Section 664.6: Those Who Signed The Settlement Agreement Could Enforce It, And Those Who Didn’t Couldn’t
Enforcing Settlement Agreement Under CCP 664.6 Requires Strict Compliance With Statute
The next case teaches us about the need to strictly comply with Cal. Code Civ. Proc. section 664.6 in order to enforce a settlement agreement under that provision. Hampton-Mitchell v. Mitchell, Case No. B228988 (2nd Dist. Div. 7 June 20, 2012) (Zelon, J., author) (not for publication).
The case started out as a lawsuit between wife (Hampton-Mitchell) and ex (Mitchell). A property dispute concerning their house, which was found to be a community asset, resulted in a mediation involving the wife, the buyer of the house, the buyer’s lender lender, the broker, and the agent. This resulted in a stipulation for settlement reached through mediation that the trial court enforced, at the request of the defendants who mediated, under CCP section 664.6. However, the wife wanted to set aside the settlement agreement, and appealed.
The broker and agent signed the stipulation ten days after the mediation. The buyer and lender, however, had not personally signed the stipulation, though they too wished to enforce it.
Mitchell’s counsel conceded that the agreement was enforceable by the broker and agent, as they signed before it was revoked. That was dispositive in favor of the broker and the agent’s effort to enforce the stipulation.
The buyer and the buyer’s lender, however, had not personally signed the stipulation. Section 664.6 requires that the parties to pending litigation either stipulate in a writing signed by the parties outside the presence of the court or orally before the court, for settlement of the case.
Buyer and lender argued that their attorney at the mediation was authorized to sign for them. Not good enough: "the term ‘parties’ as used in section 664.6 . . . means the litigants themselves, and does not include their attorneys of record." Levy v. Superior Court, 10 Cal.4th 578, 586 (1995). There is policy behind this: "The litigants’ direct participation tends to ensure that the settlement is the result of their mature reflection and deliberate assent." Id. at 585. (Note the difference between enforcement of a contract and enforcement under section 664.6. Having the signature of the person against whom a contract is to be enforced often suffices; not so in the case of section 664.6.)
COMMENT: If the parties really don’t want the stipulation for settlement to take effect until all parties have signed it, they could say so explicitly in the stipulation. If such language had been included in the stipulation, then all the parties would have had a tough time enforcing the stipulation, as two parties did not sign it.
Arbitration/Enforceability/Employment: Requiring Employee To Agree To Arbitration Provision Is Not By Itself Wrongfully Coercive, Despite Loss Of Right To A Jury
Labor Code Section 206.5 Prohibits Employer From Obtaining Release of Claim For Wages Under Specified Circumstances, But Does Not Preclude Employee From Waiving Right to Jury By Agreeing To Arbitrate
The scenario is familiar: Employee (Pulli) sues employer (Pony International, LLC), for wrongful termination and other claims. Because employee signed an arbitration provision, employer moves to compel arbitration. The twist: Does Labor Code section 206.5 void the employment agreement and the arbitration provision by precluding employer from requiring employee to give up a right to a jury trial as a condition for future employment and future wages? Yes, concluded the trial court, denying the motion to compel arbitration. Employer appealed. Pulli v. Pony International, LLC , Case No. D059137 (4th Dist. Div. 1 June 19, 2012) (Aaron, J., author) (certified for publication).
No, concluded the Court of Appeal.
Labor Code section 206.5 provides in part:
“(a) An employer shall not require the execution of a release of a claim or right on account of wages due, or to become due, or made as an advance on wages to be earned, unless payment of those wages has been made. . . . ”
After reviewing the plain language of the statute, related code sections, the purpose of section 206.5, and legislative history, the Court concluded, “section 206.5 merely prohibits an employer from requiring an employee to execute a release of a claim for wages due, and places no limitations on the enforceability of arbitration provisions.”
Furthermore, the language of the statute was interpreted narrowly, so an invalid release of a wage claim only renders the release itself “null and void” – it does not “render unenforceable the arbitration provision. . . “
Thus, the Court of Appeal concluded the arbitration provision was valid and enforceable. The agreement did not require the employee to release a claim for wages due, but even if it had done so, such a release would not have invalidated the arbitration clause. The Court of Appeal reversed the order denying the motion to compel arbitration.