Law Offices of Dixon R. Howell v. Valley

Decision Date27 May 2005
Docket NumberNo. H027422.,H027422.
Citation29 Cal.Rptr.3d 499,129 Cal.App.4th 1076
CourtCalifornia Court of Appeals Court of Appeals
PartiesLAW OFFICES OF DIXON R. HOWELL, Plaintiff and Appellant, v. Michael W. VALLEY, Defendant and Appellant.

Gordon J. Finwall, San Jose, Finwall Law Offices, for Plaintiff and Appellant.

John Michael O'Connor, Los Angeles, Law Offices of John Michael O'Connor, for Defendant and Appellant.

RUSHING, P.J.

The Mandatory Fee Arbitration Act (MFAA), under Business and Professions Code section 6200 et seq., provides a quick and inexpensive method for clients, at their option, to resolve fee disputes with their attorneys.1 In this case, we consider whether a client may assert his MFAA arbitration rights—without actually availing himself of arbitration—to delay and ultimately prevent the resolution of a fee dispute with his former attorney. Under section 6201, subdivision (a) (§ 6201(a)), the attorney must provide written notice of the client's right to arbitration under the MFAA at or before the time the attorney serves a lawsuit on the client. As our Supreme Court has recently observed, "in the typical MFAA case, the client receives [the section 6201(a) notice] and thereafter expressly chooses either to proceed under the MFAA or not." (Aguilar v. Lerner (2004) 32 Cal.4th 974, 989, 12 Cal.Rptr.3d 287, 88 P.3d 24.) The case before us, however, is far from the "typical MFAA case."

The Law Offices of Dixon R. Howell, doing business as Business Law Group (Law Firm or Firm) sued Michael W. Valley (Client) on a promissory note that he had signed to memorialize an obligation for unpaid fees. Client's answer alleged a defense of estoppel based on Law Firm's failure to give the requisite section 6201(a) notice. The lawsuit proceeded over the course of almost 15 months without any assertion by Client that he wished to arbitrate the fee dispute. The court denied Law Firm's motion for summary judgment because of its noncompliance with section 6201(a). Six days later, on the eve of trial, the court granted Client's ex parte motion in limine to dismiss the complaint. Client thereafter moved for an award of attorney fees of approximately $44,000 (i.e., nearly one and one-half times the amount in controversy in the action); the court granted the motion but awarded fees of $12,000. Law Firm appealed the dismissal of the action and Client appealed the fee order.

We are required to determine whether the court below applied the proper criteria in deciding Client's motion to dismiss. Since we conclude that the trial court dismissed the action based upon the erroneous view that dismissal was mandatory because of Law Firm's failure to give notice under section 6201(a), we reverse. After determining that reversal is required, we examine de novo the propriety of the court's denial of Firm's motion for summary judgment. We hold that there was no triable issue of material fact and that Client waived his defense of lack of notice under section 6201(a). Summary judgment therefore should have been granted.

PROCEDURAL HISTORY

Law Firm filed its complaint for breach of written contract on November 19, 2002. The complaint alleged that Client executed a promissory note in favor of Firm on April 1, 2002, and that Client breached his obligations under the note by failing to pay the sum of $33,137.50 plus interest.

Client filed a general denial to the complaint on January 3, 2003. His response included 25 affirmative defenses—many of which appear to have had no application to the case—including a defense captioned "Estoppel" that read: "Defendant alleges that the Complaint, and each cause of action alleged therein, are barred and plaintiff is estopped from obtaining any recovery from this answering defendant because plaintiff has failed to comply with Business and Professions Code [section] 6201."

The matter proceeded to judicial arbitration in August 2003, pursuant to Code of Civil Procedure section 1141.10 et seq.2 There was an award in Law Firm's favor that was rejected by Client.

Law Firm filed a motion for summary judgment, or, in the alternative, a motion for summary adjudication that Client's estoppel defense under section 6201 was without merit (collectively, the summary judgment motion or motion). The court denied the motion. In concluding that summary judgment was not appropriate, the court reasoned that: (1) while Firm met its initial burden on summary judgment of proving each element of a breach of contract claim, its failure to give Client notice of his right to arbitration under section 6201(a) created a ground for dismissal of the action; and (2) Client did not waive his arbitration rights by answering the complaint. Likewise, the court denied summary adjudication because Firm did not meet its burden of establishing that the estoppel defense was without merit—again because Firm was required to give notice to Client of the right to arbitration and Client's appearance where he had received no section 6201(a) notice was not a waiver of arbitration.

Thereafter, on February 11, 2004—six days before the assigned trial date and after the case did not settle at a mandatory settlement conference—the court granted Client's ex parte motion in limine to dismiss the action due to Law Firm's noncompliance with section 6201(a). At the same time, the court denied Firm's ex parte application to stay the action pending completion of MFAA arbitration. A notice of entry of dismissal was filed March 4, 2004. Client moved for an order awarding attorney fees of $44,051.25, as the prevailing party in the action under Code of Civil Procedure sections 1032, subdivision (a)(4) and 1033.5.3 He asserted that he was entitled to attorney fees because the action was on a contract (promissory note) which included an attorney fees provision.4 On May 4, 2004, the court awarded Client attorney fees of $12,000 (or slightly more than one-quarter of the amount sought). It concluded that "it was not reasonable to incur the full amount of fees sought, because a motion to dismiss or stay could have been brought and is reasonably likely to have succeeded."5

Law Firm filed a notice of appeal on May 3, 2004. Client filed an appeal from the attorney fees order on May 20, 2004.

The appeal from the dismissal was filed timely (Cal. Rules of Court, rule 2(a)(1)), and is a proper subject for appellate review. (See Code Civ. Proc., § 581d; Kahn v. Lasorda's Dugout, Inc. (2003) 109 Cal. App.4th 1118, 1120, fn. 1, 135 Cal.Rptr.2d 790.) Likewise, Client's appeal was timely as an original appeal from the order awarding attorney fees. (Cal. Rules of Court rule 2(a)(1).)6 Such a postjudgment award of attorney fees is also reviewable on appeal. (Code Civ. Proc., § 904.1, subd. (a)(2); R.P. Richards, Inc. v. Chartered Construction Corp. (2000) 83 Cal.App.4th 146, 158, 99 Cal.Rptr.2d 425.)

DISCUSSION
I. Issues On Appeal

Law Firm's two claims of error are as follows:

1. The dismissal of the action on the basis of Firm's noncompliance with section 6201(a) was improper because it was based on the erroneous view that such dismissal was mandatory.

2. Summary judgment should have been granted because Law Firm: (a) established all elements of its breach of contract claim; (b) negated the defense of estoppel under section 6201 by establishing that Client waived his right to assert that the dispute had to be arbitrated; and (c) established that Client's other defenses raised in opposition to the motion had no merit.7

Client contends in his appeal that the court abused its discretion by "tak[ing] such a sharp scalpel" in awarding only $12,000 in attorney fees, instead of the $44,051 requested.

We will address these contentions below. At the outset, however, we provide a necessary overview of the MFAA.

II. The Mandatory Fee Arbitration Act

The MFAA was enacted in 1978 following an earlier finding by the Board of Governors of the California State Bar that fee disputes constituted the most serious problem between attorneys and their clients. (See Aguilar v. Lerner, supra, 32 Cal.4th 974, 983-984, 12 Cal.Rptr.3d 287, 88 P.3d 24.) "The policy behind the mandatory fee arbitration statutes [was] . . . to alleviate the disparity in bargaining power in attorney fee matters which favors the attorney by providing an effective, inexpensive remedy to a client which does not necessitate the hiring of a second attorney. [Citation.]" (Manatt, Phelps, Rothenberg & Tunney v. Lawrence (1984) 151 Cal.App.3d 1165, 1174, 199 Cal.Rptr. 246; see also Huang v. Cheng (1998) 66 Cal.App.4th 1230, 1234, 78 Cal.Rptr.2d 550 [MFAA's "purpose and policy ... are to ensure the fair resolution of attorney fee disputes"].)

Accordingly, the MFAA was enacted to require, at the option of the client, that the attorney arbitrate any fee dispute: "Unless the client has agreed in writing to arbitration under this article of all disputes concerning fees, costs, or both, arbitration under this article shall be voluntary for a client and shall be mandatory for an attorney if commenced by a client." (§ 6200, subd. (c); see also Aguilar v. Lerner, supra, 32 Cal.4th at p. 981, 12 Cal.Rptr.3d 287, 88 P.3d 24.)

The arbitrator or arbitrators of a fee dispute may: "(1) Take and hear evidence pertaining to the proceeding. [¶] (2) Administer oaths and affirmations. [¶] (3) Compel, by subpoena, the attendance of witnesses and the production of books, papers, and documents pertaining to the proceeding." (§ 6200. subd. (g).) The award rendered in arbitration under the MFAA—unlike the final result where arbitration of other disputes is required by the parties' agreement (see Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9, 10 Cal. Rptr.2d 183, 832 P.2d 899)—is not binding, and either the attorney or client may obtain a trial de novo. (§ 6204, subd. (a).)

Arbitration of attorney-client disputes under the MFAA, however, is strictly limited by subject matter. "The primary limitation of the MFAA is that it applies only to disputes concerning `...

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