Schatz v. ALLEN MATKINS LECK GAMBLE

53 Cal. Rptr. 3d 173, 146 Cal. App. 4th 674, 2007 Daily Journal DAR 407, 2006 Cal. Daily Op. Serv. 317, 2007 Cal. App. LEXIS 20
CourtCalifornia Court of Appeal
DecidedJanuary 9, 2007
DocketD047347
StatusPublished
Cited by1 cases

This text of 53 Cal. Rptr. 3d 173 (Schatz v. ALLEN MATKINS LECK GAMBLE) is published on Counsel Stack Legal Research, covering California Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Schatz v. ALLEN MATKINS LECK GAMBLE, 53 Cal. Rptr. 3d 173, 146 Cal. App. 4th 674, 2007 Daily Journal DAR 407, 2006 Cal. Daily Op. Serv. 317, 2007 Cal. App. LEXIS 20 (Cal. Ct. App. 2007).

Opinion

53 Cal.Rptr.3d 173 (2007)
146 Cal.App.4th 674

Richard A. SCHATZ, Plaintiff and Respondent,
v.
ALLEN MATKINS LECK GAMBLE & MALLORY LLP, Defendant and Appellant.

No. D047347.

Court of Appeal of California, Fourth District, Division One.

January 9, 2007.

*174 Rogers Joseph O'Donnell & Phillips, Sean M. SeLegue and Zachary M. Radford, San Francisco, for Defendant and Appellant.

Joseph L. Schatz, for Plaintiff and Respondent.

McCONNELL, P.J.

This case involves an attorney fees dispute. In Alternative Systems, Inc. v. Carey (1998) 67 Cal.App.4th 1034, 79 Cal. Rptr.2d 567 (Alternative Systems), the court held the mandatory fee arbitration act (MFAA; Bus. & Prof.Code[1] § 6200 et seq.), which for public policy reasons entitles clients to nonbinding arbitration and trial de novo, supersedes a retainer agreement's binding arbitration clause when the client opts for the MFAA procedure. Under the MFAA, a client may commit to binding arbitration only after a fee dispute arises. (Alternative Systems, supra, at pp. 1042-1044, 79 Cal.Rptr.2d 567.)

The issue here is whether Alternative Systems remains good law in light of the Supreme Court's opinion in Aguilar v. Lerner (2004) 32 Cal.4th 974, 12 Cal. Rptr.3d 287, 88 P.3d 24 (Aguilar). In a concurring opinion in Aguilar, Justice Chin submitted that the majority opinion effectively overruled Alternative Systems. (Aguilar, supra, at pp. 992-993, 12 Cal. Rptr.3d 287, 88 P.3d 24 (con. opn. of Chin, J.).) Justice Chin concluded the MFAA complements, rather than supersedes the California Arbitration Act (CAA), and after nonbinding arbitration under the MFAA there is no right to trial de novo if the parties had a preexisting agreement for binding arbitration. In that instance, a second arbitration resolves the matter. (Id. at pp. 990-991, 12 Cal.Rptr.3d 287, 88 P.3d 24.)

We respectfully disagree with Justice Chin's analysis and conclude Aguilar did not impliedly overrule Alternative Systems, and it was correctly decided. We affirm the order denying the motion of defendant Allen Matkins Leek Gamble & Mallory (Allen Matkins) to compel binding arbitration following nonbinding arbitration under the MFAA and plaintiff Richard A. Schatz, M.D.'s, request for trial de novo.

*175 FACTUAL AND PROCEDURAL BACKGROUND

In a February 1999 agreement Dr. Schatz retained Allen Matkins to represent him in a dispute with a Dr. and Mrs. Palmaz concerning the assignment of income from a partnership. The agreement stated it would also pertain to "any additional matters we handle on your behalf or at your direction." The agreement contained an arbitration section, which provided: "If you do not agree to arbitrate disputes with us, simply line out this section. Arbitration is not a precondition to us representing you. By signing this letter without deleting this section, you agree that, in the event of any dispute arising out of or relating to this agreement, our relationship, or the services performed (including but not limited to disputes regarding attorneys' fees or costs ...), such dispute shall be resolved by submission to binding arbitration in San Diego County, California, before a retired judge or justice..." Dr. Schatz signed the agreement without lining out the arbitration section.

In February 2000, without entering into another agreement, Dr. Schatz retained Allen Matkins to represent him in an easement dispute with a different party or parties affecting the rear access road to his Rancho Santa Fe home. Dr. Schatz paid Allen Matkins $179,088.69 in fees and costs incurred in the matter, but approximately two months before trial he stopped making payments. Allen Matkins proceeded to trial despite nonpayment, and in an April 2003 letter to Dr. Schatz, it demanded $169,917.42 in outstanding fees and costs so "arbitration will not be necessary."

Dr. Schatz did not respond, and Allen Matkins apparently did nothing for some time. In a January 2004 letter to him, Allen Matkins invoked the arbitration clause of the agreement in the Palmaz matter. In a written response, Dr. Schatz asserted his fee dispute concerned undisclosed conflicts of interest in the easement matter. Dr. Schatz claimed the agreement's arbitration provision was inapplicable because it did not refer to the easement litigation and its reference to additional matters was not highlighted or otherwise emphasized. Alternatively, Dr. Schatz claimed the arbitration provision was illegal under Alternative Systems, supra, 67 Cal.App.4th 1034, 79 Cal.Rptr.2d 567. Dr. Schatz advised he wished to exercise his "statutory rights to nonbinding fee arbitration, and, if he so elects, trial de novo before a jury."

Allen Matkins advised Dr. Schatz it believed the arbitration provision was applicable, but it agreed to nonbinding arbitration under the MFAA through the San Diego County Bar Association (Bar Association). Allen Matkins provided Dr. Schatz with an application for the arbitration along with rules and instructions on the procedure. Allen Matkins requested that Dr. Schatz notify it within 10 days if he elected nonbinding arbitration.

At Dr. Schatz's insistence, Allen Matkins then provided him with a statutory "Notice of Client's Right to Arbitration." The notice provides a client has 30 days from the date of its receipt to apply for arbitration.

The matter was arbitrated in April 2005 through the Bar Association, and the following month the arbitrators ruled in favor of Allen Matkins. Dr. Schatz then filed a complaint seeking a trial de novo, declaratory relief and refund of attorney fees. In response, Allen Matkins petitioned to compel binding arbitration under the preexisting agreement. In his opposition, Dr. Schatz argued Alternative Systems invalidates the binding arbitration provision, and in reply, Allen Matkins argued that in Aguilar the Supreme Court impliedly abrogated the holding in Alternative Systems, *176 and binding contractual arbitration would satisfy the MFAA's de novo trial requirement. The court agreed with Dr. Schatz and denied the petition to compel arbitration.

DISCUSSION

I

Overview of Arbitration Proceedings

In standard arbitration under the CAA, both parties must agree to arbitrate. (Benasra v. Marciano (2001) 92 Cal.App.4th 987, 990,112 Cal.Rptr.2d 358.) "The CAA `represents a comprehensive statutory scheme regulating private arbitration in this state. [Citation.] Through this detailed statutory scheme, the Legislature has expressed a "strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution."' [Citation.] `The statutes set forth procedures for the enforcement of agreements to arbitrate [citations], establish rules for the conduct of arbitration proceedings except as the parties otherwise agree [citations], describe the circumstances in which arbitrators' awards may be judicially vacated, corrected, confirmed, and enforced [citations], and specify where, when, and how court proceedings relating to arbitration matters shall occur [citations].'" (Aguilar, supra, 32 Cal.4th at p. 983, 12 Cal.Rptr.3d 287, 88 P.3d 24.)

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53 Cal. Rptr. 3d 173, 146 Cal. App. 4th 674, 2007 Daily Journal DAR 407, 2006 Cal. Daily Op. Serv. 317, 2007 Cal. App. LEXIS 20, Counsel Stack Legal Research, https://law.counselstack.com/opinion/schatz-v-allen-matkins-leck-gamble-calctapp-2007.