Franklin Fraley, Jr. v. Travelers Property Casualty Co

• Court: Court of Appeals for the Ninth Circuit
• Decided: December 22, 2020
• Docket: 19-55846
• Status: Unpublished

Opinion

FILED NOT FOR PUBLICATION DEC 22 2020 UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

FRANKLIN R. FRALEY, Jr., DBA Fraley No. 19-55846 and Associates, an individual, D.C. No. Plaintiff-Appellant, 2:18-cv-00722-AB-JPR

v. MEMORANDUM* TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, a Connecticut corporation; FIDELITY AND GUARANTY INSURANCE UNDERWRITERS, INC., a Wisconsin corporation,

Defendants-Appellees,

v.

DRITA KESSLER, an individual; DK ART PUBLISHING, INC., a California corporation,

Third-party-defendants.

Appeal from the United States District Court for the Central District of California Andre Birotte, Jr., District Judge, Presiding

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Argued and Submitted October 9, 2020 Pasadena, California

Before: KLEINFELD, HURWITZ, and BUMATAY, Circuit Judges.

Fraley appeals the district court’s summary judgment order for the insurers.

We review de novo. Pavoni v. Chrysler Grp., 789 F.3d 1095, 1098 (9th Cir.

2015).

Fraley and his former clients, Drita Kessler and DK Art Publishing, Inc.,

arbitrated his fee. The arbitrator issued an award on January 22, 2018. Kessler and

DK had previously made a partial payment to Fraley of $1,299,990.00. The

arbitrator credited that amount and made a final award to Fraley, in addition to the

amount previously paid, of $1,437,891.55 in principal compensatory damages for

his attorney’s fees and costs relating to his representation of Kessler and DK;

$1,113,899.94 for attorney’s fees, expenses, and costs related to the fee dispute;

and $52,490.00 for arbitration fees, expenses, and arbitrator compensation. Thus,

the total arbitration award was $2,604,281.49, plus per diem interest of $709.10 on

the principal compensatory damages.

2 The Superior Court of the State of California confirmed the award, issuing a

judgment in favor of Fraley on July 9, 2018 for $2,921,413.51. This amount

included Fraley’s unpaid legal fees and costs; attorney’s fees, expenses, and costs

incurred by Fraley in the arbitration; arbitration fees, expenses, and arbitrator

compensation; and pre-judgment interest and enforcement costs.

A week after the final arbitration award, Fraley filed this lawsuit, claiming

the insurance companies that had settled with his former clients in another lawsuit,

Travelers Property Casualty Company and Fidelity and Guaranty Insurance

Underwriters, Inc., owed him the outstanding balance of his attorney’s lien for

failing to preserve his collateral when they transferred $5.16 million dollars to his

former clients in derogation of his lien.

The Superior Court judgment confirming the arbitration award establishes

the amount to which Fraley was entitled, the amount that his lien secured, and his

ability to apply partial payments in the manner designated by the arbitrator (e.g., to

apply payments to interest before principal). Issue preclusion prevents the insurers

from challenging the amount of Fraley’s lien and how he can apply subsequent

partial payments to what is owed to him. See DKN Holdings LLC v. Faerber, 352

3 P.3d 378, 387 (Cal. 2015). “The state court’s confirmation of the arbitration

award . . . must be given the full faith and credit it would receive under state law.”

Caldeira v. Cnty. of Kauai, 866 F.2d 1175, 1178 (9th Cir. 1989). The amount the

insurance companies set aside or reserved is of no moment. Had the insurers

interpleaded the funds and deposited all the proceeds with a court during the

settlement process, they could have limited their liability. See Siciliano v.

Fireman’s Fund Ins. Co., 133 Cal. Rptr. 376, 382 (Ct. App. 1976). But they did

not take that course.

The insurance companies also claim that Fraley’s intentional interference

claims against them were time-barred. See Cal. Code Civ. Proc. § 339. The

insurer’s claim is without merit. “It is well established that ‘[a]fter the client

obtains a judgment, the attorney must bring a separate, independent action against

the client to establish the existence of the lien, to determine the amount of the lien,

and to enforce it.’” Mojtahedi v. Vargas, 176 Cal. Rptr. 3d 313, 316 (Ct. App.

2014) (alteration in original) (quoting Brown v. Superior Ct., 9 Cal. Rptr. 3d 912,

919 (Ct. App. 2004)). “[T]he running of the statute of limitations is suspended

during any period in which the plaintiff is legally prevented from taking action to

protect his rights.” Dillon v. Bd. of Pension Comm’rs of City of Los Angeles, 116

4 P.2d 37, 39 (Cal. 1941). Fraley timely commenced arbitration proceedings in

2016, and the arbitration award was not confirmed until July 2018. He was

therefore entitled to tolling at least through the time he filed suit.

Additionally, the insurance companies contend that they are not bound by

the arbitration because they are not in privity with Fraley’s former clients. They

are incorrect. To be in privity with a party for purposes of issue preclusion, the

nonparty must have been adequately represented in the prior proceeding, such that

they could have reasonably expected to be bound. DKN Holdings, 352 P.3d at

387–88. Here, Fraley’s former clients contested his lien, and the insurers expressly

contemplated future litigation by Fraley in their settlement agreement with Fraley’s

former clients. Thus, the insurers are precluded from relitigating the amount of

Fraley’s lien and how prior payments should have been applied to what was owed

to him.

Because of the effect of the judgment confirming the arbitration, Fraley was

entitled to $2,921,413.51, and California law dictates that he receive post-judgment

interest at a rate of ten percent per annum. Cal. Code Civ. Proc. §§ 685.010,

685.020(a), 695.210. The Superior Court judgment further entitles Fraley to the

5 additional attorney’s fees, expenses, and costs he incurred to enforce his rights in

this action. Accordingly, he is owed that amount as well. On October 5, 2018,

Fraley received an additional $797,917.62 from his former clients. We leave it to

the district judge to determine what Fraley is still entitled to in the first instance.

REVERSED and REMANDED.