Brandlin & Associates Accountancy Corporation v. Silverman, B196085 (Cal. App. 2/6/2008)

• Decision Date: 06 February 2008
• Docket Number: B196085
• Court: California Court of Appeals Court of Appeals
• Parties: BRANDLIN & ASSOCIATES ACCOUNTANCY CORPORATION, Plaintiff and Respondent. v. ROBERT M. SILVERMAN et al., Defendants and Appellants.

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BRANDLIN & ASSOCIATES ACCOUNTANCY CORPORATION, Plaintiff and Respondent. v. ROBERT M. SILVERMAN et al., Defendants and Appellants.

B196085

Court of Appeals of California, Second Appellate District, Division Two

February 6, 2008

NOT TO BE PUBLISHED

Appeal from a judgment of the Superior Court of Los Angeles County, No. BS103840, Ronald M. Sohigian, Judge. Affirmed.

Law Offices of Carol L. Newman, Carol L. Newman; and Timothy D. McGonigle for Defendants and Appellants.

Rutter Hobbs & Davidoff Incorporated and Geoffrey M. Gold for Plaintiff and Respondent.

ASHMANN-GERST, J.

Respondent Brandlin & Associates Accountancy Corporation (Brandlin) initiated arbitration against appellants Robert M. Silverman, a professional corporation, and Robert M. Silverman (collectively Silverman) to recover unpaid expert witness fees. The arbitrator awarded Brandlin all the unpaid expert witness fees that it billed ($278,975.54) even though Silverman argued that Brandlin should be limited to the reasonable value of its services ($ 80,000) under a quantum meruit theory. Despite Silverman's petition to vacate the arbitration award, it was confirmed by the trial court. Silverman appeals, contending that the arbitrator was guilty of the following litany of errors: (1) he failed to decide the pivotal issue at arbitration, which was the reasonable value of Brandlin's fees; (2) he refused to reopen the arbitration hearing to consider a declaration from a new expert who said he would have only charged $50,000 to $75,000; and (3) he failed to honor the parties' contract to decide the reasonable value of its expert witness fees at the end of the engagement. Last, Silverman argues that Brandlin acted unethically by accepting an engagement it was not qualified for and that, as a result, the parties' engagement contract violates public policy. In his view, the engagement contract cannot support an arbitration award.

We find no error and affirm. When a dispute is governed by a contract, as was the case here, a quantum meruit analysis is improper. The arbitrator properly decided not to reopen the hearing to consider a declaration from a new expert because an award had already been issued. Regardless, the declaration would not have changed the arbitration award. The arbitrator honored the parties' engagement contract; it required Silverman to pay Brandlin on an hourly basis. Though Silverman suggests that there was a separate, superseding contract to arbitrate the reasonable value of Brandlin's services, this finds no support in the record. Silverman's public policy argument is based on the theory that Brandlin violated the code of professional conduct of the American Institute of Certified Public Accountants. Beyond the fact that there is no evidence that Brandlin acted unethically, an arbitration award is generally not subject to vacatur on the grounds of public policy unless it was based on a contract that violates a public policy expressed by the Legislature. There is no such public policy at play here. Moreover, Brandlin's behavior cannot otherwise invalidate a contract that, on its face, did not have an illegal or improper purpose. The parties' engagement contract was a standard and lawful agreement for expert witness services.

FACTS

Background

Silverman, an attorney, hired Duross O'Bryan (O'Bryan) to provide expert witness services and testimony on damages in an action against General Motors (General Motors action). Due to a conflict, O'Bryan was removed from the case. He recommended Brandlin as a replacement. Brandlin is an accounting firm that provides forensic accounting services.

Silverman hired Brandlin in August 2004.

By the end of January 2005, Brandlin's bill was $151,657.32. On January 31, 2005, the parties signed an engagement contract. The engagement contract stated that it was Brandlin's understanding that it would be paid for all fees and expenses incurred, whether or not the engagement was completed, or the results were used. Regarding fees, the engagement contract provided: "[Brandlin] will be compensated at our billing rates for professional time incurred in this engagement plus out-of-pocket expenses and administrative costs and such amounts are not contingent upon the outcome of [the] case. Our fees are based upon the hours actually expended by each assigned staff member extended by their hourly billing rate, which currently range[s] from $ 90 to $410 per hour, depending on the personnel assigned. [Brandlin] charge[s] for all time expended for travel." Silverman was required to pay a $10,000 retainer.

The engagement contract further provided: "In accordance with [Brandlin's] policies and procedures, we will provide you with reports of incurred time, fees and expenses as frequently as weekly. It is our practice to provide clients with copies of these reports via e-mail. The purpose of these reports is to keep clients advised of costs incurred in an effort to avoid otherwise avoidable misunderstandings and disputes. [¶] [Brandlin] will submit [its] billings periodically which provide for payment in full within 10 days. All past due invoices are subject to an 18.0% per annum interest charge (1.5% per month). Invoices are deemed accepted unless advised by you in writing within 10-days of issuance. . . . [¶] Although [Brandlin] will submit periodic billings according to the policies discussed in the preceding paragraph, [Silverman has] requested and [Brandlin has] agreed to defer payment of [Brandlin's] fees and expenses," other than the $10,000 retainer, upon the settlement or completion of the General Motors action. Silverman signed a guaranty.

The General Motors action was settled in April 2005. Brandlin's final bill was for $288,975.54. Silverman wrote Brandlin a conditional check for $70,000 to satisfy all fees. It was not cashed.

Arbitration

On August 9, 2005, Brandlin served a demand for arbitration on a claim for breach of contract against Silverman.

The stipulation

Brandlin and Silverman signed a stipulation regarding uncontested facts. According to the stipulation, inter alia, Brandlin hired Silverman pursuant to the engagement contract.

The prearbitration briefs

In its prearbitration brief, Brandlin sought $279,000, prejudgment interest and attorney fees and costs. Brandlin averred that the parties entered into a contract, Brandlin performed and Silverman failed to pay even though he never objected in writing within 10 days of receiving bills.

According to Brandlin, Silverman planned to argue that the issue at arbitration was the reasonable value of expert services. Brandlin disagreed, citing Hedging Concepts, Inc. v. First Alliance Mortgage Co. (1996) 41 Cal.App.4th 1410, 1419 (Hedging Concepts), which stated: "A quantum meruit or quasi-contractual recovery rests upon the equitable theory that a contract to pay for services rendered is implied by law for reasons of justice. . . . [Citation.] However, it is well settled that there is no equitable basis for an implied-in-law promise to pay reasonable value when the parties have an actual agreement covering compensation."

Silverman also filed a prearbitration brief. He argued that the agreement should be rescinded because Brandlin violated ethical standards by accepting services it could not competently perform, and it violated the covenant of good faith and fair dealing by negligently supervising James Ward (Ward), padding the bills, submitting fraudulent bills, and lacking sufficient experience for the job. As a result, Silverman argued that Brandlin should only receive the reasonable value of its services, which was $80,000 less the original retainer of $10,000.

The witnesses

From April 12, 2006 to April 14, 2006, testimony was offered by Jeff Brandlin (the principal of Brandlin), Ward (a Brandlin employee), Linda Bang, Silverman, his cocounsel Carol L. Newman (Newman), and his clients in the General Motors action. Brandlin called William J. Michiels (Michiels) as an expert, and Silverman called O'Bryan as an expert.

Michiels testified that Brandlin's billing was appropriate.

On cross-examination, Ward testified that on January 31, 2005, the day the engagement contract was signed, Silverman and he discussed Brandlin's fees. Regarding that specific discussion, Ward was asked: "What . . . language do you recall?" He replied: "That at the end of the case if we needed to discuss the fees, we would discuss it at that time." Additionally, Ward remembered Silverman stating that "we'd work it out later."

Ward's declaration

Ward submitted a declaration stating: He is a certified public accountant who has a "high degree of specialized professional expertise acting as an accounting expert and financial consultant doing litigation related support work." He was present at the meeting in August 2004 when Silverman hired Brandlin. Jeff Brandlin disclosed that he had never testified in court as an expert witness. Nonetheless, it was agreed that Jeff Brandlin would be the testifying expert. It was further agreed that Ward would prepare the damages calculation. Silverman provided a set of three binders and said they contained all the information necessary to calculate economic damages. Brandlin asked for a $25,000 retainer to begin preparing an initial damages calculation. Brandlin then went to work.

During September and October 2005, Ward worked on the damages model analysis. On October 27, 2004, Ward hand delivered and e-mailed Silverman a work in progress report. It showed Brandlin's time and expenses actually incurred during the period August 31, 2004, to October 24, 2004, and stated that the outstanding balance due was $27,018.01. On December 2, 2004, Ward sent Silverman a work in progress which indicated that the balanced due was $59,992. Another work in progress report was sent on December 8, 2004. By that time the balance due had risen to $ 69,312. After receiving the December 8, 2004 work in progress report, Silverman asked Brandlin...