Miscellaneous: Note To Readers: We’re Back !
Typepad Has Cured Its Problems.
I have been using the Typepad platform since 2012 to post this blog. Typepad recently had problems with its system, and I stopped posting until I felt assured that the system was stable. Now the problems, whatever their origin, appear to be fixed. So I hope to catch up on my posting.
Reviews: Jamal Greene’s How Rights Went Wrong
Your Blogger Reviews How Rights Went Wrong: Why Our Obsession With Rights Is Tearing America Apart, by Jamal Greene, with Foreword by Jill Lepore.
My review of this very interesting book appears in Volume 35, Issue 2 at p. 21 (2022) of The Journal of the Litigation Section of the California Lawyers Association. With the permission of the CLA, and its journal, I have reprinted the review. You can access the reprint by clicking on this link.
Enforceability, FAA Preemption: Second Dist. Div. 7 Holds That Failure To File Fictitious Business Name Statement Makes Arbitration Agreement Unenforceable — With A Wrinkle
The Wrinkle Is That After A Year, Defendant/Appellant Filed A Fictitious Business Name Statement.
Wrinkles. "Val Morgan, a retired attorney for the U.S. agency that oversees federal health-care payments, relaxes with two of her three wrinkly-faced, short-muzzle pug dogs, 14-year old Loretta, left, and 17-year-old Gus." Library of Congress. Photographer: Carol M. Highsmith.
Plaintiff Albert Villareal sued his employer after he injured his knee and his employer terminated his employment. The employer moved to compel arbitration. The trial court and the Court of Appeal both agreed that the employer's failure to file a fictitious business name statement prevented it from enforcing an arbitration provision at the time defendant moved to compel arbitration. Albert Villareal v. LAD-T, LLC et al, No. B313681 (2/7 10/27/22) (Feuer, Perluss, Segal).
Business and Professions Code § 17918 provides that a party who fails to file a valid fictitious business name statement cannot “maintain any action upon or on account of any contract made . . . in the fictitious business name in any court of this state until the fictitious business name statement” has been filed. Section 17918 would be dispositive, but for the fact that the failure to file the fictitious business statement only abates the action (in this case, a motion to compel arbitration, i.e., a suit in equity to compel performance of the arbitration agreement). And here, the defendant corrected the problem a year after filing its motion to compel.
So the Court of Appeal vacated the order denying the motion to compel arbitration, and remanded with directions. Plaintiff Villareal can argue in the trial court on remand that defendant LAD-T, LLC's year delay in filing a fictitious business name statement resulted in waiver of the right to arbitrate, an issue that the trial court would then need to decide.
COMMENT: Why isn't the § 17918 requirement to file a fictitious business name statement preempted by the Federal Arbitration Act, since the FAA applied to this case? As the Court of Appeal explains, the requirement to file a fictitious business name statement doesn't uniquely burden a motion to compel arbitration, because it also applies to the filing of lawsuits in general.
Waiver: 4th District Div 1 Rules Defendant Waived Right To Arbitrate Despite Comparatively Minor Delay, Given Unusual Circumstances
Defendant Waived Right To Arbitrate, Despite Minor Delay In Seeking To Compel Arbitration.
The unusual circumstances in our next case explain the Court of Appeal's conclusion that defendant waived the right to arbitrate, despite a comparatively minor delay in seeking arbitration. Mary Leger v. R.A.C. Rolling Hills et al, D080705 (4/1 10/17/22) (McConnell, Irion, Do).
Plaintiff Leger "suffers from late-stage dementia, severe diabetes, and severe contractures." She sued, alleging improper care during hospice care. Her complaint was served on March 10. On March 29, her guardian ad litem filed a motion for trial preference. Defendant answered the complaint on April 6, alleging the existence of an agreement to arbitrate. On April 11, defendant filed an opposition to the motion for preference, without mentioning it wanted to arbitrate in its papers, or in the hearing. On April 22, the trial court granted Leger's motion for a preference, and three days later, defendant's counsel wrote a letter asking plaintiff to arbitrate. Defendant filed a petition to arbitrate, a hearing was held on May 26, the trial court took the matter under submission, and then denied the request to arbitrate.
The trial court found that although defendant's delay in seeking arbitration was "comparatively minor", it was “unreasonable, manifest and prejudicial given the unique circumstances of this action.” The Court of Appeal affirmed the order denying the petition to compel arbitration.
COMMENT: The Court of Appeal acknowledged that it had not found a case on point with the unusual circumstances of this case. Usually such a short delay in petitioning to arbitrate would not result in a waiver of the right to arbitrate. However, as this case shows, there are situations in which even a "comparatively minor" delay in seeking arbitration may be inconsistent with asserting the right to arbitrate and may be prejudicial to the other side.
Public Policy, Vacatur: First District Div. 3 Holds Late Penalty On Loan Default Resulted In Forfeiture Violating Public Policy And Justifying Vacatur Of Arb Award
Violating Public Policy Can Be Ground For Vacating Award.
Liquidated damages are presumed invalid in a consumer contract and presumed valid in a non-consumer contract. The Honchariws borrowed $5.6M secured by real property in a "non-consumer" contract — so a liquidated damages provision was presumptively valid when they defaulted on the loan, and an arbitrator so found. They petitioned to vacate the award, the trial court denied their petition to vacate, and the Honchariws appealed. Honchariw v. FJM Private Mortgage Fund, LLC et al, A163756 (1/3 9/29/22) (Petrou, Fujisaki, Rodriguez).
One ground for vacating an arbitration award is: "The arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted." Cal. Code Civ. Proc. § 1286.2(a)(4). "Arbitrators may exceed their powers by issuing an award that violates a party’s unwaivable statutory rights or that contravenes an explicit legislative expression of public policy." The Court of Appeal found a violation of legislative policy to be the case here.
Here, the Late Fee imposed by the lender, which included "a 9.99% interest rate assessed against the entire unpaid principal balance of the Loan at any time a single payment is missed," violated the state policy against unreasonable liquidated damages provisions, which is the basis for Cal. Civ. Code, § 1671. The Court of Appeal was unable to find a single case "in which a liquidated damages provision was upheld when a borrower missed a single installment, and then was penalized pursuant to that provision, even in part, by a late payment fee assessed upon the entire outstanding principal balance, much of it still to be owed."
REVERSED.
Miscellaneous: Attorney Fees: A Potential Malpractice Minefield
We've Authored An Article About Attorney Fees And The Risk Of Malpractice Exposure In The October 2022 Issue Of Orange County Lawyer.
"Attorney Fees: A Potential Malpractice Minefield," authored by Marc Alexander and appearing in the October 2022 issue of Orange County Lawyer, discusses the "unhappy case" of Shahrokh Mireskandari v. Edwards Wildman Palmer, 77 Cal.App.5th 247 (2022), and its implications for legal malpractice when the risks of attorney fee shifting are (allegedly) not carefully analyzed and disclosed to the client.
Proving legal malpractice typically follows "the familiar case-within-a case method for establishing causation in litigation malpractice cases." The plaintiff-client needs to establish not only the negligence of the attorney, but also that the client would have won the underlying case but for attorney negligence. Mireskandari, however, is not a typical case, for Mireskandari's malpractice claim did not depend on prevailing in the underlying action. Instead, his malpractice claim depended on being able to prove that the "outcome" would have been better had he received different legal advice, never filed a lawsuit, and never been exposed to the risk of anti-SLAPP attorney fees.
The "case-within-a case" method of establishing a malpractice claim is simply an example of a more general principal, namely, that but for attorney negligence, the outcome of a case would have been better for the client. This is not exactly a bright line.
Perhaps the most important lesson is that a careful attorney will analyze attorney fee issues early in the litigation process, and inform the client of those risks. While this may be easy in a simple case where a contract contains a "prevailing party attorney fees clause," there are numerous situations in which the risk of fee shifting is less obvious. The article describes some attorney fee situations that create a potential malpractice minefield.