Law Finance Group, LLC v. Key
| Decision Date | 30 July 2021 |
| Docket Number | B305790 |
| Citation | 282 Cal.Rptr.3d 125,67 Cal.App.5th 307 |
| Parties | LAW FINANCE GROUP, LLC, Plaintiff and Appellant, v. Sarah Plott KEY, Defendant and Respondent. |
| Court | California Court of Appeals Court of Appeals |
Eisner, Christopher L. Frost, Beverly Hills, Taylor S. Simeone ; Greines, Martin, Stein & Richland, Cynthia E. Tobisman and Alana H. Rotter, Los Angeles, for Plaintiff and Appellant.
Grignon Law Firm, Margaret M. Grignon, Long Beach, and Anne M. Grignon for Defendant and Respondent.
Law Finance Group (LFG) appeals from an order of the superior court denying its motion to confirm an arbitration award against respondent Sarah Plott Key. Key borrowed $2.4 million from LFG to help finance a probate action alleging that Key's sister, Elizabeth Plott Tyler, exercised undue influence over their mother in orchestrating changes to a trust (the Probate Action). Key ultimately prevailed in that action, winning the right to a third of the parents’ estate. This court previously affirmed the order of the probate court awarding that relief. (See Key v. Tyler (June 27, 2016, B258055) [nonpub. opn.] 2016 WL 3587505, 2016 Cal.App.Unpub.LEXIS 4757.)1
Although Key repaid the principal that she borrowed from LFG, she refused to pay any interest, claiming that the terms of the note violated the California Financing Law ( Fin. Code, § 22000 et seq. ). LFG demanded binding arbitration under the loan agreement.
A panel of three arbitrators found that some of the loan terms were invalid but otherwise enforced the loan agreement, awarding LFG $778,351 in simple interest along with attorney fees and costs. The panel issued a modified award on September 18, 2019.
Less than two weeks later, on October 1, 2019, LFG filed a petition in superior court to confirm the award. Nearly four months after that, and 130 days after service of the modified arbitration award, Key filed a motion to vacate the award. Her motion claimed that the arbitrators exceeded their authority by finding that the loan from LFG was a consumer loan but nevertheless enforcing some of the terms of the loan agreement rather than finding it void. Nine days later, Key filed a response to LFG's petition raising the same arguments.
The superior court agreed with Key and vacated the arbitration award.
On appeal, LFG argues that the trial court should have independently considered the evidence underlying the arbitrators’ conclusion that the litigation loan it made to Key was a consumer loan rather than a commercial loan. LFG also argues that Key's requests to vacate the arbitration award were untimely. We do not reach the substantive issue because we agree with LFG that Key did not timely request that the arbitration award be vacated.
Code of Civil Procedure section 1288 requires that a petition to vacate an arbitration award must be filed and served not later than 100 days after service of the award.2 Section 1288.2 imposes the same deadline on a response to a petition to confirm an arbitration award when the response requests that the award be vacated. These deadlines are jurisdictional. ( Santa Monica College Faculty Assn. v. Santa Monica Community College Dist. (2015) 243 Cal.App.4th 538, 544–545, 197 Cal.Rptr.3d 71 ( Santa Monica ); Douglass v. Serenivision, Inc. (2018) 20 Cal.App.5th 376, 384–385, 229 Cal.Rptr.3d 54 ( Douglass ).) Neither Key's petition to vacate the arbitration award nor her request to vacate the award in her response to LFG's petition to confirm were filed within the 100-day limit. Thus, the trial court lacked jurisdiction to consider Key's request to vacate, and the arbitration award must be confirmed.
In 2013, Key needed money to pay her ongoing legal fees in the Probate Action. Her counsel in that action referred her to LFG.
Key borrowed approximately $2.4 million from LFG pursuant to a Loan and Security Agreement (Loan Agreement) that permitted her to borrow up to a maximum of $3 million. In addition to repayment of the principal, the Loan Agreement required Key to pay interest at a rate of 1.53 percent per month, compounded monthly, along with an origination fee (calculated as 2 percent of the maximum loan availability), a due diligence fee, and a servicing fee (calculated as 0.25 percent of the total amount that Key owed at the end of each month). Absent a default, LFG's right to repayment was limited to Key's recovery in the Probate Action and her interest in the trust that was the subject of that action.
The Loan Agreement contained an arbitration provision. That provision required that "any dispute between the Parties arising out of the transaction provided for in this Agreement" would be decided by a three-member arbitration panel under the Commercial Arbitration Rules of the American Arbitration Association. The provision also entitled the prevailing party to attorney fees.
Key prevailed in the Probate Action, winning the right to a third of her parents’ estate which, at the time, was equivalent to about $20 million. She repaid the principal amount of the $2.4 million loan from LFG, but did not pay any interest or other fees.
LFG demanded arbitration, seeking about $1.45 million that it claimed Key still owed under the Loan Agreement. In defense, Key argued that the Loan Agreement was unconscionable and that the various fees in the agreement violated provisions of the California Financing Law applicable to consumer loans.
On August 6, 2019, the three-arbitrator panel served its final arbitration award. At the request of the parties, the arbitrators later modified the award to reduce the amount of costs awarded to LFG. The modification was served on September 19, 2019.
The arbitrators found that the Loan Agreement was binding and enforceable. However, the arbitrators also found that the loan from LFG was a consumer loan and that the provisions for compounded interest and servicing fees were therefore unlawful under the California Financing Law. The arbitrators disregarded those provisions and awarded damages consisting of simple interest in the amount of $778,351. The arbitrators awarded LFG costs and attorney fees in the amount of $838,864 as the prevailing party.
LFG filed a petition to confirm the arbitration award on October 1, 2019, less than two weeks after the modified arbitration award was served. The parties then communicated about coordinating the timing for the hearing on LFG's petition and for the petition to vacate that Key intended to file.
Key's counsel agreed to accept service of LFG's petition and to file a challenge under section 170.6 to the assigned judge. The parties further agreed that "the 10 day time period for filing a Petition to Vacate will not apply and that once the new judge is appointed, and we can find out when a hearing can be set pursuant to that judge's calendar, we will work backwards to come up with a briefing schedule for the Petition to Confirm and the Petition to Vacate that we will be filing." Key's counsel confirmed this agreement by e-mail on October 10, 2019.
Over the next few months, the parties discussed setting a hearing date, and finally agreed on a hearing date of February 20, 2020. On December 12, 2019, counsel for LFG sent an e-mail to Key's counsel asking, Key apparently did not respond to that e-mail.
The parties then communicated further about the details of filing and service. They agreed to accept electronic service, and Key's counsel informed LFG's counsel that Key intended to serve her petition to vacate on January 27, 2020.
As promised, Key filed her petition to vacate with supporting documents on January 27, 2020 (130 days after service of the modified arbitration award). On February 5, 2020, Key filed her response to LFG's petition to confirm. Key's response also requested that the arbitration award be vacated.
Both Key's petition to vacate and her response to LFG's petition to confirm argued that the arbitrators exceeded their powers by finding that the loan from LFG was a consumer loan while failing to void the loan (or at least cancel all interest and other charges) under Financial Code sections 22750 – 22752.
In a written order, the trial court ruled that Key's petition to vacate was untimely under the 100-day deadline of section 1288, which the court concluded was jurisdictional. However, the court also ruled that Key's request to vacate in her opposition to LFG's petition was timely because it complied with the time period to respond to petitions to confirm specified in section 1290.6. The court further found that, "[i]f there is a need to extend the time to the actual filing date to enable the court to decide the petition on its merits, the court finds good cause to grant such an extension." The trial court's order did not mention section 1288.2.
On the merits, the trial court found that "the arbitrators exceeded 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 cited Financial Code section 22750, subdivision (a), which provides that, "[i]f any amount other than, or in excess of, the charges permitted by this division is willfully charged, contracted for, or received, the contract of loan is void, and no person has any right to collect or receive any principal, charges, or recompense in connection with the transaction."
Section 1288 governs the timing of both petitions...
To continue reading
Request your trial