Law Offices of David S. Karton v. Segreto

• Decision Date: 30 July 2009
• Docket Number: No. B211129.,B211129.
• Citation: 97 Cal. Rptr. 3d 329,176 Cal.App.4th 1
• Court: California Court of Appeals Court of Appeals
• Parties: LAW OFFICES OF DAVID S. KARTON, A LAW CORPORATION, Plaintiff and Appellant, v. GIUSEPPE SEGRETO, Defendant and Respondent.

176 Cal.App.4th 1

97 Cal. Rptr. 3d 329

LAW OFFICES OF DAVID S. KARTON, A LAW CORPORATION, Plaintiff and Appellant, v. GIUSEPPE SEGRETO, Defendant and Respondent.

No. B211129.

Court of Appeals of California, Second District, Division Three.

July 30, 2009.

As modified August 19, 2009.

Law Offices of David S. Karton and David S. Karton for Plaintiff and Appellant.

Kohn Law Group and Robert E. Kohn for Defendant and Respondent.

OPINION

CROSKEY, J.

We are here concerned with a Mandatory Fee Arbitration Act (MFAA) (Bus. & Prof. Code, § 6200 et seq.) nonbinding arbitration and the proceedings which followed when the attorney, who was successful at the arbitration, was not satisfied with the amount awarded by the arbitrators. Although the client had been willing to pay the attorney the amount of the award, the attorney petitioned the trial court to "correct" the award to include additional sums. The trial court denied the petition to correct, on the basis that the attorney sought modifications to the award beyond those which could be made by the trial court on a petition to correct (Code Civ. Proc., § 1286.6). The attorney then returned to the arbitrators and obtained an "amendment" to the award to include the additional amounts sought. Within 30 days of service of the amended award, the client filed a request for a trial de novo. The attorney, believing that the amended award did not give the client an additional 30 days within which to seek a trial de novo, petitioned the trial court to confirm the amended award. The trial court concluded the client's request for trial de novo was valid, and denied the petition. The client then sought its attorney's fees as the prevailing party with respect to the attorney's petitions to correct and confirm. The trial court denied the client's motion for fees. The attorney appeals from the denial of the petition to confirm. The client cross-appeals from the denial of its motion for attorney's fees.

We conclude the trial court erred in its ruling on the initial petition to correct the award. The trial court, upon concluding that the award was not correctable in the manner requested by the attorney, should have confirmed the award. (Code Civ. Proc., § 1286.) Judgment should have been entered in conformity therewith. (Code Civ. Proc., § 1287.4.) The attorney would therefore have been precluded from returning to the arbitrators and obtaining an amendment of the award, and would have had the sole remedy of appealing from the trial court's judgment confirming the award. As the trial court's denial of the attorney's petition to correct the award was undoubtedly correct, a judgment confirming the initial award is the only proper resolution of this case. We therefore direct the trial court to enter a judgment confirming the initial award, and vacating the amended award.

FACTUAL AND PROCEDURAL BACKGROUND

Attorney David S. Karton, and/or his professional corporation,¹ represented Giuseppe Segreto in an underlying action. A dispute arose regarding the fees owed by Segreto. Attorney Karton and Segreto proceeded to nonbinding arbitration under the MFAA.

In Segreto's initial petition for arbitration, Segreto represented that the amount in dispute was $42,371.16. In an arbitration brief, Attorney Karton stated the amount owed was "$42,371.16 . . . plus accrued interest plus additional costs." Apparently, the $42,371.16 amount on which both parties relied was the total due on Attorney Karton's February 23, 2007 bill, and the bill had included in its total $352.06 attributable to "interest charges."

On October 3, 2007, an arbitration hearing was held at which both parties appeared. On December 3, 2007, the arbitrators issued their award. In their findings of fact, the arbitrators stated that the "unpaid balance on [Attorney] Karton's bills was $42,371." The arbitrators concluded that, in the absence of a binding fee agreement between Attorney Karton and Segreto, Attorney Karton was entitled to recover the reasonable value of his services. The arbitrators further concluded that the amount charged by Attorney Karton "was reasonable under the circumstances and does represent the reasonable value of the services rendered." The arbitrators did not make any specific findings or conclusions regarding prejudgment interest. The arbitrators ruled in favor of Attorney Karton, in the amount of $42,371.²

The arbitrators' decision was served on the parties on December 14, 2007, with a notice indicating that if either party sought a trial de novo, that party must file a complaint within 30 days of the date of service of the arbitration award. (Bus. & Prof. Code, § 6204, subd. (a).) Neither party did so. Under the MFAA, the arbitration award thus became binding. (Bus. & Prof. Code, § 6203, subd. (b).)

On January 14, 2008, after the 30 days had passed and the award became binding, Segreto sent Attorney Karton a check for the full $42,371 awarded by the arbitrators. Attorney Karton rejected the check on the basis that "the amount tendered is not sufficient" because it did not include prejudgment interest.³ Segreto responded, "[n]othing in the arbitrators' decision supports your demand for interest."

On January 17, 2008, Attorney Karton filed a petition to confirm the arbitration award. In his petition to confirm, he sought prejudgment interest from February 28, 2007. Attorney Karton, however, did not proceed on this petition, in the apparent realization that the arbitrators' award did not provide for the recovery of prejudgment interest.

On February 6, 2008, Attorney Karton filed his "First Amended Petition" to "Correct" the arbitrators' award. In summary, Attorney Karton had originally been awarded $42,371. He argued that he should instead be awarded $42,106.05 plus prejudgment interest. In order to accomplish this change, the trial court would have to (1) award prejudgment interest; (2) reallocate $352.06 of the $42,371 fee award to prejudgment interest; and (3) award additional fees and costs incurred in the amount of $86.95.⁴

Segreto opposed the petition to correct the award. He did not, however, argue that the trial court should confirm the arbitrators' award. Instead, he simply requested dismissal of the petition to correct with prejudice.

The trial court concluded the "corrections" sought by Attorney Karton were outside the scope of corrections the trial court was statutorily permitted to make.⁵ Concluding that there was no clerical error or miscalculation in the award, but that, instead, Attorney Karton sought additional fees and an additional award of prejudgment interest, the trial court denied the petition. The trial court did not confirm the award or dismiss the petition to correct it, but simply denied the petition. The trial court verbally told Attorney Karton to go back to the arbitrators to seek the changes to the award which he wanted.

The arbitrators may correct their award only on the same bases as a trial court.⁶ (Code Civ. Proc., § 1284.) Moreover, they may only correct their award within 30 days after service of the award, and a party may only request correction within 10 days of service of the award. (Code Civ. Proc., § 1284.) However, arbitrators do possess the power to amend their awards, if certain requirements are met. There is a dispute in the case law as to whether a party may seek an amendment of an arbitration award after the expiration of the 10-day period in which to seek a correction of the award. This division has held that the 10-day period controls (Century City Medical Plaza v. Sperling, Isaacs & Eisenberg (2001) 86 Cal.App.4th 865, 881 & fn. 25 ), while Division Three of the Fourth Appellate District has held that an arbitration award may be amended at any time until the trial court confirms the award (Delaney v. Dahl (2002) 99 Cal.App.4th 647, 650, 659 (Delaney)). The Committee on Mandatory Fee Arbitration of the State Bar of California has issued an "Arbitration Advisory" regarding the "Amendment or Supplementation of Arbitration Awards." In that advisory, the committee recognized the dispute, and chose to follow Delaney. The committee therefore indicated that "an arbitrator may amend or supplement an award . . . at any time prior to judicial confirmation." (State Bar, Com. on Mandatory Fee Arbitration, Arbitration Advisory 03-02, The Amendment or Supplementation of Arbitration Awards, Mar. 27, 2003.)

In reliance on the Arbitration Advisory, on February 27, 2008, Attorney Karton requested the arbitrators amend the arbitration award. Segreto did not file any papers in opposition. On March 10, 2008, the arbitrators issued a new award. The award was not issued in addition to the prior one, it was clearly intended to supersede it. The award restated nearly all of the findings of fact of the initial award. However, the amended award adopted Attorney Karton's proposed amendments in their entirety, concluding the unpaid balance due Attorney Karton was $42,106.05, and that Attorney Karton is due "pre-award" interest in the amount of $4,748.04, plus $11.54 per day from the date of the award. The amended award was served on the parties on March 21, 2008.

On April 18, 2008, Segreto filed a request for trial de novo. This was given a separate case number and assigned to a different trial judge than the matter in which Attorney Karton had filed the petition to correct.⁷ On May 16, 2008, Attorney Karton filed, in the action in which his previous petition to correct had been filed, a petition to confirm the amended award.⁸ Attorney Karton acknowledged that Segreto had filed a request for trial de novo, but argued that, since 30 days had elapsed since the initial award had been served without a request for trial de novo, that award had become binding. Attorney Karton took the position that the arbitrators' subsequent amendment of their (then binding) initial award did not restart the 30-day clock for filing a request for trial de novo.⁹ Segreto filed a response...